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on Accounting and Auditing |
| By: | Bakr Al-Gamrh (ESC [Rennes] - ESC Rennes School of Business); Umar Farooq; Tanveer Ahsan (RTO - Rethinking Tomorrow’s Organisation - Rennes School of Business - ESC [Rennes] - ESC Rennes School of Business) |
| Abstract: | This study investigates the relationships between economic uncertainty (EU), corporate governance (CG), and the cost of debt (COD). Using an index-based measure of CG, this study investigates how CG influences debtholders' perspectives during periods of EU. The study utilizes a dataset of nonfinancial firms listed in European countries from 2013 to 2021. We find that EU and COD are positively associated, indicating that EU increases the COD of European firms. Second, while CG has an insignificant direct impact on COD, it has a significant negative moderating impact on the relationship between EU and COD, suggesting that although a strong CG system may not have a significant direct impact on COD, it has the potential to reduce the uncertainty-induced COD of European firms. The results remain consistent with alternative proxies of COD and CG, as well as before and after the COVID-19 period. The results for CG subindices suggest that shareholder rights and compensation serve as reliable indicators for debtholders during periods of EU, while audit quality and board structure do not play any significant role in reducing uncertainty-induced COD. Our findings emphasize the key role that effective CG plays in mitigating EU's adverse effects on COD. Our results are robust to endogeneity issues such as reverse causality and selection bias, as well as to external factors like time and industry effects. |
| Keywords: | Economy, Europe, Debt, Corporate Governance, Economic uncertainty Corporate governance Cost of debt Europe |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04727168 |
| By: | Berman, Yonatan (King's College London); Klor, Esteban F. (Hebrew University, Jerusalem) |
| Abstract: | This paper studies the effects of capital tax reforms on retained earnings, dividend tax revenues, and income inequality in Israel between 2001 and 2020. We analyze two major dividend tax reforms: a permanent rate increase in 2012 and a temporary tax relief in 2017. By combining administrative income tax data, household surveys, and national accounts, we find that both permanent and temporary capital tax changes substantially affect retained earnings. The five percentage points increase in the dividend tax rate resulted in an immediate increase of over 100% in the withdrawal of retained earnings and in dividend tax revenues. While the permanent tax increase did not cause a long-term change in retained earnings withdrawals, the temporary tax relief triggered a significant increase in retained earnings after the relief period ended. Using these reforms, we improve the measurement of income inequality by directly observing the distribution of retained earnings. We find stable levels of income inequality in Israel after 2007, with a top 10% income share of around 48%, a high level by international standards. |
| Keywords: | capital tax reform, income inequality, retained earnings |
| JEL: | D3 H2 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17373 |
| By: | Giovanazzi, Carmen; Victor, Vincent; Putscher, Dorothee |
| Abstract: | We examine the dynamics of corporate investment in Germany during the 2000s, a period marked by stagnant macroeconomic investment spending. Employing a mixed-methods approach, we explore investment trends across national accounts data, firm-level financials, and responses from financial executives through our financial strategy survey. We show that while tangible investment remains the most important investment category, both macroeconomic and firm-level data indicate a decline. This decrease is offset by rising intangible investment, reflecting the emergence of the intangible economy. Despite this shift, investment has lagged behind rising corporate saving, leading to an increased net lending position. Often interpreted as corporate financialization, we find only moderate and partial evidence to support this view from a firm-level perspective. Additionally, while we find an increasing importance of M&A at the firm level, this development is not fully captured in the national accounts due to missing goodwill data. Our results underscore the necessity of multifaceted analysis in understanding investment dynamics. |
| Keywords: | CFO Survey, Intangible Economy, Investment Strategy, Germany, M&A, Mixed Methods, Financialization |
| JEL: | C83 D22 E01 E22 G3 L2 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifsowp:305260 |
| By: | Campana, Juan Manuel; Hein, Eckhard |
| Abstract: | This paper provides a comprehensive analysis of the German demand and growth regimes from 1999 to 2024 within the framework of Eurozone macroeconomic governance for three sub-periods: 1999-2009, 2010-2020, and 2021-2024. Applying a national income and financial accounting decomposition approach, we find an extreme export-led mercantilist (ELM) regime during the first period, a moderated ELM regime in the second period, and a weakly export-led (WEL) regime in the third period. Also, the application of the Sraffian supermultiplier growth accounting approach indicates that exports were the primary autonomous growth driver, though with a declining trend over time. The examination of the structural underpinnings of Germany's export-led regime reveals that exports are mainly in capital goods and medium to high-technology products with a high income elasticity of demand, and thus rely on growth dynamics in the respective destination countries. The analysis of the German macroeconomic policy regime shaped by the Eurozone governance system finds for the first period a restrictive macroeconomic policy stance that suppressed domestic demand, making exports the primary growth driver. The second period saw a more expansionary stance, leading to a less extreme ELM regime. This trend continued into the third period, leading to a WEL regime with balanced domestic and external growth drivers. The paper concludes by advocating for a coordinated Eurozone macroeconomic policy mix that generates sufficient domestic demand and imports to balance the structurally shaped German export dynamics and to prevent regional and global current account imbalances. |
| Keywords: | Eurozone governance, Germany, growth decomposition, macroeconomic policy regime |
| JEL: | E11 E12 E61 O52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ipewps:305270 |