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on Accounting and Auditing |
| By: | Bachas, Pierre; Brockmeyer, Anne; Dom, Roel; Semelet, Camille |
| Abstract: | We document new facts on corporate taxation and the revenue potential of corporate minimum taxes, leveraging firm-level tax returns from 16 countries. First, effective tax rates (ETRs) follow a hump-shaped pattern with firm size: small firms benefit from reduced rates, while large firms take up tax incentives, leaving mid-sized firms with the highest ETRs. On average, the ETR for the largest 1% of firms is 2.2 percentage points lower than the average ETR for top decile firms. Second, although statutory tax rates are above 15% in all sample countries, over a quarter of top firms face an ETR below 15%, challenging the simple tax haven vs non-haven dichotomy. Third, a simple 15% domestic minimum tax for the top 1% firms could raise corporate taxes by 14% on average across countries, absent behavioral responses. In contrast, the global minimum top-up tax would only raise a quarter of this revenue due to its generous deductions and a smaller number of firms in scope. |
| Keywords: | Firm size; Tax incentives; Global minimum tax; Corporate effective tax rate |
| JEL: | H25 H87 O23 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20609 |
| By: | Bachas, Pierre; Brockmeyer, Anne; Ferreira, Alipio; Sarr, Bassirou |
| Abstract: | Can algorithms enhance bureaucrats’ work in developing countries? In data-poor environments, bureaucrats often exercise discretion over key decisions, such as audit selection. Exploiting newly digitized micro-data, we conduct an at-scale field experiment whereby half of Senegal’s annual audit program is selected by tax inspectors and the other half by a transparent risk-scoring algorithm. Algorithm-selected audits are 18 ppt less likely to be conducted, detect 89% less evasion, are less cost-effective, and don’t reduce corruption. Moreover, even a machine-learning algorithm would only have moderately raised detected evasion. These results are consistent with bureaucrats’ expertise, the task complexity, and inherent data limitations. |
| Keywords: | Algorithms; Firms; Bureaucrats; Taxation; State capacity |
| JEL: | O17 H83 H26 D73 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20608 |
| By: | Giovanni Di Bartolomeo; Silvia Fedeli; Stefano Papa |
| Abstract: | We test whether minimal, non-informative messages can nudge tax compliance beyond standard deterrence. In a within-subjects lab experiment, we randomize exposure to either a reminder that leaves audit probability unchanged or an informative warningtied to higher audit probability, and estimate e¤ects on both the probability of evasion and the share of income evaded. A short non-informative reminder, holding incentives fixed, lowers the probability of evasion by about 16 percentage points, with no detectable effect on the evaded share among evaders; informative messages add at most marginal effects once audit probability is controlled for. |
| Keywords: | tax compliance; nudge; deterrence; audit; laboratory experiment |
| JEL: | H26 C91 D91 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp281 |
| By: | Boyarchenko, Nina; Hachem, Kinda; Kleymenova, Anya |
| Abstract: | A large literature at the intersection of economics and finance offers prescriptions for regulating banks to increase financial stability. This literature abstracts from the discretion that accounting standards give banks over financial reporting, creating a gap between the information assumed to be available to regulators in models of optimal regulation and the information available to regulators in reality. We bridge insights from the economics, finance, and accounting literatures to synthesize knowledge about the design and implementation of bank regulation and identify areas where more work is needed. We present a simple framework for organizing the relevant ideas, namely the externalities that motivate bank regulation, the rationales for allowing accounting discretion, and the use of discretion to circumvent regulation. Our takeaway from reviewing work in these areas is that academic studies of bank regulation and accounting discretion require a more unified approach to design optimal policy for the real world. |
| JEL: | D62 E44 G21 G28 M41 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20396 |
| By: | Cody Kallen |
| Abstract: | A substantial portion of corporate debt remains hidden from balance sheets. I document two forms of off-balance-sheet leverage in nonfinancial corporations: operating leases (pre-2019) and intraperiod borrowing—short-term debt issued and repaid within reporting periods, which I am the first to study in nonfinancial firms. Approximately 29 percent of publicly traded firms used substantial operating leases and 12 percent show evidence of substantial intra-period borrowing, with a disproportionate subset using both types of hidden debt. Firms using substantial hidden leverage are generally smaller, more reliant on short-term funding, are less monitored by sophisticated market participants, and report lower leverage, suggesting they use off-balance-sheet debt to project false leverage profiles. When accounting changes in 2019 revealed substantial operating leases, affected firms subsequently cut capital expenditures by 25 percent and R&D by 14 percent, faced heightened risks of executive turnover and stakeholder scrutiny, and experienced more frequent accounting problems. Critically, revelation of substantial operating leases caused these exposed firms to curtail their intra-period borrowing and to raise their reported non-lease leverage. |
| Keywords: | off-balance-sheet; lease financing; capital structure; disclosure of off-balance-sheet financing |
| JEL: | G14 G32 M48 |
| Date: | 2026–07–16 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:103561 |
| By: | Barrios, John; Neuhierl, Andreas; Schilling, Linda |
| Abstract: | We examine how accounting standards, specifically the choice between held-to-maturity (HTM) and mark-to-market (MTM) accounting, shape bond market stability and firm investment behavior during financial crises. We develop a theoretical framework showing that HTM accounting allows insurers to strategically internalize their price impacts, stabilizing bond prices by avoiding forced liquidations during market downturns. In contrast, MTM accounting rules amplify market instability by forcing immediate recognition of losses, triggering forced asset sales. Empirically, using comprehensive data on corporate bond holdings by insurers and mutual funds, we demonstrate that bonds predominantly held by insurers experience significantly smaller price declines during crises compared to bonds held primarily by mutual funds, who are constrained by MTM accounting requirements. Employing a shift-share instrumental variable approach, we further establish the causal stabilizing effect of insurer ownership on bond prices. Additionally, we show substantial real economic consequences: firms whose bonds are largely held by insurers benefit from lower debt costs, enabling greater investment in capital expenditures and acquisitions post-crisis. Our results underscore the critical role of accounting discretion in influencing market stability, investor behavior, and firm-level economic resilience during periods of financial distress. |
| Keywords: | Accounting rules; MTM vs HTM; Bond fire sales |
| JEL: | M4 G32 G12 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20565 |
| By: | Accetturo, Antonio; Baltrunaite, Audinga; Cariola, Gianmarco; Frigo, Annalisa; Gallo, Marco |
| Abstract: | We examine the effects of laxer non-financial disclosure regulation on operating costs and access to external financing for micro firms in Italy. Starting in 2016, firms below certain size thresholds were exempted from filing reports with qualitative information that complements standard balance sheet items. Compliance rates were higher among older and more productive firms, in line with strategic considerations that play a role in policy adoption. However, the benefits of simplified reporting appear limited: in a regression discontinuity design that exploits the multidimensional size cut-offs that determine eligibility, we find no evidence of cost savings. We instead document a negative impact on ownership transfers and access to credit markets due to increased opacity, suggesting that the reduction of information disclosure to stakeholders may hinder business dynamism. |
| JEL: | G30 G38 M41 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20343 |
| By: | Cecchetti, Stephen; Kress, Jeremy; Schoenholtz, Kermit L. |
| Abstract: | In 2023, US regulators proposed the “Basel Endgame, †a long-awaited overhaul of bank capital requirements. The proposal aimed to bring the United States into compliance with international standards established by the Basel Committee on Banking Supervision in response to the 2008 Global Financial Crisis. However, fierce industry opposition to what banks viewed as a costly increase in capital requirements effectively killed the proposal. In this essay, we describe the purpose of bank capital and the history of international standard-setting in bank regulation. We then highlight the most important aspects of the Basel Endgame, as well as the arguments for and against adopting the rule. We show that the debate unnecessarily conflated two distinct questions: (1) whether the United States should comply with international regulatory standards, and (2) whether the United States should raise large banks’ capital requirements. While there are strong grounds to answer both questions in the affirmative, they need not be addressed together. That is, the United States can implement international standards in a capital-neutral manner to preserve global cooperation in bank regulation, leaving the separate question of raising capital requirements for another day. |
| Keywords: | Basel committee on banking supervision; Bank regulation; Capital requirements; International Standard Setting |
| JEL: | G23 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20386 |