nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒03‒19
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Optimal Tax Administration By Michael Keen; Joel Slemrod
  2. International Comparisons of Corporate Income Tax Rates By Congressional Budget Office
  3. Curbing Corporate Debt Bias By Ruud A. de Mooij; Shafik Hebous
  4. Company Stock Reactions to the 2016 Election Shock: Trump, Taxes and Trade By Alexander F. Wagner; Richard J. Zeckhauser; Alexandre Ziegler
  5. What Influences Bank Lending in Saudi Arabia? By Ken Miyajima
  6. Did pre-crisis mortgage lending limit post-crisis corporate lending? Evidence from UK bank balance sheets By Zhang, Lu; Uluc, Arzu; Bezemer, Dirk
  7. Banks’ Adjustment to Basel III Reform; A Bank-Level Perspective for Emerging Europe By Michal Andrle; Vladimír Tomšík; Jan Vlcek

  1. By: Michael Keen; Joel Slemrod
    Abstract: This paper sets out a framework for analyzing optimal interventions by a tax administration, one that parallels and can be closely integrated with established frameworks for thinking about optimal tax policy. Its key contribution is the development of a summary measure of the impact of administrative interventions—the “enforcement elasticity of tax revenue†—that is a sufficient statistic for the behavioral response to such interventions, much as the elasticity of taxable income serves as a sufficient statistic for the response to tax rates. Amongst the applications are characterizations of the optimal balance between policy and administrative measures, and of the optimal compliance gap.
    Keywords: Tax administration;Optimal taxation;Tax elasticity;Tax rates;Tax administration, tax compliance, optimal taxation
    Date: 2017–01–20
  2. By: Congressional Budget Office
    Abstract: In this report, CBO examines corporate tax rates—the statutory rates, as well as average and effective marginal rates—and the factors that affect them for the United States and other G20 countries. In 2012, the U.S. top statutory corporate tax rate was 39.1 percent with state taxes included, making it the highest in the G20. The average and effective corporate tax rates in the United States were lower—at 29 percent (third in the G20) and 19 percent (fourth in the G20), respectively.
    JEL: F23 H20 H25
    Date: 2017–03–08
  3. By: Ruud A. de Mooij; Shafik Hebous
    Abstract: Tax provisions favoring corporate debt over equity finance (“debt bias†) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate financial stability risk. We find that rules targeted at related party borrowing (the majority of today’s rules) have no significant impact on debt bias—which relates to third-party borrowing. Also, these rules have no effect on broader indicators of firm financial distress. Rules applying to all debt, in contrast, turn out to be effective: the presence of such a rule reduces the debt-asset ratio in an average company by 5 percentage points; and they reduce the probability for a firm to be in financial distress by 5 percent. Debt ratios are found to be more responsive to thin capitalization rules in industries characterized by a high share of tangible assets.
    Keywords: Corporate debt;Debt service ratios;Financial risk;Corporate taxes;Thin capitalization;Risk management;Econometric models;Corporate tax, capital structure, debt bias, thin capitalization rule
    Date: 2017–01–30
  4. By: Alexander F. Wagner (University of Zurich, Centre for Economic Policy Research (CEPR), European Corporate Governance Institute (ECGI), and Swiss Finance Institute); Richard J. Zeckhauser (Harvard University and National Bureau of Economic Research (NBER)); Alexandre Ziegler (University of Zurich)
    Abstract: Donald Trump’s election was a significant surprise. The reaction of company stock prices to the election reflects shifts in investor expectations about economic growth, taxes, and trade policy. High-beta stocks outperformed, presumably due to strengthened growth expectations. Expectations of significant corporate tax cuts boosted high-tax firms, but hurt firms with significant net operating loss carryforward balances. Investors currently perceive the climate to be more favorable for domestically-oriented companies than those with substantial foreign involvement. Markets incorporated expectations on growth and tax policy into stock prices relatively quickly; they took more time to digest the consequences of shifts in trade policy.
    Keywords: Stock returns, event study, corporate taxes, trade policy, corporate interest payments, post-news drift, election surprise
    JEL: G12 G14 H25 O24
    Date: 2017–02
  5. By: Ken Miyajima
    Abstract: Determinants of bank-level credit growth in Saudi Arabia are investigated by applying a panel approach to data spanning 2000–15. Strong bank balance sheet conditions, economic activity, and oil prices support bank lending. Reduced bank concentration appears to have helped. Lending remained robust in 2015 despite oil prices having declined, helped by strong bank balance sheets and a reduction in bank holdings of “excess liquidity†. To support bank lending in the period ahead, bank balance sheets need to remain strong. Fiscal adjustment and a reduced reliance on banks to finance the budget deficit would support credit provision to the private sector.
    Keywords: Bank credit;Saudi Arabia;Banks;Loans;Credit expansion;Panel analysis;Time series;Econometric models;Bank credit, macro-financial linkages, fixed-effects panel model
    Date: 2017–02–13
  6. By: Zhang, Lu (Sustainable Finance Lab, The Netherlands.); Uluc, Arzu (Bank of England); Bezemer, Dirk (Global Economics and Management, University of Groningen, The Netherlands.)
    Abstract: Was the bank credit crunch following the collapse of Lehman Brothers in September 2008 in many economies due to a loan supply collapse or to a decrease in loan demand? This paper investigates the effects of UK banks’ pre-crises exposure to residential property markets on their post-crisis business lending to explore the existence of a negative post-crisis loan supply shock. We isolate the loan supply effect from a loan demand effect by using a unique quasi-experimental setting and a rich, tailor-made micro-level data set on bank lending volumes, bank balance sheets and mortgage loan characteristics. Controlling for a range of bank-specific factors, we find that banks with larger shares of residential mortgages in total loans in 2008 Q2 reduced their lending to business more after 2008 Q3. Post-crisis lending to business is also sensitive to the riskiness of banks’ mortgage portfolios. Banks having more mortgages to borrowers with impaired credit history, or more mortgages to the self-employed, or mortgages with higher loan to value ratios prior to the crisis reduced their lending to non-financial businesses more.
    Keywords: Credit crunch; bank balance sheets; mortgage lending; micro data; United Kingdom
    JEL: E20 E32 E51
    Date: 2017–03–03
  7. By: Michal Andrle; Vladimír Tomšík; Jan Vlcek
    Abstract: The paper seeks to identify strategies of commercial banks in response to higher capital requirements of Basel III reform and its phase-in. It focuses on a sample of nine EU emerging market countries and picks up 5 largest banks in each country assessing their response. The paper finds that all banking sectors raised CAR ratios mainly through retained earnings. In countries where the banking sector struggled with profitability, banks have resorted to issuance of new equity or shrunk the size of their balance sheets to meet the higher capital-adequacy requirements. Worries echoed at the early stage of Basel III compilation, namely that commercial banks would shrink their balance sheet by reducing their lending to meet stricter capital requirements, did materialize only in banks struggling with profitability.
    Keywords: Banking sector;Europe;Commercial banks;Emerging markets;Bank supervision;Basel Core Principles;Bank reforms;capital adequacy, Basel III, balance sheet
    Date: 2017–02–10

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