nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2019‒05‒20
seven papers chosen by

  1. What type of microfinance institutions comply with International Financial Reporting Standards? By Magloire Nya Tchatchoua; Isabelle Pignatel; Hubert Tchakoute Tchuigoua
  2. Regulatory Spillovers in Common Audit Markets By Duguay, Raphael; Minnis, Michael; Sutherland, Andrew
  3. The Determinants of FX Derivatives Use : Empirical Evidence from Turkish Non-Financial Firms in BIST By Mustafa Akay; Doruk Kucuksarac; Muhammed Hasan Yilmaz
  4. Double-Counting of Investment By Robert J. Barro
  5. The Governance of Risk Management: The Importance of Directors’ Independence and Financial Knowledge By Dionne, Georges; Maalaoui Chun, Olfa; Triki, Thouraya
  6. Domestic intellectual property rights protection and exports: Accessing the credit channel. By Ndubuisi, Gideon
  7. The corporate saving glut and the current account in Germany By Klug, Thorsten; Mayer, Eric; Schuler, Tobias

  1. By: Magloire Nya Tchatchoua; Isabelle Pignatel; Hubert Tchakoute Tchuigoua
    Abstract: What are the characteristics of microfinance institutions (MFIs) that choose to draft their financial statements according to international accounting standards? That is the question this article investigates. We study a pooled sample of 5,290 audited financial statements from 2007 to 2015 and find consistent evidence that the institutional framework, for-profit status, and maturity, are likely to drive the MFIs choice to comply with international financial reporting standards. Results are robust after controlling for whether MFIs operate in a country where IFRS are permitted or required.
    Keywords: IFRS; Microfinance; Audit
    JEL: G21 G34 L31 M42
    Date: 2019–05–10
  2. By: Duguay, Raphael; Minnis, Michael; Sutherland, Andrew
    Abstract: We find that Sarbanes-Oxley (SOX) had two significant effects on the audit market for nonpublic entities. The first short-run effect stems from inelastic labor supply coupled with an audit demand shock from public companies. As a result, private companies reduced their use of attested financial reports in bank financing by 12%, and audit fee increases for nonprofit organizations (NPOs) more than doubled. The second long-run effect was a transformation in the audit supply structure. After SOX, NPOs were less likely to match with auditors most exposed to public companies, while auditors increasingly specialized their offices based on client type. Audit market concentration for NPOs dropped by more than half within five years of SOX and remained at this level through the end of our sample in 2013, while the number of suppliers increased by 26%. Our results demonstrate how regulation directed at public companies generates economically im-portant spillovers for nonpublic entities.
    Keywords: Sarbanes-Oxley, securities regulation, auditing, market structure, accounting, private firms, non-profits, labor economics.
    JEL: H83 M12 M2 M21 M41 M42 M48 M49
    Date: 2019
  3. By: Mustafa Akay; Doruk Kucuksarac; Muhammed Hasan Yilmaz
    Abstract: [EN] The increasing share of foreign currency debt in emerging market corporates has drawn attention in the last years. Therefore, containing FX risk of the corporates has become a priority for emerging markets. In this regard, the use of FX derivatives is one of the most commonly used solutions to hedge against FX risk. However, there seems to be substantial heterogeneity across the corporates in terms of derivative use. Therefore, understanding which corporates are more likely to engage in FX derivatives is crucial in terms of policy design. This study aims to determine firm-specific factors for derivative use of the nonfinancial firms quoted in Borsa Istanbul (BIST). The descriptive findings show that off-balance sheet accounts driven by FX derivatives have increased as well as on-balance sheet FX short position, which indicates that some of the Turkish nonfinancial firms engage in hedging activities. The study also employs a probit model for the identification of common characteristics of non-financial firms which use FX derivative instruments. It is found that firms with larger size and higher leverage ratios tend to utilize FX derivatives more whereas the firms with considerably ample liquidity buffers and higher tangible assets tend to use fewer FX derivatives. Then, we investigate the extent of derivative use with fixed effects panel regressions. The results show that firm size, tangibility ratio and degree of internationalization are found to be significant determinants of the extent of derivative use. [TR] Gelismekte olan ulke (GOU) firmalarinin doviz borclulugundaki son yillardaki artis dikkat ceken seviyelere gelmistir. Bu nedenle, firmalarin doviz kuru riskini azaltmak gelismekte olan ulkeler acisindan oncelik haline gelmistir. Bu baglamda, doviz kuru uzerine yazilmis turev araclarin (doviz turev) kullanilmasi, en yaygin yontemlerden biri olarak on plana cikmaktadir. Bununla birlikte, turev arac kullanimi acisindan firmalar arasinda heterojenlik gozlenmektedir. Bu nedenle, hangi tip firmalarin doviz turev araclarini kullandiginin ve kullanim tutarinda belirleyici olan unsurlarin anlasilmasi politika tasarimi acisindan onem tasimaktadir. Bu calismada, Borsa Istanbul'da (BIST) islem goren finansal kesim disi firmalarin turev kullaniminda belirleyici olan unsurlar incelenmektedir. Tanimlayici bulgular, doviz turev araclari tarafindan kaynaklanan bilanco disi pozisyonun, bilanco ici doviz acik pozisyonunu ile beraber arttigini gostermektedir. Bu durum, bazi firmalarin riskten korunma faaliyetlerinde bulunduguna isaret etmektedir. Calismada ayrica doviz turev araclari kullanan finansal kesim disi firmalarin ortak ozelliklerinin belirlenmesi icin kullanilan probit model sonuclari, buyuk firmalarin veya yuksek kaldirac oranlarina sahip firmalarin doviz turev araclarini daha fazla kullanma egiliminde oldugunu, ancak yuksek likidite tamponu ve maddi varliga sahip firmalarin ise daha az doviz turev araci kullanma egiliminde oldugunu gostermektedir. Son olarak, turev kullanim hacmi sabit etkiler panel regresyonlari ile incelenmis olup sonuclar, firma buyuklugunun, maddi duran varlik oraninin ve operasyonel anlamda uluslararasilasma derecesinin turev kullanim hacminde belirleyici oldugunu gostermektedir.
    Date: 2019
  4. By: Robert J. Barro
    Abstract: The national income and product accounts double-count investment, which enters once when it occurs and again in present value when the cumulated capital leads to more rental income. From the perspective of resources available intertemporally for consumption, the double-counting issue implies over-statement of levels of GDP and national income. There is also exaggeration of capital-income shares. A proposed alternative measure of product and income involves a form of full expensing for gross investment. In the steady state, revised product and income correspond to consumption. Outside of the steady state, the measure deviates from consumption because full expensing relates to the long-run flow of gross investment, not the current flow. At a practical level, the new concept requires only an extension from the standard depreciation rate to an effective rate that adds in the economy’s expected long-run rate of economic growth.
    JEL: E01 E22
    Date: 2019–05
  5. By: Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management); Maalaoui Chun, Olfa (HEC Montreal, Canada Research Chair in Risk Management); Triki, Thouraya (HEC Montreal, Canada Research Chair in Risk Management)
    Abstract: This paper tests the effects of the independence and financial knowledge of directors on risk management and firm value in the gold mining industry. Our original hand-collected database on directors’ financial education, accounting background, and financial experience allows us to test the effect of each dimension of financial knowledge on risk management activities. We show that directors’ financial knowledge increases firm value through the risk management channel. This effect is strengthened by the independence of the directors on the board and on the audit committee. Extending the dimension of education, we show that, following unexpected shocks to gold prices, educated hedgers are more effective than average hedgers in the industry. As a policy implication, our results suggest adding the experience and education dimensions to the 2002 Sarbanes–Oxley Act and New York Stock Exchange requirements for financial literacy.
    Keywords: Risk management governance; financial knowledge; financial and accounting education of director; financial experience of director; independence of director; policy implications.
    JEL: D83 G18 G30 G32 G34 G38
    Date: 2018–01–04
  6. By: Ndubuisi, Gideon (UNU-MERIT)
    Abstract: Recent studies on the export effects of domestic intellectual property rights protection focus on the innovation, border and technology transfer channels to underscore the pathways by which effective domestic IPRs protection influences own country's export. I extend this literature by arguing that another pathway domestic IPRs protection affects own country's export is via the credit channel i.e. firms access to external finance. Among many others, this occurs because effective domestic IPRs protection creates a scenario wherein exporters can use their intellectual properties in the same way they use tangible assets as collateral in order to overcome the huge variable and upfront fixed costs they face. To underscore this pathway, I evaluate the export effect of domestic IPRs protection within the comparative model framework and find empirical evidence for my hypothesis, with the results indicating that countries with more effective IPRs protection export more from sectors that depend more on external finance and that have more intangible assets.
    Keywords: Intellectual Property Rights, Exports, Access to Finance
    JEL: F10 F13 F14 F36 O33 O34
    Date: 2019–05–06
  7. By: Klug, Thorsten; Mayer, Eric; Schuler, Tobias
    Abstract: We investigate for the case of Germany the positive correlation between the corporate saving glut in the non-financial corporate sector and the current account surplus from a capital account perspective. By employing sign restrictions our findings suggest that mostly labor market, world demand and financial friction shocks account for the joint dynamics of excess corporate saving and the current account surplus. Household saving shocks, in contrast, cannot explain the correlation. We conclude that the corporate saving glut, explained through these factors, is the main driver of the current account surplus.
    Keywords: current account,corporate saving,macro shocks
    JEL: E32 F32
    Date: 2019

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