nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒12‒11
seven papers chosen by

  1. The Double Dividend of Relative Auditing – Theory and Experiments on Corporate Tax Enforcement By Ralph-C. Bayer
  2. Tax Simplicity and Heterogeneous Learning By Philippe Aghion; Ufuk Akcigit; Matthieu Lequien; Stefanie Stantcheva
  3. Sweat Equity in U.S. Private Business By McGrattan, Ellen R.; Bhandari, Anmol
  4. Provisioning policies for non-performing loans: How to best ensure a "clean balance sheet"? By Wahrenburg, Mark
  5. An Inverse Problem Study: Credit Risk Ratings as a Determinant of Corporate Governance and Capital Structure in Emerging Markets: Evidence from Chinese Listed Companies By ManYing Kang; Marcel Ausloos
  6. Uganda; Technical Assistance Report-Report on the Financial Transactions and Balance Sheets Mission By International Monetary Fund
  7. Literature review on taxation, entrepreneurship and collaborative economy By Dondena; CASE; IEB; PWC

  1. By: Ralph-C. Bayer (School of Economics, University of Adelaide)
    Abstract: Recent papers have shown that theoretically tax authorities can not only reduce tax evasion but also boost output in oligopolies by conditioning the audit effort spent on a firm on all firms' tax returns in an industry. In this paper we revisit these results and extend the class of relative audit rules with this property by including discontinuous rules. Field experiments testing the theory predictions would require randomizing audit rules across many otherwise identical industries and are therefore impractical. Instead we conduct laboratory tests of the theoretical mechanisms of a variety of rules. We find that both dividends of relative auditing, i.e. less evasion and higher output, materialize in the laboratory. The behavioral mechanism generating the higher output differs somewhat from the one propagated by theory though.
    Keywords: corporate-tax evasion, relative audit rules, experimental tests
    JEL: H26 D43 K4
    Date: 2017–11
  2. By: Philippe Aghion; Ufuk Akcigit; Matthieu Lequien; Stefanie Stantcheva
    Abstract: We study the effects of fiscal incentives for self-employment using new French tax data from 1994 to 2012. France serves as a good quasi-laboratory: It has three fiscal regimes - or modes of taxation - for the self-employed, which differ in their financial payoffs and in their administrative simplicity. These regimes have changed extensively over time - offering the opportunity to study how people learn about them and understand them. We find that the self-employed respond to the tax and administrative notches created by the eligibility thresholds: there is strong bunching right before the eligibility thresholds, which we use to estimate self-employed taxable income elasticities and the value of administrative simplicity. Even a small preference for administrative simplicity could explain the bunching observed. There is a sizable cost of tax complexity; agents are not immediately able to understand what the right regime choice is and there is evidence for costly learning over time. The cost of complexity is regressive because it affects mostly the uneducated, low income, and low skill agents. Agents who can be viewed as more informed and knowledgeable (e.g., the more educated or high-skilled) are more likely to make the correct regime choice and to learn faster.
    Keywords: self-employment, taxation, entrepreneurship
    JEL: H21
    Date: 2017–11
  3. By: McGrattan, Ellen R. (Federal Reserve Bank of Minneapolis); Bhandari, Anmol (Federal Reserve Bank of Minneapolis)
    Abstract: This paper uses theory disciplined by U.S. national accounts and business census data to measure private business sweat equity, which is the value of time to build customer bases, client lists, and other intangible assets. We estimate an aggregate sweat equity value of 0.65 times GDP, with little cross-sectional dispersion in valuations when compared to business net incomes and large cross-sectional dispersion in rates of return. Our estimate of sweat equity is close to the estimate of marketable fixed assets used in production by private businesses, implying a high ratio of intangible to total assets. We use the model to evaluate the impact of greater tax compliance of private businesses and lower tax rates on the net income of both privately held and publicly traded businesses.
    Keywords: Intangibles; Business valuation
    JEL: E13 E22 H25
    Date: 2017–11–20
  4. By: Wahrenburg, Mark
    Abstract: New provisioning rules introduced by IFRS 9 are expected to reduce the procyclicality of provisioning. Heterogeneity among banks in the procyclicality of provisioning may not only reflect the formal accounting rules, but also variation in discretionary provisioning policies. This paper presents empirical evidence on the heterogeneity of provisioning procyclicality among significant banks that are directly supervised by the ECB. In particular, this paper finds that provisioning is relatively procyclical at banks that have i) high loans-to-assets ratios, ii) high shares of non-interest income in total operating income, iii) low capitalization rates, and iv) low total assets. Supervisory guidance provided to banks on how to implement IFRS 9 has mostly been of a qualitative nature, and may prove inadequate to prevent an undesirably wide future variation in provisioning among EU banks.
    Keywords: IFRS 9,provisioning rules,EU banks
    Date: 2017
  5. By: ManYing Kang; Marcel Ausloos
    Abstract: Credit risk rating is shown to be a relevant determinant in order to estimate good corporate governance and to self-optimize capital structure. The conclusion is argued from a study on a selected (and justified) sample of (182) companies listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange and which use the same Shanghai Brilliance Credit Rating & Investors Service Company assessment criteria, for their credit ratings, from 2010 to 2015. Practically, 3 debt ratios are examined in terms of 11 characteristic variables. Moreover, any relationship between credit rating and corporate governance can be thought to be an interesting finding. The relationship between credit rating and leverage is not as evident as that found by other researchers from different countries; it is significantly positively related to the outside director, firm size, tangible assets and firm age, and CEO and chairman office plurality. However, leverage is found to be negatively correlated with board size, profitability, growth opportunity, and non-debt tax shield. Credit rating is positively associated with leverage, but in a less significant way. CEO-Board chairship duality is insignificantly related to leverage. The non-debt tax shield is significantly correlated with leverage. The correlation coefficient between CEO duality and auditor is positive but weakly significant, but seems not consistent with expectations. Finally, profitability cause could be regarded as an interesting finding. Indeed, there is an inverse correlation between profitability and total debt (Notice that the result supports the pecking order theory). In conclusion, it appears that credit rating has less effect on the so listed large Chinese companies than in other countries. Nevertheless, the perspective of assessing credit risk rating by relevant agencies is indubitably a recommended time dependent leverage determinant.
    Date: 2017–12
  6. By: International Monetary Fund
    Abstract: In response to a request from the Bank of Uganda (BOU) and in consultation with the African Department, a mission visited Kampala, Uganda during January 5–16, 2015, to provide technical assistance (TA) to the BOU for improving the existing financial transactions and balance sheet accounts by institutional sectors. This activity (15STU53) is conducted with support from the AFRITAC East. The mission reviewed the existing quarterly flow of fund accounts by institutional sectors and provided advice for development of sectoral financial transactions and balance sheets following the System of National Accounts 2008 (2008 SNA). In addition, the mission conducted an outreach workshop mainly for all the agencies that provide important data for development of sectoral financial transactions and balance sheets and possible user departments of the BOU.
    Keywords: Sub-Saharan Africa;Uganda;
    Date: 2017–10–06
  7. By: Dondena; CASE; IEB; PWC
    Abstract: This study provides a comprehensive review of the theoretical and empirical economic literature on tax and entrepreneurship, taking also into account a number of open, tax-related questions raised by the changing nature of entrepreneurship, symbolised by the growing importance of the collaborative economy
    Keywords: taxation, innovation, digital, entrepreneurship, collaborative economy
    JEL: H24 H25 L86 O32 O33
    Date: 2017–11

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.