nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2019‒08‒19
seven papers chosen by

  1. Role of cross currency swap markets in funding and investment decisions By Brophy, Thomas; Herrala, Niko; Jurado, Raquel; Katsalirou, Irene; Le Quéau, Léa; Lizarazo, Christian; O’Donnell, Seamus
  2. Government R&D Support for SMEs: Policy Effects and Improvement Measures By Lee, Sungho
  3. Does accrual accounting alter fiscal policy decisions? Evidence from Germany By Christofzik, Désirée I.
  4. Public Sector Balance Sheet Strength and the Macro Economy By Seyed Reza Yousefi
  5. Detection of Accounting Anomalies in the Latent Space using Adversarial Autoencoder Neural Networks By Marco Schreyer; Timur Sattarov; Christian Schulze; Bernd Reimer; Damian Borth
  6. Stated preferences for capital taxation - tax design, misinformation and the role of partisanship By Chirvi, Malte; Schneider, Cornelius
  7. Tax-Sheltered Retirement Accounts: Can Financial Education Improve Decisions? By M. Martin Boyer; Philippe d'Astous; Pierre-Carl Michaud

  1. By: Brophy, Thomas; Herrala, Niko; Jurado, Raquel; Katsalirou, Irene; Le Quéau, Léa; Lizarazo, Christian; O’Donnell, Seamus
    Abstract: A US dollar funding premium in the EUR/USD cross currency swap market has been in existence since 2008. Whilst there are many reasons behind this dislocation, since 2014 the divergence in monetary policy between the euro area and the United States has played a growing role. This paper aims at exploring and gaining more insight into the role the Eurosystem’s Expanded Asset purchase Programme (APP) has had in guiding investment and funding decisions and its influence on the cross currency basis. The downward pressure on yields, exerted by the APP, has made euro assets less attractive and has led investors to search for yield abroad. At the same time, the decline in yields and tighter credit spreads have attracted US corporate issuers to the euro market in search of cheaper funding costs. These cross-border flows from issuers and investors have played a strong role in driving the US dollar funding premium. The purpose of this study is to gauge whether these changing trends in cross-border flows have implications for the implementation of the Eurosystem’s APP. Beyond the structural increase in the US dollar funding premium described above, a cyclical component has led to an amplification of the premium over balance sheet reporting dates, due to new bank regulations. This paper also analyses the behaviour of euro area banks in cross currency swap markets over balance sheet reporting dates, using the money market statistical reporting (MMSR) dataset in order to discern whether the increase in the US dollar funding premium at these specific points in time has an adverse impact on the transmission of monetary policy. JEL Classification: D53, E52, G11, G15, G18
    Keywords: balance sheet constraints, balance sheet reporting dates, cross-border investment and funding flows, cross currency basis swap, monetary policy divergence, US dollar funding premium
    Date: 2019–08
  2. By: Lee, Sungho
    Abstract: The government's R&D grant for SMEs has risen to 3 trillion won a year, placing Korea second among OECD nations. Indeed, analysis revealed that government support has not only expanded corporate R&D investment and registration of intellectual property rights but has also increased investment in tangible and human assets and marketing. However, there has been a lack of improvements found in the value added, sales and operating profit because the recipient selection system, which relies solely on the qualitative assessments of technology experts was ineffective. Nevertheless, if a predictive model was properly applied to the system, the causal effect on the value added could increase by more than two fold. Accordingly, to develop such a model, it is important to focus on the economic performance rather than the technical achievements. Also, more policy experiments should be conducted on small firms and a phased approach for R&D financing should to be adopted (① grant → ② equity investment → ③ loan). - Korea's R&D subsidy for SMEs has risen to approx. 3 trillion won a year, making Korea the second largest spender among OECD nations. - The SBIR, the main R&D support program for SMEs in the US, is structured in three phases. - The US case shows that the small lump sum grants for a large number of small firms is more effective than large funds for a few mid-sized firms. - The Korean government's corporate R&D support mostly targets medium-sized development activities, not small-scaled exploratory research. - Current corporate R&D support which is evaluated by the number of registered patents and publications must be reformed. - The scalability of intangible assets is as important as the economies of scale of tangible assets. - In all indicators, recipients exhibited much better performance than nonrecipients at the time of support. - In most performance indicators, recipients stand lower than non-recipients in terms of growth. The former even posted negative growth in operating profit and R&D investment. - This study estimated the causal effects using the two-step approach which integrates the nonparametric matching method and parametric regression model. - The government's R&D support contributed to SMEs' debt and equity financing, and firms expanded their investment in capabilities/ assets such as intellectual properties, relational assets, tangible assets and human capital. - Using the funding, firms invested more in capabilities/ assets, but it did not lead to improving the value added, operating profit and sales growth. - Firms with high growth prospects were selected as recipients in a smaller proportion while those with low growth prospects were selected as recipients in a larger proportion, making the value added growth of recipients lower than the average. - Estimation of the heterogenous causal effects on the value added increments found a positive effect only in the top four deciles. - If the support given to those with negative treatment effect was redistributed, this could double the positive effect. - In keeping pace with the flexibility in corporate R&D practices, the government needs to explore an operating system in which an active exchange of feedback takes place between R&D experiments and market verification. - This study suggests reforming the existing recipient selection practice which is solely based on the qualitative evaluation by technology experts, and promoting the use of the predictive model and a phased expansion of policy experiments. - Evaluations should target economic performance, not publications, IP rights and R&D amount, and a selection model should be developed to optimize the evaluation results. - In accordance to risks associated with the respective stages of R&D and commercialization, the government needs to choose the most suitable financing methods among grants, equity investment and loan support. - More free contests should be offered.
    Date: 2018
  3. By: Christofzik, Désirée I.
    Abstract: Many governments have replaced traditional cash-based accounting with some form of accrual-based accounting system. However, empirical evidence on the effects of the public accounting system on fiscal policy is scarce. Following rules by the federal states, municipalities in Germany have adopted accrual-based accounting systems gradually. By exploiting variations over time and across states I find no evidence for an impact on the overall financial balance. However, my findings suggest that accrual accounting has altered the structure of the budget. Revenues from the sales of non-financial assets have decreased significantly. This supports the hypothesis that municipalities had used these one-off measures before to meet fiscal constraints. Using data on entities controlled by the municipalities, the analysis provides no evidence for repercussions on these public funds, institutions or enterprises.
    Keywords: public sector accounting,accrual accounting,local public policy,fiscal rules,stock-flow adjustments
    JEL: H83 H71 H72
    Date: 2019
  4. By: Seyed Reza Yousefi
    Abstract: This paper introduces concepts of public sector balance sheet (PSBS) strength, taking into account different aspects of what governments own in addition to what they owe. It develops measures of PSBS strength and investigates their macroeconomic implications. Empirical estimations show that in their pricing of sovereign bonds, financial markets account for government assets and net worth in addition to their liabilities. Furthermore, economies with stronger public sector balance sheets experience shallower recessions and recover faster in the aftermath of economic downturns. This faster return to growth can be explained by the greater space for countercyclical fiscal policy in countries with stronger balance sheets.
    Date: 2019–08–06
  5. By: Marco Schreyer; Timur Sattarov; Christian Schulze; Bernd Reimer; Damian Borth
    Abstract: The detection of fraud in accounting data is a long-standing challenge in financial statement audits. Nowadays, the majority of applied techniques refer to handcrafted rules derived from known fraud scenarios. While fairly successful, these rules exhibit the drawback that they often fail to generalize beyond known fraud scenarios and fraudsters gradually find ways to circumvent them. In contrast, more advanced approaches inspired by the recent success of deep learning often lack seamless interpretability of the detected results. To overcome this challenge, we propose the application of adversarial autoencoder networks. We demonstrate that such artificial neural networks are capable of learning a semantic meaningful representation of real-world journal entries. The learned representation provides a holistic view on a given set of journal entries and significantly improves the interpretability of detected accounting anomalies. We show that such a representation combined with the networks reconstruction error can be utilized as an unsupervised and highly adaptive anomaly assessment. Experiments on two datasets and initial feedback received by forensic accountants underpinned the effectiveness of the approach.
    Date: 2019–08
  6. By: Chirvi, Malte; Schneider, Cornelius
    Abstract: Although theoretical research on optimal capital taxation suggest to incorporate public opinions, the empirical literature on preferences regarding capital taxation almost exclusively focusses on the emotionally loaded estate tax. This paper presents a more comprehensive investigation of preferences towards different, tangible instruments of capital taxation beyond the estate tax. In particular, we focus on the effects of tax-specific design features and personal as well as asset-related characteristics. For this, we conducted a factorial survey experiment with over 3,200 respondents on Amazon's Mechanical Turk (MTurk). By using different tax instruments as reference points for each other we strengthen the robustness of our findings. While our results confirm well-established findings of previous literature, we show that the specific design of tax instruments is indeed decisive for preferences over capital taxation. Whereas proposed effective tax rates of the estate tax and the one-time wealth tax show a significant progressivity, there is no clear pattern for both periodical taxes. Furthermore, preferences depend on the respondents' characteristics, especially their partisanship. Democrats clearly prefer concentrated over periodical capital taxes, Republicans' only articulated preference refers to the particular rejection of the estate tax. Remarkably, this opposition does not hold for a perfectly congruent one-time wealth tax. This result provides novel empirical evidence for drivers of the opposition towards the estate tax beyond mere misinformation discussed by previous literature: emotional charge potentially triggered by political framing.
    JEL: C90 D31 H21 H24
    Date: 2019
  7. By: M. Martin Boyer; Philippe d'Astous; Pierre-Carl Michaud
    Abstract: We conduct a stated-choice experiment to analyze the decision to contribute to front- or back-loaded tax-sheltered savings accounts. Our experimental design includes a randomized financial education treatment that provides information on these accounts. We assess whether respondents learn about the tax implications of these accounts and make contribution choices that increase after-tax income when exposed to the intervention. We find that our intervention improves both the understanding of the tax implications of the savings accounts (an increase of 6 to 15 percent) and contribution decisions. We find effects on after-tax lifetime-income for respondents by up to $1,900 per scenario presented.
    JEL: D14 G11 H31
    Date: 2019–07

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