nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2024‒03‒18
six papers chosen by

  1. Reporting and derivation of data on financial transactions related to banks' securities holdings By Antonio Colangelo; Asier Cornejo Pérez; Danilo Liberati; Giorgio Nuzzo; Antonio Rodríguez Caloca
  2. Clever planning or unfair play? Exploring the economic and statistical impacts of tax avoidance by multinationals By Alessio Anzuini; Elena Pisano; Luca Rossi; Alessandra Sanelli; Enrico Tosti; Ernesto Zangari
  3. ChatGPT and Corporate Policies By Manish Jha; Jialin Qian; Michael Weber; Baozhong Yang
  4. The Dynamic Effects of Income Tax Changes in a World of Ideas By James Cloyne; Joseba Martinez; Haroon Mumtaz; Paolo Surico
  5. National central banks and the governance of the European system of central banks By Martin F. Hellwig
  6. How Do Intangible Capital Stocks of Finland, Sweden, and Germany Compare? By Koski, Heli; Pajarinen, Mika; Rouvinen, Petri

  1. By: Antonio Colangelo (European Central Bank); Asier Cornejo Pérez (European Central Bank); Danilo Liberati (Bank of Italy); Giorgio Nuzzo (Bank of Italy); Antonio Rodríguez Caloca (Bank of Italy)
    Abstract: This paper contributes to the ongoing efforts by the European authorities to reduce the reporting burden for banks by assessing the statistical methods currently used to compile data pertaining to financial transactions on securities holdings. Based on statistical information collected by the Bank of Italy, we compare data on purchases of securities (net of sales and redemptions) reported by banks with transaction estimates based on indirect (i.e. balance sheet) methods envisaged within the methodological framework of datasets compiled by the European System of Central Banks (ESCB). Although the direct method of collecting data on transactions is more costly for reporting agents, it produces results which are fully aligned with current statistical methodological standards (European System of Accounts 2010, ESA 2010). By contrast, the indirect method is a simplified and less costly approach. The recent development of high-quality data sources such as the ESCB integrated system for the market prices of securities – the Centralised Securities Database – has boosted the attractiveness of indirect methods, since they have the potential to deliver accurate and reliable estimates. The significance of the differences between direct collection and indirect compilation of these data is analysed in detail for listed ISIN securities that are actively traded on exchanges, by also considering the impact of price volatility and trading activity. From an aggregated perspective, all indirect methods produce results which are comparable and consistent with the ESA 2010 methodology for all instrument types. There are some minor differences for equity instruments, due to the higher price volatility and trading activity associated with these instruments, but the overall aggregated dynamics are also well captured by indirect methods in these cases. The results thus support implementing simplified reporting solutions that would reduce the burden of statistical data collection without jeopardising statistical quality. It should also be noted that the differences can be expected to be even smaller if the methods are applied at a monthly frequency (as may be the case in future in the context of the ESCB Integrated Reporting Framework, for instance) instead of at a quarterly frequency, as in our exercise.
    Keywords: micro data, security-by-security data, securities, transaction data
    JEL: C18 C81 G15
    Date: 2023–10
  2. By: Alessio Anzuini (Bank of Italy); Elena Pisano (Bank of Italy); Luca Rossi (Bank of Italy); Alessandra Sanelli (Bank of Italy); Enrico Tosti (Bank of Italy); Ernesto Zangari (Bank of Italy)
    Abstract: Following the 2007-8 financial crisis, increasing concern surrounding tax avoidance by multinational enterprises (MNEs) drew attention from academia and policy circles alike. Profit shifting practices not only impact revenue and fairness, but also exacerbate global tax competition and generate economic distortions. Tax avoidance by MNEs is achieved through several complex strategies, in which tax havens and offshore financial centres typically play a prominent role. Policy initiatives adopted under the aegis of the G20 and the OECD, including the BEPS plan and the Two-Pillar agreement, attempt to address this issue, but their final impact remains uncertain. The interplay between the tax strategies of MNEs and governments' efforts to attract investments also distorts external economic statistics. Indeed, residency-based reporting blurs the distinction between profit-driven and genuine investments. Recent economic literature has developed methods to better allocate foreign direct investments (FDIs) and portfolio investments, revealing a different picture of international capital flows, both internationally and in Italy, where external statistics show a high incidence of tax havens.
    Keywords: profit shifting, tax avoidance, BEPS, Two Pillars, global minimum tax, official statistics, cross-border investments
    JEL: F53 H2 K20 K34 M48
    Date: 2023–10
  3. By: Manish Jha; Jialin Qian; Michael Weber; Baozhong Yang
    Abstract: We create a firm-level ChatGPT investment score, based on conference calls, that measures managers' anticipated changes in capital expenditures. We validate the score with interpretable textual content and its strong correlation with CFO survey responses. The investment score predicts future capital expenditure for up to nine quarters, controlling for Tobin's q and other determinants, implying the investment score provides incremental information about firms' future investment opportunities. The investment score also separately forecasts future total, intangible, and R&D investments. High-investment-score firms experience significant negative future abnormal returns. We demonstrate ChatGPT's applicability to measure other policies, such as dividends and employment.
    JEL: C81 E22 G14 G31 G32 O33
    Date: 2024–02
  4. By: James Cloyne (University of California Davis, NBER and CEPR); Joseba Martinez (London Business School and CEPR); Haroon Mumtaz (Queen Mary, University of London); Paolo Surico (London Business School and CEPR)
    Abstract: Using a narrative identification of US tax changes over the post-WWII period, we show that corporate income tax cuts foster R&D spending and innovation, leading to a persistent increase in aggregate productivity and output. In contrast, changes in the average personal income tax rate have mostly short-term e ects. An estimated endogenous productivity model highlights therole of "applied research" - over and above formal R&D - as a main force behind these results, and suggests a social rate of return to investment in innovation between 20% and 75%.
    Keywords: corporate taxes, narrative identification, TFP, R&D, technological adoption.
    JEL: E23 E62 O32 O34 O38
  5. By: Martin F. Hellwig (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: The paper analyses the role of national central banks (NCBs) in the governance of the European System of Central Banks (ESCB). NCBs are the owners of the European Central Bank (ECB), and their governors dominate the ECB’s Governing Council, but in monetary policy operations, NCBs are subordinated to the ECB. The dominance of NCB governors has materially affected Governing Council decisions on relations between NCBs and the ECB, allowing the NCBs to maintain some of their erstwhile glory, sometimes in contradiction to the primary law. Examples involve the monetary funding of investments declared as non-monetary, violations of Treaty provisions for the allocation of income from monetary policy operations, and accounting rules that obfuscate the boundary between ECB-subordinate and independent activities of NCBs. The net effect of these developments is to enlarge the domain of NCB activities.
    Keywords: European Monetary Union, European System of Central Banks, Governance of the Eurosystem, ANFA, ELA, PSPP, Central-Bank Accounting and Balance Sheets
    JEL: E50 E58 F53
    Date: 2024–02
  6. By: Koski, Heli; Pajarinen, Mika; Rouvinen, Petri
    Abstract: Abstract Investment is an expenditure from which future returns are expected. The portion of past investments that retains potential for future returns is referred to as capital. If capital can be touched, it is tangible; otherwise, it is intangible. Brands and patents are examples of intangible capital. For decades, Finland has been making more investments in intangible rather than tangible productive assets. However, due to the different accumulation and obsolescence of the two capital types, Finland’s productive capital stock is still predominantly tangible. Finland and Germany are similar in terms of intangible capital. In contrast, Sweden invests significantly more in intangible capital than Finland and also utilizes these investments more efficiently. Finland’s intangible capital (per hour worked) is only two-thirds of that in Sweden. The capital related to software, databases, and data in Sweden is four times greater than in Finland.
    Keywords: Intangible capital, Business investment, Labor productivity, National accounts
    JEL: D24 E22 O30 O47
    Date: 2024–02–27

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