nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒10‒22
seven papers chosen by

  1. Estimating the relationship between the current account, the capital account and investment for India By Ashima Goyal; Vaishnavi Sharma
  2. From measuring the past to strategically framing challenges in the healthcare sector. The role of the balance scorecard By Anna Comacchio; Maddalena Campioni; Mauro Bonin
  3. The Role of Corporate Taxes in the Decline of the Startup Rate By Neira, Julian; Singhania, Rish
  4. Do Corporate Taxes Hinder Innovation? By Abhiroop Mukherjee; Alminas Zaldokas
  5. Does the Investment Model Explain Value and Momentum Simultaneously? By Andrei S. Gonçalves; Chen Xue; Lu Zhang
  6. Taxes and the Fed : Theory and Evidence from Equities By Anthony M. Diercks; William Waller
  7. The Taxman calls. How does Facebook answer? Global Effects of Taxation on Online Advertising By Angel Cuevas; Ruben Cuevas; Andrea Lassmann; Federica Liberini; Antonio Russo

  1. By: Ashima Goyal (Indira Gandhi Institute of Development Research); Vaishnavi Sharma (Indira Gandhi Institute of Development Research)
    Abstract: Causality from the capital account (KA) to the current account (CA) of the balance of payments indicates disruption from capital flows while the reverse can indicate smooth financing of the CA that allows investment to exceed domestic savings. A three-variable vector autoregression tests for Granger causality between the Indian CA, KA, KA components, and gross fixed capital formation (GFCF) over 2000-01Q1 to 2015-16Q3. Since a current account deficit indicates an excess of investment over savings it is useful to estimate which type of capital flows affect investment. No causality is found to exist in any direction between the KA and the CA. There is only indirect causality through some components. Of the capital flow components only FDI affects GFCF. The latter consistently affects the CA. The CA affects debt portfolio flows and non-resident deposits, suggesting these were used to finance the CA, but they were not causal for GFCF. Volatile flows therefore did not deteriorate the CA, but they also did not contribute to GFCF. India's gradual capital account convertibility may have mitigated shocks from the KA. Long-term sustainability, however, requires FDI to increase compared to other types of flows.
    Keywords: Current account, Capital account, Balance of payments, Granger causality, Gross fixed capital formation
    JEL: F21 F32
    Date: 2017–09
  2. By: Anna Comacchio (Dept. of Management, Università Ca' Foscari Venice); Maddalena Campioni (Dept. of Management, Università Ca' Foscari Venice); Mauro Bonin (Health and Social Care, Regional Direction, Veneto Region)
    Abstract: Raising challenges and reducing resources in the healthcare sector, have put performance management center stage. Recent debate has, on the one hand, highlighted the negative effects of this increasingly diffuse management approach, on the other hand, more emphasis has been placed on the need to move from performance measurement to performance management and to better integrate it with strategic planning. From this stand point a body of studies focused on the replacement of traditional accounting system by multidimensional frameworks and more specifically by the Balance scorecard. The paper investigates the role of balance scorecard in the healthcare sector and how this multidimensional framework might help to effectively link strategy and performance management, for a more comprehensive and strategic management of healthcare organizations in a fast moving environment. The paper provides empirical evidence, through a case study, on the role that a multidimensional approach such as the one delivered by the Balance scorecard can have to help organization and managers to move from measuring the past to strategically framing challenges.
    Keywords: balance scorecard, organizational innovation, healthcare sector, performance management
    JEL: L25 L30
    Date: 2017–10
  3. By: Neira, Julian; Singhania, Rish
    Abstract: The business startup rate in the United States has exhibited a large secular decline in recent decades. The reasons behind the decline are not well understood. This paper hypothesizes that the startup rate declined in large part because corporate taxes raised the opportunity cost of entrepreneurship. We formalize this thesis using a model of occupational choice that features firm entry and exit. Quantitatively, the model accounts for much of the decline in the startup rate. Taxes alone account for one-fifth of the decline. Cross-sectoral patterns in US data support our results.
    Keywords: Firm Entry, Startups, Corporate Taxes, Declining Business Dynamism, Occupational Choice
    JEL: D2 E2 E6 H2
    Date: 2017–09–26
  4. By: Abhiroop Mukherjee (Associate Professor, Department of Finance, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Alminas Zaldokas (Assistant Professor, Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology)
    Abstract: Abhiroop Mukherjee and Alminas Zaldokas, HKUST IEMS Faculty Associates, examined how tax changes influence patenting activity in corporations, and found that tax increases would likely lead to lower innovation, but it would not be easy to reverse these losses quickly by cutting taxes back later.
    Keywords: corporate governance, development, emerging market and developing economies, emerging markets, innovation, patents, R&D, research and development
    Date: 2017–07
  5. By: Andrei S. Gonçalves; Chen Xue; Lu Zhang
    Abstract: Two innovations in the structural investment model go a long way in explaining value and momentum jointly. Firm-level investment returns are constructed from firm-level accounting variables, and are then aggregated to the portfolio level to match with portfolio-level stock returns. In addition, current assets form a separate production input besides physical capital. The model fits well the value, momentum, investment, and profitability premiums jointly, and partially explains the positive stock-investment return correlations, the procyclicality and short-term dynamics of the momentum and profitability premiums, and the countercyclicality and long-term dynamics of the value and investment premiums. However, the model fails to explain momentum crashes.
    JEL: E13 E22 G12 G14 G31
    Date: 2017–10
  6. By: Anthony M. Diercks; William Waller
    Abstract: We provide a critical theoretical and empirical analysis that suggests a key driver of fiscal effects on equity markets is the Federal Reserve. For the Post-1980 era, tax cuts lead to higher cash flow news and higher discount rates. The discount rate news tends to dominate such that tax cuts are associated with lower equity returns. This result is flipped for the Pre-1980 era. Our results are confirmed across multiple measures of tax shocks (narrative, SVAR, municipal bonds, etc.) at different frequencies (daily, quarterly, annual). We motivate our empirical findings with a standard New Keynesian model (in addition to the FRB/US model) that exhibits a shift in the aggressiveness of monetary policy. Moreover in our theoretical framework, downward nominal wage rigidities account for observed asymmetries in the response to tax cuts versus tax increases.
    Keywords: Federal Reserve ; Fiscal policy ; News Decomposition ; Stock Market
    JEL: G0 E0 E63 G12 E5
    Date: 2017–10–11
  7. By: Angel Cuevas (Universidad Carlos III Madrid); Ruben Cuevas (Universidad Carlos III Madrid); Andrea Lassmann (KOF, ETH Zurich); Federica Liberini (KOF, ETH Zurich); Antonio Russo (KOF, ETH Zurich)
    Abstract: We study the effects of the taxation of digital platforms on the online advertising market. We exploit novel data on daily unit prices of Facebook ads targeted to country-specific audiences, collected around a major change in the firm's accounting practices following the introduction of the UK Diverted Profit Tax. We show that a substantial increase in ads prices followed such change, although with heterogeneous intensity across countries. These results are in line with a model of a platform operating in the global advertising market. We show that taxation of profits generated in one country makes the price charged to advertisers from that country (resp. other countries) increase (decrease). Accordingly, we demonstrate that aggregate advertising prices in OECD countries increased more, after the policy change, the larger is the market share of UK-based advertisers.
    Keywords: tax incidence; digital economy; online advertising
    JEL: H22 H25 F16
    Date: 2017–09

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