nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2019‒02‒25
five papers chosen by

  1. Dividends from Unrealized Earnings and Default Risk By Ester Chen; Ilanit Gavious; Nadav Steinberg
  2. The Internationalization of R&D By Ali-Yrkkö, Jyrki; Pajarinen, Mika
  3. Tax administration and compliance: evidence from medieval Paris By Slivinski, Al; Sussman, Nathan
  4. Evolution of financial information and management control over the last 150 years. The case of Bodegas Torres By Oriol Amat; Natàlia Amat
  5. Currency mispricing and dealer balance sheets By Cenedese, Gino; Della Corte, Pasquale; Wang, Tianyu

  1. By: Ester Chen (Peres Academic Center); Ilanit Gavious (Ben-Gurion University); Nadav Steinberg (Bank of Israel)
    Abstract: Using hand-collected data on Israeli firms’ unrealized earnings and debt restructurings following adoption of the IFRS, we investigate whether and how dividend payments based on unrealized revaluation earnings affect a firm’s default risk. Our results indicate that in the era of fair value accounting, the origin of the dividend payout—coming from unrealized versus realized earnings—has a significant effect on a firm’s default risk above and beyond the effect of the extent of the payment. Specifically, controlling for various determinants of financial risk, including the amount of the dividends paid (originating from either realized or unrealized earnings), companies are over three times more likely to subsequently require debt restructuring if they distribute dividends based on unrealized earnings. However, this enhanced risk seems to be mispriced by the market; firms that distribute dividends based on unrealized earnings exhibit an insignificantly different cost of debt than firms that never do so.
    Keywords: cost of debt, default risk, dividends, fair value accounting
    JEL: M21 M41 G35
    Date: 2017–06
  2. By: Ali-Yrkkö, Jyrki; Pajarinen, Mika
    Abstract: Abstract The aim of this paper is to broaden the knowledge concerning the development of Finnish firms’ innovation activities. The results show that during 2008–2017 the share of overseas R&D has risen. Currently, 14–25% of Finnish firms’ total R&D are conducted overseas. If Nokia is taken into account, the share of overseas R&D rises to 53–65%. Furthermore, the results suggest that Finnish firms invest approximately Eur 1.8 billion in innovation activities outside the traditional R&D definition.
    Keywords: Research, Development, R&D, Company, BERD, Internationalization, Globalisation
    JEL: O31 O32
    Date: 2019–02–15
  3. By: Slivinski, Al; Sussman, Nathan
    Abstract: We analyze the Parisian taille of the late 13th century - a taxation mechanism used to finance periodic major expenditures by the French Crown, including wars. Our major finding is that this system was remarkably successful along a number of dimensions, in an environment without the administrative structures used by contemporary governments. The taille's essential features were; an agreement between the king and city government to collect a fixed amount of revenue, and a collection process that made use of information about taxpayers held by their fellow artisans and/or neighbors. We show that it collected considerable sums without social unrest, with high levels of compliance, and administrative costs that were low even by modern standards. We also argue that its success may have lessons for improved tax collection and compliance in contemporary less-developed economies.
    Keywords: compliance; evasion; Fairness; institutions; middle ages; Paris; taxation
    JEL: H2 H21 H26 N13 N43
    Date: 2019–02
  4. By: Oriol Amat; Natàlia Amat
    Abstract: This article describes the most relevant milestones in the development of both financial information and management control, from the inception of the business up to the present day but particularly over the last 150 years. As a case study, it sets out the development of the wine producing company Bodegas Torres, a family group with its headquarters in Vilafranca del Penedés (Barcelona). It is a company renowned for its innovation and excellence in the world of wine producing, but also in management, including its financial information and management control practices.
    Keywords: Financial information, management control, winemaking, Miguel Torres.
    JEL: M41 M42
    Date: 2019–02
  5. By: Cenedese, Gino (Fulcrum Asset Management); Della Corte, Pasquale (Bank of England); Wang, Tianyu (Tsinghua University)
    Abstract: We relate currency mispricing originating from the breakdown of covered interest rate parity to the dealer balance-sheet constraints resulting from the post-crisis financial regulation. Using a unique data set on contract-level foreign exchange derivatives with disclosed counterparty identities, we find that dealers with a higher leverage ratio demand an additional premium from their clients for synthetic dollar funding. We handle endogeneity using two exogenous variations associated with the public disclosure of the leverage ratio, and the introduction of the UK leverage ratio framework while controlling for changes in demand conditions at the client level.
    Keywords: Exchange rates; dollar basis covered interest parity condition; arbitrage opportunities.
    JEL: F31 G12 G15
    Date: 2019–02–15

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