nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒06‒18
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Under cover: detecting the existence of profit-shifting in China By Qian, Xuefeng; Tian, Bifei; Reed, W. Robert; Chen, Ziruo
  2. A new approach to identify the economic effects of disclosure: Information content of business risk disclosures in Japanese firms By KIM, Hyonok; YASUDA, Yukihiro
  3. Mandatory adoption of business risk disclosure: evidence from Japanese firms By KIM, Hyonok; YASUDA, Yukihiro
  4. Tax evasion, intrinsic motivation, and the evolutionary effects of tax reforms By Fabio Lamantia; Mario Pezzino; Fabio Tramontana
  5. Capital Taxation and Investment: Matching 100 Years of Wealth Inequality Dynamics By Boehl, Gregor; Fischer, Thomas
  6. Behavioral insights and business taxation: Evidence from two randomized controlled trials By Biddle, Nicholas; Fels, Katja; Sinning, Mathias
  7. Developing Effective Working Relationships Between Supreme Audit Institutions and Parliaments By Alastair Swarbrick
  8. Competition for Global Value Added: Export and Domestic Market Shares By R. Cezar; A. Duguet; G. Gaulier; V. Vicard

  1. By: Qian, Xuefeng; Tian, Bifei; Reed, W. Robert; Chen, Ziruo
    Abstract: This paper investigates profit-shifting behaviour among a large sample of multinational corporations (MNCs) in China. While profit-shifting behaviour is difficult to observe directly, it can be inferred from the behaviour of firms. That is the approach taken by Egger, Merlo, and Wamser (Unobserved tax avoidance and the tax elasticity of FDI 2014, henceforth EM&W) in their seminal analysis of tax elasticity of German MNCs. They developed a two-component mixture model that categorized MNCs into tax "avoiders" and "non-avoiders" based upon the estimated elasticities of investment to taxes. The authors of this paper apply their approach to their sample of MNCs in China. Like EM&W they find evidence of two distinct groups of MNCs. One group is responsive to changes in taxes, reducing investment when taxes increase. The other group is unresponsive to taxes, so that investment is not significantly associated with changes in tax rates. The authors show that the characteristics of these groups closely match the "avoiders" and "non-avoiders" of EM&W's sample. Even so, their estimated tax elasticities are much smaller than EM&W. This suggests that the extent of profit-shifting was relatively small during China's period of preferential tax treatment for foreign investors.
    Keywords: MNCs,profit shifting,tax elasticity of investment,finite mixture model,China
    JEL: F23 H32
    Date: 2017
    URL: http://d.repec.org/n?u=RePEc:zbw:ifwedp:201726&r=acc
  2. By: KIM, Hyonok; YASUDA, Yukihiro
    Abstract: We empirically examine the economic effects of disclosure by focusing on mandatory textual business risk disclosures in Japan. A unique feature of this study is the construction of a new risk measure, which enables us to isolate economic disclosure effects (i.e., information risk) from fundamental value effects (i.e., fundamental risk). We find that there is a positive association between the number of items within business risk disclosures and information risk. We also find that the results are more pronounced for firm-level disclosure that deviates from that of other firms in the same industry and year. This indicates that business risk disclosures affect investors' risk perceptions and thus increase the information component in the cost of capital.
    Keywords: textual business risk disclosure, information risk, boilerplate, real effects
    JEL: G14 M41
    Date: 2016–05
    URL: http://d.repec.org/n?u=RePEc:hit:hcfrwp:g-1-13&r=acc
  3. By: KIM, Hyonok; YASUDA, Yukihiro
    Abstract: We take advantage of institutional changes and its characteristics in Japan to empirically examine mandatory business risk disclosure. We find that there is a negative impact on total risk from the introduction of mandatory business risk disclosure. This suggests that an increase in business risk disclosure reduces a firm's cost of capital, which is contrary to the results of previous research. However, we also find that there is a positive relationship across firms and years after inception between the amount of business risk disclosure and total risk, indicating that mandatory business risk disclosure has a negative impact on investors' assessment of firms' risk. Although these two effects offset each other, the positive effects of enhanced disclosure of business risks on the cost of capital overcome the negative effects.
    Keywords: Mandatory business risk disclosure, Total risk, Cost of capital
    JEL: G14 M41
    Date: 2016–05
    URL: http://d.repec.org/n?u=RePEc:hit:hcfrwp:g-1-14&r=acc
  4. By: Fabio Lamantia; Mario Pezzino; Fabio Tramontana
    Date: 2017
    URL: http://d.repec.org/n?u=RePEc:man:sespap:1707&r=acc
  5. By: Boehl, Gregor (IFMS, Goethe University Frankfurt, Germany.); Fischer, Thomas (Department of Economics, Lund University)
    Abstract: Using a parsimonious, analytically tractable dynamic model, we are able to explain up to 100 years of the available data on the dynamics of top-wealth shares for several countries. We build a micro-founded model of heterogeneous agents in which - in addition to stochastic returns on investment - individuals disagree marginally on their expectations of future returns and thus hold different asset positions. We show that, given a positive tax on capital gains, the distribution converges to a double Pareto distribution for which the degree of wealth inequality decreases with the tax rate. Closed-form solutions confirm that without government intervention there is infinite inequality. Moreover, transition dynamics are shown to increase with the tax rate. We discuss the model's ability to match the measured wealth inequality for the US, the UK, Sweden, and France, both in levels and transitions. The heterogeneous development in the different countries and across time can be traced back to different tax regimes.
    Keywords: Wealth inequality; capital taxation; stochastic simulation; heterogeneity
    JEL: C63 D31 G11 H23
    Date: 2017–06–07
    URL: http://d.repec.org/n?u=RePEc:hhs:lunewp:2017_008&r=acc
  6. By: Biddle, Nicholas; Fels, Katja; Sinning, Mathias
    Abstract: This paper presents the findings of two Randomized Controlled Trials (RCTs) that were conducted in collaboration with the Australian Taxation Office (ATO). The first trial tests the effect of changes to letters (timing, social norms, color, and provision of information about charitable donations) on response rates of businesses, the timing of payments and the amount of tax debt payments. The second trial consists of two parts. The first part aims to raise awareness of the relevance of tax debt payment by changing internal guidelines used by field auditors. The second part focuses on studying the effect of changing the phone script used by desk auditors to offer assistance with payment arrangements and simplifying a follow-up letter. The findings of the first trial indicate that none of the treatments had a significant effect on any of the outcome measures considered. In contrast, the results of the second trial indicate that changing the phone script of desk auditors and simplifying the follow-up letter reduced the proportion of default assessments raised by the ATO significantly, suggesting that businesses are responsive to certain types of nudges.
    Keywords: tax compliance,business taxation,behavioral insights,nudging
    JEL: C93 H25 H26
    Date: 2017
    URL: http://d.repec.org/n?u=RePEc:zbw:rwirep:698&r=acc
  7. By: Alastair Swarbrick
    Abstract: Supreme audit institutions and parliaments have an important role in holding governments to account for the use of public funds. Parliaments rely on the objective and professional work of supreme audit institutions to provide them with information about the use of public resources. Parliaments, however, will only use the work of the supreme audit institutions if it is interesting and relevant. This SIGMA paper provides a comparative analysis of how supreme audit institutions and parliaments have developed effective working relationships in the European Union (EU) and EU Accession countries. It describes the expectations for establishing effective relationships and the key factors and issues that influence them, and offers guidance to supreme audit institutions and parliaments for establishing effective working relationships. It also provides a toolkit for strengthening these working relations.
    Date: 2017–06–13
    URL: http://d.repec.org/n?u=RePEc:oec:govaac:54-en&r=acc
  8. By: R. Cezar; A. Duguet; G. Gaulier; V. Vicard
    Abstract: We propose a new “global” market share indicator that complements the traditional export market share analysis by accounting for the foreign value added embodied in the production process and for the performance of national firms on their domestic market. We also consider all the income from activities used in the production to address the manufacturing final demand, namely all activities within the manufacturing value chain. Our results show that the role of services is growing in global value chains. Interestingly, considering our global indicator makes the dynamics of market shares converge among large economies, which can be explained by a de-correlation between national and export performances. This de-correlation appears to reflect greater specialization within global manufacturing value chains.
    Keywords: International trade, Market share, Value added, Global value chains, Globalization, Manufacturing industry.
    JEL: F10 F60 L60
    Date: 2017
    URL: http://d.repec.org/n?u=RePEc:bfr:banfra:628&r=acc

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