nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒01‒01
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The German statutory pension scheme: Balance sheet, cross-sectional internal rates of return and implicit tax rates By Metzger, Christoph
  2. Accounting versus real production responses among firms to tax incentives: bunching evidence from Hungary By Pálma Mosberger
  3. Cash-Flow Business Taxation Revisited: Bankruptcy, Risk Aversion and Asymmetric Information By Robin Boadway; Motohiro Sato; Jean-François Tremblay
  4. Balance Sheet and Currency Mismatch: Evidence for Peruvian Firms By Nelson R. Ramírez-Rondán
  5. Fiscal Multipliers, Oil Revenues and Balance Sheet Effects By Martha López
  6. Securitisation, loan growth and bank funding: the Swiss experience since 1932 By Jonas Meuli; Thomas Nellen; Thomas Nitschka
  7. Currency devaluations, aggregate demand, and debt dynamics in an economy with foreign currency liabilities By Köhler, Karsten

  1. By: Metzger, Christoph
    Abstract: We present a framework for accounting of the German statutory pension scheme and estimate a balance sheet for the years 2005 until 2012. Extending and applying the methodology proposed by Settergren and Mikula (2005), we estimate the cross-sectional internal rates of return of the German pension scheme over this period. We are able to show that the cross-sectional internal rate of return is mainly financed by increasing contributions and by changing the liabilities not backed by assets. Additionally, our results reveal that from an expenditure perspective, the major part of the internal rate of return is resulting from changing longevity rather than indexation of pension entitlements. Finally, we prove that from a cross-sectional perspective the implicit tax of a pension scheme can mainly be interpreted as an “implicit wealth tax” on pension wealth and subsequently present empirical estimates for these cross-sectional implicit tax rates.
    Keywords: accounting of pension schemes,balance sheet,internal rate of return,implicit tax,fiscal sustainability
    JEL: E01 H55 H83 H87
    Date: 2016
  2. By: Pálma Mosberger (Magyar Nemzeti Bank, Central Bank of Hungary)
    Abstract: Existing evidence indicates that companies’ reported earnings react to tax incentives, but we do not know whether these are accounting responses, evasion responses or real responses. This paper tests for the responses using a quasi-experimental design of a corporate minimum tax scheme introduced in Hungary in 2007 that widened the tax base only for firms with low reported profit rate (profit as a share of revenue). With a new panel dataset containing administrative tax records on corporations I replicate previous findings on the earnings responses to tax incentives, but also document three additional pieces of evidence that suggest accounting rather than real responses. First, companies reacted too quickly to the change in incentives to reflect real responses: only a half year after the introduction of the reform the data exhibit sharp bunching in the distribution of profit rates in accordance with the new incentives. Second, direct measures of real production responses suggest no significant behavioral reactions. Additional analysis of the reported cost structure of corporations shows large changes only in reported material cost which is the most easily over-reportable item, supporting the reasoning that reported changes are mostly coming from reduced cost over-reporting.
    Keywords: taxation, firm behavior, tax evasion and avoidance
    JEL: D22 H26 H32
    Date: 2016
  3. By: Robin Boadway (Queen's University); Motohiro Sato (Hitotsubashi University); Jean-François Tremblay (University of Ottawa)
    Abstract: It is well-known that cash-flow business taxes with full loss-offset, and their present-value equivalents, are neutral with respect to firms' investment decisions when firms are risk-neutral and there are no distortions. We study the effects of cash-flow business taxation when there is bankruptcy risk, when firms are risk-averse, and when financial intermediaries face asymmetric information problems in financing heterogeneous firms. Cash-flow taxes remain neutral under bankruptcy risk alone, but can distort the entry and investment decisions of firms under both risk-aversion and asymmetric information. We characterize the nature of such distortions and show that cash-flow taxes can increase social welfare in this context. An ACE tax is equivalent to a cash-flow tax but is easier to implement under asymmetric information.
    Keywords: cash-flow tax, risk-averse firms, asymmetric information
    JEL: H21 H25
    Date: 2016–12
  4. By: Nelson R. Ramírez-Rondán (Central Bank of Peru)
    Abstract: In the Peruvian economy, as in other emerging economies, a significant portion of the debt held by firms is denominated in US dollars. While an exchange rate depreciation likely increases firm debt and influences plans of investment and production, literature finds weak or no evidence of this balance sheet effect. In this paper I argue that this effect is observed in firms with a significant currency mismatch. I estimate the currency mismatch (defined as assets minus liabilities in USD and expressed as a percentage of total assets in domestic currency) from which the exchange rate has negative effects on firms' investment. Using financial information from 74 non-financial Peruvian firms from 2002 to 2014, I find significant balance sheet effects for firms with a currency mismatch below -10.4 percent.
    Keywords: Balance Sheet, Dollar Debt, Peru
    JEL: C33 E22 F31 F34
    Date: 2016–12
  5. By: Martha López (Banco de la República)
    Abstract: Fiscal multipliers are different across countries and under different economic circumstances. The studies of the effect of government spending shock on output have focus their attention on the behavior of consumption. However, the crowding out of investment is also an important matter of study. In this respect, balance sheet effects play an important role in all countries and in all circumstances. The aim of this paper is to study this important issue in a small open economy that is also characterized by an important proportion of non-Ricardian agents and commodity revenues. The results show that balance sheet effects might reduce the fiscal multiplier by half. Also, that this result might be mitigated if a subsidy, financed with the income taxes revenues from a higher fiscal multiplier, is put into action. Finally, the paper also shows that a structural fiscal rule delivers less welfare losses due to financial frictions than other rules. Classification JEL: D91, E21, E62.
    Keywords: Fiscal multipliers, fiscal policy rules, non-Ricardian households, DSGE model, Financial Frictions.
    Date: 2016–12
  6. By: Jonas Meuli; Thomas Nellen; Thomas Nitschka
    Abstract: This paper empirically analyses securitisation in Switzerland from a macroeconomic and bank balance sheet perspective based on a novel and near-comprehensive data set on a specific form of securitisation over the sample period from 1932 to 2014. The Swiss Pfandbrief is a distinct covered bond with a similar institutional framework as the U.S. Federal Home Loan Bank System.
    Keywords: Securitisation, covered bonds, mortgage loans, bank balance sheet management, business cycles, financial cycle, financial stability
    JEL: E43 E44 E51 G12 G21 G23 N24
    Date: 2016
  7. By: Köhler, Karsten
    Abstract: The paper employs a post-Kaleckian model to address the question of how currency devaluations affect aggregate demand, capital accumulation, and debt in an economy with foreign currency liabilities. In benchmark post-Kaleckian open economy models currency devaluations have two key effects. First, they change international price competitiveness and thus affect net exports. Second, devaluations change income distribution and thereby affect consumption and investment demand. The overall effect on aggregate demand and investment is ambiguous and depends on parameter values. Existing models, however, disregard balance sheet effects that arise from foreign currency-denominated external debt. The paper develops a novel post-Kaleckian open economy model that introduces foreign currency-denominated external debt and balance sheet effects. The model is then used to analyse the effects of a currency devaluation on aggregate demand, growth, and debt dynamics in small open economies with a fixed exchange rate in the short- to medium-run. The main findings are that the existence of foreign currency-denominated debt means that devaluations are more likely to take a contractionary form, and that foreign interest rate hikes, and high illiquidity and risk premia compromise debt sustainability. Devaluations only stabilise debt ratios if they succeed in boosting domestic capital accumulation.
    Keywords: currency devaluation,external debt,balance sheet effects,original sin,currency mismatch,Kaleckian model
    JEL: E11 E12 F36 F41
    Date: 2016

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