nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2020‒06‒15
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Hometown favoritism and the quality of government monitoring: Evidence from rotation of Chinese auditor By Jian Chu; Raymond Fisman; Songtao Tan; Yongxiang Wang
  2. The Impact of Country-by-Country Reporting on Corporate Tax Avoidance By Felix Hugger
  3. Determinants of firm investment: Evidence from Slovenian firm-level data By Lenarčič, Črt; Papadopoulos, Georgios
  4. Financial VAT May Improve Trade Openness By Julio López-Laborda; Guillermo Peña
  5. How to articulate beyond GDP and businesses’ social and environmental indicators? By Olivier E. Malay
  6. The Role of Communication in the Organizational Support of Managers in Efficient Management By Izabela Sta?czyk; Magdalena M. Stuss; Anna Wzi?tek-Sta?ko

  1. By: Jian Chu (Nanjing University); Raymond Fisman (Boston University); Songtao Tan (Renmin University of China); Yongxiang Wang (University of Southern California, Shanghai Advanced Institute of Finance, Shanghai Jiaotong University, Shanghai)
    Abstract: Audits are a standard mechanism for reducing corruption in government investments. The quality of audits themselves, however, may be affected by relationships between auditor and target. We study whether provincial chief auditors in China show greater leniency in evaluating prefecture governments in their hometowns. In city-fixed-effect specifications – in which the role of shared background is identified from auditor turnover – we show that hometown auditors find 38 percent less in questionable monies. This hometown effect is similar throughout the auditor’s tenure, and is diminished for audits ordered by the provincial Organizations Department as a result of the departure of top city officials. We argue that our findings are most readily explained by favoritism rather than an endogenous response by local officials to concerns of better enforcement by hometown auditors. We complement these city-level findings with firm-level analyses of earnings manipulation by state-owned enterprises via real activity manipulation (a standard measure from the accounting literature), which we show is higher under hometown auditors.
    Keywords: Social Ties, Audit quality, State-owned enterprise, Government investment, China
    JEL: D73 G3 M42 H83
    Date: 2020–02
  2. By: Felix Hugger
    Abstract: Within the framework of the OECD BEPS initiative many countries introduced nonpublic country-by-country reporting for MNEs above a revenue threshold. The reports provide tax authorities with information on the global activities of multinationals at a country level. This paper investigates the responses of companies to country-bycountry reporting and tests whether the goal of a reduction in tax avoidance is achieved. Difference-in-difference estimations show an increase in consolidated effective tax rates of about one percentage point in the treatment group and provide evidence for a reduction in profit shifting at the subsidiary level. Responses are more pronounced for companies experiencing a stronger increase in detection probability. At the same time, total tax payments do not rise, which may be explained by a decrease in economic activity of companies in scope. The second part of the paper investigates avoidance of the disclosure obligation and documents substantial excess mass just below the revenue threshold in the post-reform years. This effect is stronger for company types with higher costs of CbCR and lower costs of adjusting revenues.
    Keywords: Corporate tax avoidance, multinational firms, country-by-country reporting, disclosure regulation
    JEL: F23 H26 K34 M48
    Date: 2019
  3. By: Lenarčič, Črt; Papadopoulos, Georgios
    Abstract: This paper examines the role of corporate balance sheet positions in determining Slovenian firms' investment behaviour. The analysis is based on the theoretical framework of the financial accelerator which suggests that firms' financial positions influence their real behaviour. The underlying hypotheses of the financial accelerator are tested, namely its asymmetric effect during crises and in respect to firms' size. In addition, the existence of differences in the relationship between the balance sheet variables and investment across various sectors is examined. The results indicate that indeed balance sheet strength is an important determinant of Slovenian firms' investment behaviour. Moreover, this relationship is affected by a firm's size but the effect of the crisis or its sectoral specialization do not seem to materially affect it.
    Keywords: Firm investment; financial accelerator; firm-level data
    JEL: C33 D22 E22
    Date: 2020–04–18
  4. By: Julio López-Laborda (Department of Public Economics, University of Zaragoza, Spain); Guillermo Peña (Department of Public Economics, University of Zaragoza, Spain)
    Abstract: This paper theoretically and empirically analyzes the influence on the rate of trade openness of the taxation of financial services under VAT. The empirical analysis is carried out using data from the OECD and 36 European Union countries for the period 1961-2012. Dynamic panel data techniques are used, concretely the GMM System, and an unbalanced panel is handled. The results corroborate that financial VAT, and in particular the “option-to-tax” method applied by some countries in the European Union, have a positive impact on a country’s rate of trade openness.
    Date: 2020–06
  5. By: Olivier E. Malay (IRES & Hoover Chair of Economic and Social Ethics, University of Louvain (UCLouvain))
    Abstract: In the past decades, new indicators have been developed to provide alternatives to Gross Domestic Product (GDP) at the macro level, and to financial indicators at the business level (businesses’ social and environmental indicators). However, these new indicators are poorly articulated between the business and the macro level. This paper aims to discuss the different possibilities of articulation that exist and outline a framework for a better micro-macro articulation. Firstly, we draw from the example of GDP and traditional business indicators by analysing the way they are articulated. Secondly, we review how sets of alternative indicators aim to articulate the macro and micro level by analysing indicators constructed around Gross National Happiness (GNH) and Sustainable Development Goals (SDGs). This research shows that two specific types of articulation exist between indicators at different levels, one referred to as the ‘accounting’ type and the other called the ‘conceptual’ type. Their strengths and limits will be discussed, as well as how they can be combined. Finally, recommendations will be provided on how to best articulate beyond GDP and business level indicators.
    Keywords: Sustainability indicators; Beyond GDP indicators; Business indicators; Corporate Social Responsibility (CSR); Micro macro articulation; Sustainable Development Goals (SDGs), Gross National Happiness (GNH)
    JEL: E0 M41 N10 N40 Q56
    Date: 2020–04–01
  6. By: Izabela Sta?czyk (Jagiellonian University, Institute of Economics, Finance and Management, Department of Human Resources Management); Magdalena M. Stuss (Jagiellonian University, Institute of Economics, Finance and Management, Department of Organization and Management); Anna Wzi?tek-Sta?ko (Jagiellonian University, Institute of Economics, Finance and Management, Department of Human Resources Management)
    Abstract: Communication process is one of the principal factors that exert influence upon the success of an entire organization. An extremely important role is that which is played by the management of the team. For that very reason, specialists in organizations organize managers in this area by building appropriate relationships, programs, and systems which will assist managers in the management of their objectives efficiently and effectively. In this paper, the results of research conducted amongst senior managers in three fields: in an outsourcing company, in a production company, and also amongst managers who were the attendees of post-graduate studies within the scope of HR management, and also that of audit, are presented. The semi-structured interview method, based upon the interview questionnaire developed by the authoress herself was applied.
    Keywords: Managerial support, Communication, Management of staff teams, Management efficiency
    JEL: J21 J24 L29
    Date: 2020–02

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