nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒06‒04
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The impact of financial, institutional and cultural factors on the disclosure, magnitude of adjustments and transparency of Non-GAAP Financial Measures By Silvia Gardini; F. Marta L. Di Lascio; Franco Visani
  2. Prospects for Improving the Taxation of E-Business in the Russian Federation By Kornienko, Natalia; Velikova, Elena; Gulyaeva, Svetlana; Korolev, Georgiy; Pushkareva, Nataliya; Mitrofanova, Ekaterina
  3. Modelling corporate tax reform in the EU: New calibration and simulations with the CORTAX model By Joint Research Center of the European Commission - IPTS
  4. Modern Approaches to the Taxation of Representative Offices and Branches of Foreign Companies (BEPS, FATCA) By Kornienko, Natalia; Velikova, Elena; Gulyaeva, Svetlana; Pushkareva, Nataliya; Mitrofanova, Ekaterina
  5. Mandatory IFRS adoption in Brazil and firm value By Sampaio, Joelson Oliveira; Gallucci Netto, Humberto; Silva, Vinícius Augusto Brunassi
  6. Capital structure determinants of financially constrained and unconstrained firms By Sanvicente, Antonio Zoratto; Bortoluzzo, Adriana Bruscato; Bortoluzzo, Mauricio Mesquita
  7. Intangible Capital and the Choice of External Financing Sources By HOSONO Kaoru; TAKIZAWA Miho
  8. Earnings Management and the Floatation Structure: Empirical Evidence from Polish IPOs By Tomasz Sosnowski

  1. By: Silvia Gardini (University of Bologna, Department of Management Studies); F. Marta L. Di Lascio (Free University of Bozen-Bolzano, Faculty of Economics and Management); Franco Visani (University of Bologna, Department of Management Studies)
    Abstract: The paper analyses how company-specific financial factors and country-specific institutional and cultural factors affect the extent to which companies disclose Non-GAAP Financial Measures (NGFMs) in their financial communications. Our study is based on the analysis of 1,731 quarterly financial reports from 120 companies located in 23 countries and listed in Standard & Poor’s Global Oil Index. The results provide evidence that supports both the informative theory on NGFMs (asserting that NGFMs are disclosed to provide the investors with higher quality information) and the opportunistic theory (affirming that NGFMs are disclosed to mislead investors). On one side we see that highly indebted companies more frequently disclose NGFMs, but they are conservative in their adjustments, which is consistent with the informative theory. On the other side, low profitability is a driver of positive adjustments providing evidence of an opportunistic behaviour. The regulation on NGFMs has a positive effect on disclosure and does not increase conservatism. It increases the transparency of adjustments, but more in a formal way than substantially. Also the specific set of accounting standards adopted has a relevant effect on the disclosure of NGFMs. The cultural factors play a role partially consistent with this theory, but on average their impact is negligible. Our study was the first to analyse the use of NGFMs including companies from different continents and considering the impact of cultural variables. From a theoretical point of view, the results provide evidence that an informative and opportunistic use of NGFMs coexist and that different factors (mainly company-specific financial factors and institutional factors) lead to different practices. From a practical point of view the analysis provides interesting evidence for the evolution of regulations on NGFMs.
    Keywords: non-GAAP financial measures, institutional factors, cultural factors, voluntary disclosure, accounting standards
    JEL: M40 M41 M48
    Date: 2017–05
  2. By: Kornienko, Natalia (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Velikova, Elena (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Gulyaeva, Svetlana (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Korolev, Georgiy (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Pushkareva, Nataliya (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Mitrofanova, Ekaterina (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: It's hard to remember the last time tax issues attracted global attention so much, as it is now. Project BEPS2 by OECD, is described as the biggest change in the history of international taxation. The current order is based on the paradigm of tax competition and allows companies to organize business in such way as to erode tax base artificially and to transfer income to low-tax jurisdictions. It opposes BEPS project carried out by OECD, which seeks to adapt the international system of taxation to the new, digital, economy and the rapid development of e-business. Both Russia's and worldwide tax legislation fall behind the development of electronic business. In connection with the special relevance of the issue of e-business taxation within the BEPS project the final report on Activity 1 of BEPS Project «Preparation of measures on taxation of the digital sector." was released in October 2015. In 2015 the EU introduced a new concept of determining the place of supply of e-services to end-users: the place of services' supply recognized as Buyer's location. The Federal Law was adopted In Russia on 3d July, 2016 N 244-FZ "On Amendments to Parts One and Two of the Tax Code of the Russian Federation", coming into force 1st January 2017. It introduces a new principle of foreign companies taxation in the provision of electronic services by customer's location. In terms of recent research the e-business taxation in Russia, all countries of EAEC and a number of the EU countries is analyzed. The research reflects the OECD's position on taxation of e-business, as well as the position of the EU. According to the results of the research, suggestions for e-business taxation in the Russian Federation were made, including suggestions both in terms of direct and indirect taxation. In the framework of direct taxation proposals were prepared both to Tax Code of the Russian Federation and the agreements on avoidance of double taxation. Suggestions for taxation of e-business were prepared not only at the national level, but at the supranational level.
    Date: 2017–02
  3. By: Joint Research Center of the European Commission - IPTS
    Abstract: This report investigates the economic impact of the European Commission proposal for a common corporate tax base (CCTB) and a common consolidated corporate tax base with formula apportionment (CCCTB) within the EU. Furthermore, on top of the common base, it considers proposals to reduce the debt bias in corporate taxation. To do so, we employ an applied general equilibrium model (CORTAX) covering all EU Member States, featuring different firm types and modelling many key features of corporate tax regimes, including multinational profit shifting, investment decisions, loss compensation and the debt-equity choice of firms.
    Keywords: corporate taxation, CGEM, debt-bias, European Union
    JEL: H25 H26 H68 H87 C68
    Date: 2016–10
  4. By: Kornienko, Natalia (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Velikova, Elena (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Gulyaeva, Svetlana (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Pushkareva, Nataliya (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Mitrofanova, Ekaterina (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The establishment of representatives of foreign companies and corporations in Russia is a form of direct investment into the Russian economy. The OECD recommends that various countries tax permanent representatives as if they were independent entities. The existing tax law of the Russian Federation does not adequately cover and regulate these tax issues. The notorious Bloomberg, McKenna, Amazon, Google, IKEA, Starbucks and other cases are glaring examples of tax evasion. Practices of other world nations and countries seriously address the issue of developing measures against dilution and transfer of the tax base through the use of permanent representatives specifically in the BEPS plan. Foreign companies have the opportunity to do business in other countries without an obligation to pay taxes on the income from such business transactions. However, in order to fulfill OECD recommendations, a concept of taxation of representatives and affiliated branches of international organizations in the Russian Federation must be developed, taking into account national interests and the practices of other world nations and countries. For example, there should be an opportunity to use the term "independent entity" to fulfill the purpose of the Russian taxation system to adequately tax representatives and affiliated branches of foreign organizations in the Russian Federation and to fulfill the country's obligations stipulated in international treaties between the Russian Federation and other countries aimed at avoiding double taxation.
    Date: 2017–03
  5. By: Sampaio, Joelson Oliveira; Gallucci Netto, Humberto; Silva, Vinícius Augusto Brunassi
    Abstract: Using diff-in-diff approaches and the propensity-score matching, this study focuses on firm-level Tobin´s q and Market-to-book outcomes for Brazilian firms who in 2008 were required by Law 11.638/07 to adopt the full International Financial Reporting Standards (IFRS) by 2010. Brazil’s tier-system of corporate governance standards for publicly-traded firms, its uniquely wholesale adoption of the IFRS, and the previously considerable gap between its national GAAP and IFRS readily lend the scenario to research, which thus far finds small or inconsistent results when focused on IFRS adoption-related outcomes in Europe and China. However, while these features recommend the transitioned Brazilian equity market to analysis, additional unique features, such as its small population size and its limited historical data -- of varied quality – increase the challenge in selecting a suitable empirical methodology. Using quarterly data from 2006-2011, control firms in the Nivel II and Novo Mercado tiers of Bovespa which already complied with higher quality accounting standards are matched to treatment firms in the Regular and Nivel I tiers with similar averaged values of size and sector. Our results suggest that there is a positive impact on Tobin´s q and Market-to-book for firms who are forced to adopt IFRS in Brazil. We can observe the same results when we consider all variables winsorized at 5% level. We also find a positive relation between the firm value (measured by Tobin´s q and Market-to-book) and net income. Firms with higher net income are more likely to have higher Tobin´s q and Market-tobook. In an opposite way, we find a negative relation among firm value, size, Ebit-to-sales, sales growth and PPE-to-sales. All results are statistically significant at 1% level. '
    Date: 2017–03–07
  6. By: Sanvicente, Antonio Zoratto; Bortoluzzo, Adriana Bruscato; Bortoluzzo, Mauricio Mesquita
    Abstract: This paper discusses the determinants of capital structure with a focus on both publicly-owned and privately-owned firms. We use annual financial statement data for over 1,000 publicly-owned and privately-owned Brazilian firms covering the 2012-2015 period. This enables us to use financial statements under the prevailing IFRS regime. The methodology takes into account the interdependency between debt and dividend policies, recognized in the literature on determinants of both capital structure and dividend policies. We also take into account that both debt and dividend policies can be used to mitigate agency problems, and that the presence of agency problems may in turn affect the choice of capital structure and dividend policy in a firm. As a proxy for the agency cost of equity, the firm’s inverted asset turnover ratio is used. Our empirical strategy treats debt and dividend policies and agency cost as dependent variables and leads to the use of a system of three equations, which are estimated with the generalized method of moments (GMM). In particular, we find that both payout and previous debt levels are positive and significant determinants of debt levels, but that there are differences in how important they are for privately-owned firms, on one hand, and publicly-owned firms, on the other. Also, some usual determinants of capital structure are significant for one group: for privately-owned firms (cash flow), for publicly-owned firms (intangibility), but not for the other, pointing out the importance of analyzing such firms separately.
    Date: 2017–05–11
  7. By: HOSONO Kaoru; TAKIZAWA Miho
    Abstract: Using a dataset of Japanese listed firms from 2002 to 2013, we examine how firms' asset structure in terms of the ratio of intangible to tangible capital is related to their choice of financing sources among bank loans, equity issues (seasoned equity offerings: SEO), and bond issues. We further investigate how the choice of financing is related to post-financing investment in tangible and intangible capital. We find that firms with higher intangible capital ratios are more likely to choose equity issuance and less likely to choose loans than bond issues. Using propensity score matching and difference-in-differences approach (PSM-DID), we further find that firms that chose loans invest less in intangible capital than those that did not. Finally, we also obtain results that are consistent with a number of existing theories on capital structure such as the market timing (mispricing) hypothesis on equity issuance, the tradeoff and the pecking order hypotheses on debt and equity, and the holdup hypothesis on bank loans.
    Date: 2017–05
  8. By: Tomasz Sosnowski (University of Lodz, Poland)
    Abstract: Firms use discretionary accounting choices to manage earnings disclosures around the time of certain types of corporate events. The IPO provides an opportunity to earnings management because of the significant information asymmetry between investors and issuers at the time of the offering. The main aim of the study is to empirically investigate the links between the earnings management and the portions of primary and secondary shares sold in IPO. In order to investigate whether the earnings management influences the issue of new shares and the sale of secondary shares I use Tobit and logit regressions, where discretionary accruals are the proxy for earnings management. Using a sample of 221 firms from WSE between 2005 and 2015 I do not find evidence that the increase of pre-IPO discretionary accruals positively affects the sale of primary shares in the IPO, but the analysis revealed that the reporting less limits the probability of the new shares issuance. In turn, the sale of secondary shares in the IPO is more likely in companies using a conservative earnings management. Furthermore, negative discretionary accruals increase the portion of secondary shares in the IPO.
    Keywords: Initial public offering, IPO, Primary shares, Secondary shares, Earnings management
    JEL: G14 G32 G23
    Date: 2017–05

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