Template-Type: ReDIF-Article 1.0
Author-Name: Wendy Heltzer
Author-Name: Mary Mindak
Author-Name:  Mingjun Zhou
Title: DO FIRMS ENGAGE IN AGGRESSIVE TAX REPORTING PRIOR TO BANKRUPTCY?
Abstract: Our study examines the tax reporting behaviors of firms just before they file for bankruptcy (prebankruptcy firms). Specifically, we investigate whether pre-bankruptcy firms engage in more aggressive tax reporting, in comparison to non-bankruptcy firms. We also investigate whether the relationship between aggressive financial reporting and aggressive tax reporting is different across pre-bankruptcy and non-bankruptcy firms. Our findings suggest that pre-bankruptcy firms engage in more aggressive tax reporting, vis-à-vis non-bankruptcy firms. Additionally, we find that the positive relation between aggressive book reporting and aggressive tax reporting is stronger among pre-bankruptcy firms, vis-à-vis firms that are not approaching bankruptcy. Thus, our findings not only further our understanding of the motivations behind these significant reporting decisions, but also help us understand how a growing proportion of corporate managers respond to increasing pressures to perform in a depressed economy.
Classification-JEL: M400, M410, M480
Keywords: Tax Reporting, Bankruptcy, Aggressive Reporting
Journal: Accounting & Taxation
Pages: 1-15
Volume: 7
Issue: 2
Year: 2015
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v7n2-2015/AT-V7N2-2015-1.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:1-15

Template-Type: ReDIF-Article 1.0
Author-Name: Krzysztof Kluza  
Title: DEBT REPAYMENT CAPACITY OF LOCAL GOVERNMENT SECTOR IN POLAND DURING THE 2008-2013 ECONOMIC SLOWDOWN PERIOD
Abstract: The crisis, which began in 2008, had a negative impact on the financial condition of local governments across the European Union. In Poland, the debt of the local government sector increased from 2.3% of GDP in 2008
to 4.2% of GDP in 2013. The growing indebtedness influenced the scope of countercyclical policies of local governments. At present, such policies appear as hardly sustainable in the context of future debt repayments and the required deleveraging process. The paper shows simulations concerning the ability of local governments to service their accumulated debt. In a moderately optimistic scenario when there is no new borrowing, over 25% of local governments will need more than 15 years to repay their existing debts. Although in 2013 the financial indicators showed sufficient space for debt servicing for 95% of local governments, the sector remains highly vulnerable to future adverse scenarios. The use of random sampling computational algorithms (Monte Carlo method) applied to the local government financial ratios based on free operating cash flow and net debt confirms the sector’s negative credit risk exposure. Even modestly adverse scenarios show that ca. 20 percent of local governments will reach alarmingly low levels of their debt service indicators in the near future. The larger municipalities appear to be the local government subcategory with the highest credit risk exposure.
Classification-JEL: C15, H72, H74, R50
Keywords: Local Governments, Local Government Risk, Debt Repayment Capacity, Monte Carlo Method
Journal: Accounting & Taxation
Pages: 17-27
Volume: 7
Issue: 2
Year: 2015
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v7n2-2015/AT-V7N2-2015-2.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:17-27

Template-Type: ReDIF-Article 1.0
Author-Name: Abdullah Mohammed Alzahrani
Author-Name:  Ayoib Che-Ahmad
Title: ROYAL FAMILY MEMBERS AND FIRM PERFORMANCE: EVIDENCE FROM KINGDOM OF SAUDI ARABIA
Abstract: This study examines the relationship between Royal family members on the board of directors and firm performance of 573 publicly listed in the Saudi Stock Exchange (Tadawul) during 2007-2011 periods. This study utilizes two measurements of the firm performance: (1) Tobin’s Q and (2) ROE. Using the WLS, the result of this study shows that the existence of Royal family members on the board of Saudi-listed companies is significantly associated with firm performance. This study provides evidence on the role played by Royal family members in reducing agency conflicts and information asymmetries in Saudi Arabia where firms may be influenced by the cultural issues related to political ties and family involvement. The result of this study contributes to the existing theory and empirical evidence of how Royal family members add value to the firm. It offers policy-makers additional evidence on the positive impact of Royal family members on firm performance.
Classification-JEL: M48
Keywords: Tobin’s Q, ROE, Royal Family Members on the Board, Saudi Arabia
Journal: Accounting & Taxation
Pages: 29-42
Volume: 7
Issue: 2
Year: 2015
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v7n2-2015/AT-V7N2-2015-3.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:29-42

Template-Type: ReDIF-Article 1.0
Author-Name: Ali Shakil Khan
Author-Name: Awang Yusop Adom 
Title: A TEST OF THE PECKING ORDER THEORY OF CAPITAL STRUCTURE IN CORPORATE FINANCE
Abstract: This paper utilises a cross section of 12,244 publicly traded corporations in the U.S. from the time period 1999 to 2009 to test the pecking order theory of capital structure. Applying the methodology of Frank and Goyal (2003), limited evidence to support pecking order theory is found. Consistent with Frank and Goyal (2003), a much stronger relationship between net equity issued and financing deficit is observed than net debt issuance and financing deficit. Whereas, the pecking order theory suggests that firms should exhaust all debt issuing capacity before they issue any equity and equity should only be used as a last resort.
Classification-JEL: G3
Keywords: Pecking Order Theory, Capital Structure, Financing Deficit
Journal: Accounting & Taxation
Pages: 43-49
Volume: 7
Issue: 2
Year: 2015
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v7n2-2015/AT-V7N2-2015-4.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:43-49

Template-Type: ReDIF-Article 1.0
Author-Name: Yousef Jahmani
Author-Name: Suman Niranjan 
Title: EARNINGS MANAGEMENT, WEAK INTERNAL CONTROLS, AND FIRM SIZE
Abstract: We investigate the association between earnings management and internal control weaknesses as well as the association between earnings management and firm size. We use two samples: one from large accelerated filers, matched with the same number of firms with strong internal control, and the other from accelerated filers with internal control weaknesses, matched with the same number of firms with strong internal control. Using a modified Jones model, we determine that firms with weak internal control manage their earnings more than do those with strong internal control. The test result is robust for accelerated filers but only modest for large accelerated filers, suggesting that large firms manage their earnings less than do other firms. The results suggest that firm size is an important factor in determining earnings management. The findings are important for regulators who may consider additional disclosure requirements for accelerated filers, non-accelerated filers, and smaller firms and auditors who may increase their scrutiny of financial statements of these firms.
Classification-JEL: M41
Keywords: Earnings Management, Internal Control, Discretionary Accruals, Firm Size
Journal: Accounting & Taxation
Pages: 51-64
Volume: 7
Issue: 2
Year: 2015
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v7n2-2015/AT-V7N2-2015-5.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:51-64

Template-Type: ReDIF-Article 1.0
Author-Name: Wray Bradley  
Title: TRANSFER PRICING: INCREASING TENSION BETWEEN MULTINATIONAL FIRMS AND TAX AUTHORITIES
Abstract: Transfer pricing taxation is a significant source of tension between Multinational Firms (MNFs) and tax authorities. The tension relates to the different perspectives of MNFs and tax authorities. MNFs view taxes related to transfer prices as costs to avoid. On the other hand, regulators and tax authorities view taxes related to transfer pricing from the perspective of making sure that MNFs pay their fair share of taxes to the country or territory where MNFs generate profits. Previously, the U.S. was the primary world leader in the area of transfer pricing taxation. The Organization of Economic Cooperation and Development (OECD) have replaced the U.S in this role. The new OECD project titled Base Erosion and Profit Shifting (BEPS) will dramatically change transfer pricing taxation, on a worldwide basis. It also has the potential to affect change in foreign direct investment (FDI). These changes will take place in both developed and underdeveloped countries. This article informs regulators, tax authorities, MNF management, academics, and tax professionals about several major emerging issues related to BEPS. The article also informs
accounting and taxation academics about future research needs in this area.
Classification-JEL: F23, H26, K34, M48
Keywords: Transfer Pricing, Tax Avoidance, Multinational Firms, Tax Regulation
Journal: Accounting & Taxation
Pages: 65-73
Volume: 7
Issue: 2
Year: 2015
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v7n2-2015/AT-V7N2-2015-6.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:65-73

Template-Type: ReDIF-Article 1.0
Author-Name: Hsueh-En Hsu
Author-Name: Chiulien C Venezia
Author-Name:  Chelsea Schrader
Title: RELATIONSHIPS BETWEEN INSTITUTIONAL OWNERSHIP, CAPITAL STRUCTURE AND RESEARCH AND DEVELOPMENT INVESTMENT
Abstract: Research and development (R&D) is vital for an information technology (IT) firm’s innovation. This study investigates the relationship among institutional ownership, capital structure, and research and development investment for 336 listed information technology firms from 2006 to 2009. Empirical evidence shows that there is no significant relationship between institutional ownership and research and development investment. The finding suggests that institutional investors may not influence management decision making on research and development investment. This study also finds that capital structure has a negative relationship with research and development investment. The result indicates that information technology firms may use less debt when the investment outcome is uncertain.
Classification-JEL: M400, M490
Keywords: Research and Development, Institutional Ownership, Capital Structure, Information Technology
Journal: Accounting & Taxation
Pages: 75-82
Volume: 7
Issue: 2
Year: 2015
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v7n2-2015/AT-V7N2-2015-7.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:85-72

Template-Type: ReDIF-Article 1.0
Author-Name: Venus C. Ibarra
Author-Name: Rodrigo M. Velasco 
Title: ACCOUNTING KNOWLEDGE, PRACTICES, AND CONTROLS OF MICRO, SMALL AND MEDIUM ENTERPRISES: EVIDENCE FROM THE PHILIPPINES
Abstract: Of the business enterprises operating in the Philippines, 99.6% are micro, small, and medium enterprises (MSMEs). The Magna Carta of Small Enterprises (Republic Act 6977) governs these MSMEs. However, they are still subject to laws on the declaration of income and other regulations as imposed by the Bureau of Internal Revenue (BIR), including proper accounting in accordance with accounting standards.This paper looks at the accounting knowledge, practices and controls of MSMEs located in Metro Manila cities and in several Quezon Province towns. The study primary investigates whether or not MSMEs understand accounting principles, have acceptable accounting practices and controls. Majority of the MSMEs are either very knowledgeable or knowledgeable on accounting principles and concepts. MSMEs common accounting methods used are cash, accrual and installment. Common accounting practices used by MSMEs are manifested in their bad debt estimation, depreciation method used, net receivable estimation, business documents used and payment methods. MSMEs practice basic accounting controls; however, computers are not commonly used. ANOVA reveals that there are significant differences between MSMEs in Metro Manila and in Quezon Province on their knowledge of accounting principles, accounting practices and controls.
Classification-JEL: M40, M41, M48
Keywords: Accounting, Practices, Controls, MSMEs
Journal: Accounting & Taxation
Pages: 83-96
Volume: 7
Issue: 2
Year: 2015
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v7n2-2015/AT-V7N2-2015-8.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:83-96