Tax progressivity and entrepreneurial dynamics

This study examines how tax progressivity affects entrepreneurial dynamics in 18 countries. The results show that increased downside progressivity has a positive influence on the transition rate from nascent entrepreneurship to established business ownership. In addition, only downside progressivity calculated using marginal tax rates is related to the transition ratio, implying that it is marginal tax rates, and not average tax rates, that are used in the entrepreneurial decision-making process. This paper contributes to our understanding of entrepreneurial dynamics and the effect of tax progressivity on the transition from nascent entrepreneurship to established business ownership. © 2020 by the authors

Trust in Public Programmes and Distributive (In)justice in Taxation

In the tax psychology literature, there is a lack of empirical evidence on the degree of distributive justice in taxation. This article aims to test the relationship between trust in public programmes and distributive justice in taxation at the cross-country level. The sample consists of 47 countries. Trust in public programmes and distributive justice in taxation are measured based on data collected from Wave 7 of the World Values Survey, which took place worldwide in 2017-2022. An Ordered Probit Model was utilised for the empirical analysis. This study finds that if taxpayers support preferential organisations like the police and universities, they are less likely to support distributive justice, where the rich are taxed to support the poor. On the other side, if taxpayers support equitable organisations such as armed forces, courts, civil service, and elections, then they are more likely to believe in taxing the rich to support the poor. The current study’s findings have policy implications for governments intending to improve tax revenue collection. Additionally, the practical implication of the current study is that governments willing to combat income inequality should consider the differences between preferential and equitable organisations in their decision-making. There is congruence between taxpayers’ feelings toward distributive justice and their confidence in equitable organisations

Joining a Currency Union to Improve Financial Development and Competitiveness: The Case of Slovakia

Enhancing competitiveness is a priority for nations seeking to promote economic growth. One of the critical drivers of a nation’s sustainable competitiveness is financial system development. However, whether joining a currency union has a positive impact on a country’s financial system development requires further investigation. This study evaluates the impact of euro adoption on Slovakia’s financial system development using a synthetic control method with lasso regularization methodology. A comprehensive index that captures the depth, access, and efficiency of financial institutions and markets is used to measure financial system development. Based on a donor pool composed of non-euro OECD countries, the analysis constructs a synthetic counterfactual of Slovakia’s financial system development had it not adopted the euro in 2009. This enables a comparison between real and synthetic Slovakia. The results show that Slovakia’s transition to the common currency contributed positively to the development of its financial system. The findings show that from 2010 - 2021, Slovakia realized a 19 percent increase in its financial system development relative to the counterfactual after adopting the euro. Robustness checks using a different donor pool and alternative specification with additional covariates produce varied, but still positive, effects confirming the study’s main findings

Further Evidence On The Ability Of FIFO And LIFO Earnings To Predict Operating Cash Flows: An Industry Specific Analysis

The continuing convergence of U.S. GAAP with International Accounting Standards has brought into question the future use of the LIFO inventory method in the U.S. Since the Financial Accounting Standards Board (2010) has stipulated that earnings should aid investors and creditors in their quest to forecast future cash flows to the enterprise, this research examines whether FIFO earnings or LIFO earnings is preferable, for this purpose, as an aid to ex ante operating cash flow itself,over a three-year forecast horizon. We conclude that ex ante operating cash flows are quite useful in forecasting operating cash flows across industries for up to three years-ahead. We find differing results with respect to the incremental predictive content of LIFO versus FIFO earnings,depending on industry and the forecast horizon. For the Manufacturing industry and the Services industry, LIFO earnings is superior to FIFO earnings for forecasting operating cash flows across the entire three year forecast horizon.In contrast, for the Retail Trade industry and the Finance, Insurance, and Real Estate industry, FIFO earnings is preferable for all three forecasts of operating cash flows. For firms in the Transportation,Communications, Electric, Gas, and Sanitary Services industry and in the Wholesale Trade industry, mixed results are observed. Insufficient LIFO data are available for evaluations of the Agriculture, Forestry, and Fishing industry,the Mining industry, the Construction industry, and the Public Administration industry

Portfolio risk-return analysis: The case of the automotive industry in the Czech Republic

Risk has always been the concern of managers and shareholders as a part of decision-making processes. Managers tend to control unsystematic risk mostly while trying to minimize the exposure to systematic (market) risk. The paper aims to assess the risk level and risk-return tradeoffs for the companies operating in Czech automotive industry. A diversification formula and calculation of returns using return-on-equity were employed on the yearly basis from 2005 till 2014. The returns and risk calculations were conducted on the portfolio of auto manufacturers, followed by the portfolio of auto suppliers, while the third one was performed for suppliers and manufacturers taken together. The results of the study show that the average correlation coefficient tends to decrease when we move from manufacturers to suppliers, while increasing when we join manufacturers and suppliers in one portfolio. The highest diversification benefit has been reached in the portfolio of auto suppliers. The highest risk is manifested for the portfolio of manufacturers, while the lowest – in the portfolio of auto suppliers. Risk level declined when we joined manufacturers and suppliers in comparison with risk of manufacturers alone. However, the lowest risk and the highest risk-return tradeoff were achieved in the portfolio of suppliers. © Foundation of International Studies, 2017 and CSR, 2017.16-25536S, GACR;GAČR, Grantová Agentura České Republik

Further Evidence On The Ability Of FIFO And LIFO Earnings To Predict Operating Cash Flows: An Industry Specific Analysis

The continuingconvergence of U.S. GAAP with International Accounting Standards has broughtinto question the future use of the LIFO inventory method in the U.S. Since theFinancial Accounting Standards Board (2010) has stipulated that earnings shouldaid investors and creditors in their quest to forecast future cash flows to theenterprise, this research examines whether FIFO earnings or LIFO earnings ispreferable, for this purpose, as an aid to ex ante operating cash flow itself,over a three-year forecast horizon. We conclude that ex ante operating cashflows are quite useful in forecasting operating cash flows across industries forup to three years-ahead. We find differingresults with respect to the incremental predictive content of LIFO versus FIFO earnings,depending on industry and the forecast horizon. For the Manufacturing industry andthe Services industry, LIFO earnings is superior to FIFO earnings forforecasting operating cash flows across the entire three year forecast horizon.In contrast, for the Retail Trade industry and the Finance, Insurance, and RealEstate industry, FIFO earnings is preferable for all three forecasts ofoperating cash flows. For firms in the Transportation,Communications, Electric, Gas, and Sanitary Services industry and in the WholesaleTrade industry, mixed results are observed. Insufficient LIFO data areavailable for evaluations of the Agriculture, Forestry, and Fishing industry,the Mining industry, the Construction industry, and the Public Administrationindustry

To Work More or Less? The Impact of Taxes and Life Satisfaction on the Motivation to Work in Continental and Eastern Europe

Using country-level data from 2000-2013, we test the relationship between life satisfaction (measured as how people evaluate their life as a whole rather than their current feelings) and the motivation to work (measured as aggregate hours of work). Our hypothesis is that even after controlling for average labor income tax rates in countries with high and low average hours worked, there is a significant negative association between the motivation to work and life satisfaction. The main findings of this paper are that the increase in the motivation to work per employee comes at the expense of life satisfaction, and differences in average tax rates on labor income cannot account for differences in time allocation. Once life satisfaction is included, the hypotheses of previous neoclassical economic studies are almost irrelevant in determining the response of market hours to higher average tax rates on labor income. In line with our assumption, we find a negative relationship between life satisfaction and the motivation to work in the cross-country examinations. In countries with the highest hours worked (Hungary, Estonia), wealth is generally preferred to leisure and in countries with the lowest hours worked (France, Germany), leisure is preferred to wealth

Portfolio Risk-Return Analysis: The Case of the Automotive Industry in the Czech Republic

Risk has always been the concern of managers and shareholders as a part of decision-making processes. Managers tend to control unsystematic risk mostly while trying to minimize the exposure to systematic (market) risk. The paper aims to assess the risk level and risk-return tradeoffs for the companies operating in Czech automotive industry. A diversification formula and calculation of returns using return-on-equity were employed on the yearly basis from 2005 till 2014. The returns and risk calculations were conducted on the portfolio of auto manufacturers, followed by the portfolio of auto suppliers, while the third one was performed for suppliers and manufacturers taken together. The results of the study show that the average correlation coefficient tends to decrease when we move from manufacturers to suppliers, while increasing when we join manufacturers and suppliers in one portfolio. The highest diversification benefit has been reached in the portfolio of auto suppliers. The highest risk is manifested for the portfolio of manufacturers, while the lowest – in the portfolio of auto suppliers. Risk level declined when we joined manufacturers and suppliers in comparison with risk of manufacturers alone. However, the lowest risk and the highest risk-return tradeoff were achieved in the portfolio of suppliers

Carbon taxes and the composition of new passenger car sales in Europe

This paper examines the effectiveness of implementing carbon taxes to reduce carbon dioxide emissions from transport. Using the system Generalized Method of Moments estimator, we utilize cross-country analysis for the first time to study the impact of carbon taxes on the composition of petrol versus diesel passenger cars sold in 17 countries over the period 2013-2017. The results suggest that increasing carbon taxes affects consumer behavior, causing a significant shift from petrol to diesel fuel vehicles, controlling for factors such as the price of passenger cars, fuel price, interest rates, income level, population density, inflation, and vehicle stock. © 2020 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).Grant Agency Academia aurea (GA AA) [GA/16/2019]; Internal Grant Agency of the Tomas Bata University in Zlin [IGA/FaME/2020/001

The Value Relevance Of Announcements Of Transformational Information Technology Investments

In this paper, we examine the influence of IT strategic role to extend the findings of Im et al. (2001), Chatterjee et al. (2002) and Dos Santos et al. (1993). Specifically, we demonstrate that IT strategic role can explain how IT investments in each of the IT strategic roles might affect the firm\u27s competitive position and ultimately firm value. We find positive, abnormal returns to announcements of IT investments by firms making transformative IT investments, and with membership in industries with transform IT strategic roles. The results of previous research are not found to be significant when IT strategic role is included as an explanatory variable. These results provide support for the value of capturing the IT strategic role of a firm\u27s IT-related competitive maneuvering in studies striving to understand the conditions under which IT investments are likely to produce out-of-the-ordinary, positive returns