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on Accounting and Auditing |
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Issue of 2018‒05‒14
seven papers chosen by |
| By: | Garcia, Filomena; Marques, Rafael; Opromolla, Luca David; Vezzulli, Andrea |
| Abstract: | The administration of tax policy has shifted its focus from enforcement to complementary instruments aimed at creating a social norm of tax compliance. In this paper we provide an analysis of the effects of the dissemination of information regarding the past degree of tax evasion at the social level on the current individual tax compliance behavior. We build an experiment where, for given levels of audit probabilities, fines and tax rates, subjects have to declare their income after receiving either a communication of the official average tax evasion rate or a private message from a group of randomly matched peers about their tax behavior. We use the experimental data to estimate a dynamic econometric model of tax evasion. The econometric model extends the Allingham-Sandmo-Yitzhaki tax evasion model to include self-consistency and endogenous social interactions among taxpayers. We find four main results. First, tax compliance is very persistent. Second, the higher the official past tax evasion rate the higher the degree of persistence: evaders are more likely to evade again, and compliant individuals are more likely to comply again. Third, when all peers communicate to have evaded (complied) in the past, both evaders and compliant individuals are more likely to evade (comply). Fourth, while both treatments, and especially the unofficial information treatment, are associated, in the context of our experiment, with a significantly larger growth in evasion intensity, the aggregate effect depends on the characteristics of the population. In countries with inherently low levels of tax evasion, official information can have beneficial effects by consolidating the behavior of compliant individuals. However, in countries with inherently high levels of tax evasion, official information can have detrimental effects by intensifying the behavior of evaders. In both cases, the impact of official information is magnified in the presence of strong peer effects. |
| Keywords: | Experiment; Information; peer effects; tax evasion; Tax morale |
| JEL: | C24 C92 D63 H26 Z13 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12886&r=acc |
| By: | Paugam, Luc; Casta, Jean-François; Stolowy, Hervé |
| Abstract: | This paper has three objectives: (1) To introduce a theoretical solution to the issue of non-additivity between assets in place, relying on an accounting-based valuation approach; (2) To explain how such an approach can be implemented empirically by measuring synergies between assets; (3) To present the properties of this non-additive valuation technique. We use Choquet capacities, i.e., non-additive aggregation operators, to measure the interactions between assets and apply our methodology to a sample of U.S. firms from the Capital Goods industry. To operationalize our approach we examine the relationships between synergies – captured by Choquet capacities – and the market-to-book ratio (proxying for growth options), and show how interactions between assets are consistently linked to a firm’s market-to-book ratio. We also measure firm-specific productive efficiency relative to the industry and firm size. For large firms, efficiency, as defined by our approach, is positively associated with higher future operating cash flows. For small firms, efficiency is positively associated with higher future sales growth. We document that the non-additive approach appears to be better to identify expected relationships between efficiency and future performance than a simpler approach based on the market-to-book ratio. |
| Keywords: | Goodwill; Non-additive accounting-based valuation; Synergies; Choquet capacities; Growth options; Productive efficiency |
| JEL: | G39 M40 M41 |
| Date: | 2017–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1227&r=acc |
| By: | Neil Crosby; Steven Devaney; Peter Wyatt |
| Abstract: | Explicit discounted cash flow methods are used in many countries to assess the value of property investments or their likely rate of return given a particular price. These are typically supplemented by simpler models for the purpose of estimating market value and this has led to debate over the merits of different approaches. A parallel situation exists in the case of UK development sites: both cash flow appraisals and simpler residual valuations are used by the real estate industry to assess site values and development viability. Yet traditional residual valuation methods involve making assumptions that are inconsistent with financial theory and this makes it difficult to compare the required returns for such schemes against those used for other investment opportunities. Hence, in this paper, we explore the relationship between the profit and interest allowances used in traditional residual valuation models and the internal rates of return that they appear to imply. This is done with reference to a number of simulated examples of different schemes and the implications for practice are then assessed. |
| Keywords: | Development appraisal; Development Viability; Internal rate of return; Residual valuation |
| JEL: | R3 |
| Date: | 2017–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2017_162&r=acc |
| By: | Sake van den Berg; Aart Hordijk |
| Abstract: | Almost all financial crises in the world showed a real estate element if it was not the main cause after all, and so did the 2008 financial crisis with subprime mortgages. As a result of that the G 20 concluded : "never again". It meant that Central Banks and Financial Market Authorities started to investigate how to solve the problem and take precautions.In the Netherlands they first of all questioned the auditors. Their defence was that they relied upon valuation reports from certified valuers. Other than that in 2011 the Auditors addressed the problem to the valuers in a management letter.To improve the situation representatives from the Auditors and the valuers sat together and developed 28 recommendations about valuer’s independency, education, scope of work, the valuation itself and quality assurance procedures. The underlying guidance were international standards, from the auditor’s side the IAS and IFRS and from the valuer’s side the IVs and EVS. The recommendations were followed by good practices, examples for both disciplines to help them to interpret the recommendations.The paper will show the recommendations as well as the process at which the Netherlands Register of Certified Valuers was formed. |
| Keywords: | Cooperation with Auditors; International%2FEuropean Valuation Standards; to discipline the valuation profession; to prevent financial crises; Valuation |
| JEL: | R3 |
| Date: | 2017–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2017_257&r=acc |
| By: | Matteo Ruzzante |
| Abstract: | Government financial assets are increasingly recognized as playing an important role in assessing fiscal sustainability. However, very little research has been done on the dynamics of government financial assets compared to liabilities. In this paper, we investigate the impact of recent financial crises and macroeconomic shocks on government balance sheets, decomposing the separate effects on financial assets and liabilities. Using quarterly Government Finance Statistics (GFS) data, we analyze a panel of 27 countries over the period 1999Q1-2017Q1 through fixed effects and panel VAR techniques. Financial crises are shown to deteriorate the net financial worth of governments, but no significant impact is found on assets suggesting that they are not being used as fiscal buffers in bad times. On the contrary, countries that suffered both financial and banking crises experienced an “artificial” increase of their asset position through bank bailouts. Macroeconomic shock analyses reveal that government balance sheet items are countercyclical, but important asymmetries are found in their dynamics. |
| Date: | 2018–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:18/93&r=acc |
| By: | Christian Leuz |
| Abstract: | The use of evidence and economic analysis in policymaking is on the rise, and accounting standard setting and financial regulation are no exception. This article discusses the promise of evidence-based policymaking in accounting and financial markets as well as the challenges and opportunities for research supporting this endeavor. In principle, using sound theory and robust empirical evidence should lead to better policies and regulations. But despite its obvious appeal and substantial promise, evidence-based policymaking is easier demanded than done. It faces many challenges related to the difficulty of providing relevant causal evidence, lack of data, the reliability of published research, and the transmission of research findings. Overcoming these challenges requires substantial infrastructure investments for generating and disseminating relevant research. To illustrate this point, I draw parallels to the rise of evidence-based medicine. The article provides several concrete suggestions for the research process and the aggregation of research findings that could be considered if scientific evidence is to inform policymaking. I discuss how policymakers can foster and support policy-relevant research, chiefly by providing and generating data. The article also points to potential pitfalls when research becomes increasingly policy-oriented. |
| JEL: | A11 D61 D72 D78 G18 G38 K22 L51 M48 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24535&r=acc |
| By: | Jang-Ting Guo (Department of Economics, University of California Riverside); Fu-Sheng Hung (National Chengchi University, Taiwan) |
| Abstract: | Recent empirical studies have documented that the incidence of firms' tax evasion on their sales is negatively correlated with the country's level of financial development. Our analysis shows that this stylized fact can be theoretically accounted for within a small-open-economy model of optimal tax enforcement under asymmetric information in credit markets. In an economy with a more developed financial sector that exhibits smaller agency costs, we find that the government will raise its optimal probability of tax auditing, which in turn leads to more tax compliance. It follows that financial development and tax evasion are inversely related, as observed in the actual data. |
| Keywords: | Tax Evasion; Financial Development; Asymmetric Information; Credit Rationing. |
| JEL: | D82 H26 H32 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:ucr:wpaper:201810&r=acc |