nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒01‒22
nine papers chosen by

  1. Lessons for US Business Tax Reform from International Tax Rates By Gary Clyde Hufbauer; Zhiyao (Lucy) Lu
  2. A New Calibration for CORTAX: A computable general equilibrium model for simulating corporate tax reforms By à lvarez-Martínez, María Teresa; Barrios, Salvador; Bettendorf, Leon; d'Andria, Diego; Gesualdo, Maria; Loretz, Simon; Pontikakis, Dimitrios; Pycroft, Jonathan
  3. Real Exchange Rates, Current Accounts and Competitiveness Issues in the Euro Area By Rajmund Mirdala
  4. Capital flows and growth dynamics in Central and Eastern Europe By Karsten Staehr
  5. Discretion in the Deferred Tax Valuation Allowance and Its Impact on Firms' Dividend Payouts By KOCHIYAMA, Takuma; SEKI, Koreyoshi
  6. Disentangling Innovation in Small Food Firms: The role of External Knowledge, Support, and Collaboration By Wixe, Sofia; Nilsson, Pia; Naldi, Lucia; Westlund, Hans
  7. Invisible hand discipline from informed trading: Does market discipline from trading affect bank capital structure? By Mamatzakis, Emmanuel; Zhang, Xiaoxiang; Wang, Chaoke
  8. Les business angels, révélateurs, plus que moteurs, de l’engagement des entreprises dans l’innovation By Nadine Levratto; Maarouf Ramadan; Luc Tessier
  9. Adjudication: Does family ownership structure affect investment-cash flow sensitivity? Evidence from Italian SMEs By Valentina Peruzzi

  1. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Zhiyao (Lucy) Lu (Peterson Institute for International Economics)
    Abstract: With the election of Donald Trump and a Republican Congress, business tax reform seems a likely bet for 2017. International tax rate comparisons using a new dataset from Thomson Reuters highlight the unfavorable disparity between US corporate tax rates and practices in other advanced economies: The US actual average tax rate, calculated from the dataset at 31.1 percent—even after taking various credits, deductions, and “loopholes” into consideration—is higher than the simple average of foreign groups at 28.1 percent. Comprehensive corporate tax reform, headlined by a cut in the corporate tax rate, should be a priority for the incoming administration and Congress to spur investment and make the United States a more attractive location both for domestic and foreign investment. However, fiscal deficits associated with business tax reform, together with the stimulus to investment, will likely drive up the dollar exchange rate and increase the US trade deficit unless strong offsetting measures are part of the reform package.
    Date: 2017–01
  2. By: Ã lvarez-Martínez, María Teresa (European Commission - JRC); Barrios, Salvador (European Commission - JRC); Bettendorf, Leon (CPB Netherlands); d'Andria, Diego (European Commission - JRC); Gesualdo, Maria (European Commission - JRC); Loretz, Simon (Institute of Advanced Studies (Vienna)); Pontikakis, Dimitrios (European Commission - JRC); Pycroft, Jonathan (European Commission - JRC)
    Abstract: The paper presents a new calibration for CORTAX (short for CORporate TAXation), which is a computable general equilibrium (CGE) model covering all EU member states, the US, Japan and a tax haven. The CORTAX model was originally built by the Centraal Planbureau (CPB) in the Netherlands based on the earlier OECDTAX model of Sorensen (2001). The calibration presented in this paper updates the base year to 2012. As the previous calibration was for 2007, the two calibrations represent pre- and post-crisis data. CORTAX models many key features of the corporate tax regimes including multinational profit shifting, investment decisions, loss compensation and the debt-equity choice of firms. The model is designed to investigate many aspects of corporate income taxation (CIT), including adjustment or harmonisation of the CIT rate or base and reforms to address the debt bias in CIT. Furthermore, it can examine consolidation of multinational CIT base, which inter alia addresses some of the issues concerning base erosion and profit shifting (BEPS). Given the choices companies have when confronted with changes in their respective environments, it is important to assess the effects of the reform under a general framework, which takes into account the interactions between different parts of internationally open economies, such as the impact of CIT reforms on firms' investment decisions. Indeed, as a computable general equilibrium model, it simulates all main macroeconomic variables, including GDP, investment and employment. The paper gives an explanation of the model structure, describes the data used, the calibration method and provides descriptive statistics for the baseline values of the model, comparing those for 2012 with the previous 2007 values.
    Keywords: Corporate taxation; Computable general equilibrium model; Model calibration; CORTAX
    Date: 2016–12
  3. By: Rajmund Mirdala
    Abstract: The lack of nominal exchange rate flexibility in the monetary union induced the growing divergence of trade performance among the member countries. Intra-Eurozone current account imbalances among countries with different income levels per capita fuel discussions on competitiveness channels under common currency. Asynchronous current account trends between North and South of the Euro Area were accompanied by significant appreciations of real exchange rate in the periphery economies originating in the strong shifts in consumer prices and unit labor costs in these countries relative to the countries of the Euro Area core. The issue is whether the real exchange rate is a significant driver of persisting current account imbalances in the Euro Area considering than, according to some authors, differences in domestic demand are more important than is often realized. In the paper we analyze main aspects of current account adjustments in the Euro Area member countries. From estimated VAR model we calculate impulse-response function of the current account to the real exchange rate (REER calculated on CPI and ULC base) and domestic demand shocks and variance decomposition to examine the relative importance of both shocks. Our results indicate that while the prices and costs related determinants of external competitiveness affected imports more significantly than exports, demand drivers shaped current account balances mainly during the crisis period.
    Keywords: current account, real exchange rate, economic crisis, vector autoregression, impulse-response function, variance decomposition
    JEL: C32 F32 F41
    Date: 2016–12
  4. By: Karsten Staehr
    Abstract: This paper assesses the importance of capital flows as measured by the current account balance for the growth dynamics of the EU countries from Central and Eastern Europe. Economic growth in these countries was on average relatively high before the global financial crisis but markedly lower after the crisis. Panel data econometrics using annual data for 1997–2015 points to the contemporaneous current account balance having a sizeable negative effect on annual GDP growth. Estimations using many control variables and instrumental variables suggest that the negative effect is mainly demand driven. Counterfactual simulations show that growth rates in all CEE countries would have been lower in the absence of capital flows, and this applies particularly to the countries with the most disadvantageous starting points
    Keywords: business cycles, output performance, capital flows, current account balance, transition economies
    JEL: P17 P21 P36
    Date: 2017–01–13
  5. By: KOCHIYAMA, Takuma; SEKI, Koreyoshi
    Abstract: Prior studies document that firms manage earnings by exercising discretion in valuing deferred tax assets. Drawing from a hand-collected sample of more than 10,000 firm-year observations of Japanese listed firms, we extend the literature by focusing on dividend policy as a motive to manage earnings. If reported earnings are central to determining dividends, managers have incentives to manage earnings upward to avoid dividend cuts. Therefore, we test whether and how firms exercise discretion in valuation allowance account for deferred tax assets in order to manage earnings. We find that discretionary changes in the valuation allowance are related to dividends, particularly among firms that favor increased and stable dividends. We also find that firms likely establish lower valuation allowance when pre-managed earnings and distributable profits fall short of levels needed to maintain dividends. We provide new evidence of dividend-based earnings management and the economic consequences of using managerial estimates as measurement inputs.
    Date: 2017–01
  6. By: Wixe, Sofia (Centre for Entrepreneurship and Spatial Economics (CEnSE), Jönköping International Business School, Sweden); Nilsson, Pia (Centre for Entrepreneurship and Spatial Economics (CEnSE), Jönköping International Business School, Swede); Naldi, Lucia (Centre for Family Enterprise and Ownership (CeFEO ), Jönköping International Business School, Sweden); Westlund, Hans (Centre for Entrepreneurship and Spatial Economics (CEnSE), Jönköping International Business School, & KTH Royal Institute of Technology, Sweden)
    Abstract: This paper applies unique survey data on innovation and external interaction of small food producers in Sweden. The overall purpose is to test if firms that are more engaged in external interaction are more innovative. To disentangle innovativeness beyond new goods and services, innovation is measured as new processes, new markets, new suppliers, new ways of organization, and new distributors. Findings point to a positive relationship between firm innovation and external interaction, both in terms of collaboration, external knowledge and support from regional actors. In particular, collaboration regarding transports and sales is shown to enhance most types of innovation. Product and process innovation benefit from external knowledge from extra-regional firms as well as regional support from the largest firm. Findings suggest that current innovation policies can improve their efficiency by increasing their flexibility to enable tailor-made innovation policies at the local level.
    Keywords: Innovation; collaboration; food industry; rural regions
    JEL: L25 L66 O31 R12
    Date: 2017–01–16
  7. By: Mamatzakis, Emmanuel; Zhang, Xiaoxiang; Wang, Chaoke
    Abstract: A bank generally hold more equity capital than required by their regulators. We hypothesize that stock market has a disciplining role vis-à-vis bank managers that forces them to increase their capital level. For market discipline to be effective, market factors such as changes in firm equity values and returns, would influence bank decision making. We apply the model to annual panel data for publicly traded bank holding companies in three stock markets over a sample period from 2006 to 2015. Using OLS and fixed effect, we find a significantly positive relationship between market discipline and bank capital structure. In addition, we find that market discipline is a more effective to enhance bank capital when bank perform efficiently. Robust tests based on instrumental variable and dynamic GMM evidence of a causal link between market discipline and bank capital structure. The results have certain policy implications for understanding the role of stock market in affecting bank operation that in turn could improve bank prudency and assist the design of an enhanced regulation framework.
    Keywords: Market discipline, Informed trading, PIN, Bank capital
    JEL: C61 G14 G21
    Date: 2016–12–01
  8. By: Nadine Levratto; Maarouf Ramadan; Luc Tessier
    Abstract: Whereas the funding of the first years of the life cycle of companies is presented as a key condition for their survival and growth, the attention given to business angels (BA noted below) by academics have been growing steadily during the past years. This article proposes to discuss the extent, which they contribute to innovation from a unique database of 432 French companies financed by one of the members of the network France Angels (French Federation of Business Angels networks) during the period 2004-2011. We compare it to a test group constituted of 2,160 similar companies. We specify an econometric model specifying the determinants of innovation approximated by the share of non-financial intangible assets in total assets explained by the presence or absence of a BA and control variables. The use of the estimation method using a Fixed Effects Vector Decomposition method shows the positive effect of BA on innovation. Elements of explanation of these results are provided from a qualitative survey of BA members of France Angels and from a subset of companies extracted from the population of 432 ones backed by BA. They illustrate how the specific behavior of BA at the time of selection of companies and their attitude during the accompaniment period explains these different trajectories.
    Keywords: Business Angels, Innovation, Entrepreneurship, Start-up, France.
    JEL: G11 G32 M13
    Date: 2016
  9. By: Valentina Peruzzi (Università Politecnica delle Marche)
    Abstract: The aim of this paper is to investigate whether family control, family management and family ownership concentration affect the investment-cash flow sensitivity of small- and medium-sized enterprises. By analysing a sample of Italian SMEs for the period 2004-2013, I find that family-owned businesses are significantly associated with higher investment-cash flow dependence. This relation, however, is found to be driven by two distinct factors: (i) the presence of a highly concentrated family ownership (ownership concentration channel) and (ii) the active involvement of the family in the business (family management channel).
    Keywords: family firms, investment-cash flow sensitivity, financing constraints, family CEO, ownership concentration.
    JEL: G31 G32

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