Earnings Manipulation among the Main Industrial Sectors. Evidence from Italy

This paper examines the risk of earnings manipulation among the Stock Italian Companies (“Società per Azioni”) in the main industrial sectors. The companies have been selected from the leading industrial sectors (textile, food, clothing, automotive and metallurgic) which have been generating relevant revenue streams over the past decades. These industry sectors have considered the ones who have driven the Italian Economy. By collecting financial data from AIDA database, we test the existence of Earnings Manipulation within Stock Italian Companies using the Beneish Model (Manipulation Score). The analysis conducted to those companies shows that the application of the model brings to the following interpretation: by using the threshold-limit of -1.78 (Beneish et al., 2013) a half of the companies analyzed has a low probability of manipulating income

Twin Deficits in the European Countries

Public debt is a burden on future electors and taxpayers. In absence of constitutional constraints, the incumbent government may shift in the future the cost of some public expenditures or tax reductions, by financing them via new debt. However, according to the Ricardian theorem of public debt, the burden of debt is always anticipated to the present via an increased saving. If this theorem were true, a budget deficit would not affect the current account of the balance of payment. This paper analyzes the re-lationship between trade deficit and budget deficit. Using yearly data for the period between 1970 and 2010 in thirty-three European countries, we find evidence supporting the hypothesis that a chronic and robust budget deficit generates a trade deficit. The dynamic estimates show that a one per cent decrease in the government budget surplus/GDP ratio tends to deteriorate the current account/GDP ratio of 0.37 per cent, confirming previous studies with a different empirical basis. Dividing the sample period in two sub-periods (1970-1991 and 1992-2010), empirical findings show that current and past values of govern-ment budget influence trade balance in the first sub-period, whilst past values of government budget affect trade balance in the most recent years. Moreover, the estimated effect of government budget on current account balance is positive and equal to 0.48 and 0.30, respectively. For the high deficit countries, a long-run relationship between these variables has been found, showing that one percentage point increase in budget surplus/GDP ratio is associated with an improvement in the current account balance of roughly 0.15 percentage point. The estimated long-run government budget elasticity is negative and statistically significant, while the estimated speed of adjustment is equal to 0.33. Finally, Granger causality tests show mixed results

Le politiche di bilancio nell’Eurozona: strategie ed evidenza empirica

In questo saggio vengono esaminati gli effetti di ampie manovre di politica di bilancio, ovvero di un consolidamento e di uno stimolo fiscale nei diciotto stati membri dell’Eurozona, in un periodo di riferimento che va dal 1980 al 2015. L’evidenza empirica dimostra che nel caso di uno stimolo fiscale, una riduzione della pressione fiscale e un aumento della spesa pubblica in conto capitale generano un aumento del tasso di crescita economica e un miglioramento dei conti pubblici, mentre l’aumento della spesa corrente ha effetti opposti. Nel caso di un consolidamento fiscale, una riduzione della spesa pubblica corrente rispetto a un aumento della pressione fiscale è più efficace nel comportare un aumento del tasso di crescita economica. Tali risultati sono confermati attraverso studi di regressione. Il tema oggetto d’analisi è quanto mai attuale e si inquadra in un filone di ricerca piuttosto recente, che si arricchisce costantemente di nuovi spunti e suggestioni. I risultati possono essere particolarmente utili stante le conclamate difficoltà che l’UME sta attraversando nel riprendere un sentiero di crescita “virtuosa”. In particolare, essi assumono un rilievo particolare per i PIGS, le cui economie sono affette da “vizi” di lungo periodo

Optimal Size Government and Economic Growth in EU Countries

Using time-series and panel data methodologies, the paper analyzes the existence and shape of the «BARS curve» (Barro, Armey, Rahn, and Scully) for EU countries in the period 1970-2009, connecting the size of Government (measured by the share of public expenditure on GDP) to the rate of economic growth. Individual countries research has been conducted for twelve EU countries for which enough data were available, while panel analysis has been performed both for EU-27 and for some sub-groups, distinguished by their different socio-economic and monetary structures, and per capita GDP. BARS curves were generally found, and the shares of actual public expenditures generally exceed substantially those related to the maximization of GDP growth. However, great differences emerge. For the 12 countries examined by time-series techniques, the difference between the actual level and the peak of the BARS curve ranges from 5.7 points for Germany and 18.1 points for Belgium. Similar situations were found in the panel analysis, with a smaller gap for the Anglo-Saxon countries in comparison to the Western Continental countries. For low per capita GDP countries the peak is higher than for the mature economies. Moreover, we found a long-run relationship between real GDP and public expenditure for six countries, while Granger-causality tests suggest different flows of direction for each country. So, further research may prove useful to shed light on the disparities emerging in the empirical analysis of individual countries, as well as within panel sub-groups. Results in the paper highlight that European countries are very heterogeneous in terms of the peak of the BARS curve. This evidence leads to an interesting question, i.e. if the fiscal adjustment should be the same for all the States or it should depend on the weight of the public sector on GDP in each country

On the failure of European planning for less developed regions. The case of Calabria

This study analyzes the negative performance of Calabria’s Regional Program 2000-2006, for the enhancement of cultural goods to attract tourism, as an example of the waste of resources done in the regional planning under the EU-Italian complex planning procedure for economic convergence. The empirical analysis shows that the variables relating to cultural sites, education sites and sites with tourism or tourism potentialities had no significance or even negative influence. The most significant variable was the number of non profits present in the municipalities. Criminal hubs were also significant, but the variable cultural sites in criminal hubs was not significant. A relevant part of the funds remained unspent for the purposes of the plan and was devoted to other destinations. After the program the number of visitors and revenues from museum and archeological sites of Calabria lower than before while on average in Italy has had a great increase. On the other hand tourism in Calabria experienced a differential increase, in spite of the waste of the funds of the European regional policy

A New Approach to the Scoreboard

Purpose – The purpose of this paper is to investigate the information content of the variables that can help detecting external and internal imbalances in an early stage. The starting point is the Scoreboard, where nine indicators are chosen in order to increase macroeconomic surveillance of all member states. Design/methodology/approach – This paper provides an overview of the variables that could be informative for imbalances by focusing on EU-27 countries over the period 1960-2010. The number of chosen variables is 28, and they are aggregated in six macro-areas. Therefore, once an imbalance is observed in any of those areas, it is possible to detect in a simple way which specific variable is determining such outcome. Findings – In general, this approach provides reliable signal to the policy-makers about the indicators that can drive imbalances within the area, shedding light on the relationship among the variables included in the analysis, too. Research limitations/implications – In fact, the empirical results underline some well-known critical issue for several countries, and is largely in line with results obtained in a variety of EC and OECD studies. Originality/value – The main added value of the approach adopted in this paper is the introduction of more variables than those initially proposed by the European Commission in the construction of the Scoreboard. This provides more information about the macroeconomic situation in each country, preserving, however, the simplicity of the analysis as the variables are aggregated by homogeneous areas

Using an artificial neural networks experiment to assess the links among financial development and growth in agriculture

Financial development, productivity, and growth are interconnected, but the direction of causality remains unclear. The relevance of these linkages is likely different for developing and developed economies, yet comparative cross-country studies are scant. The paper analyses the relationship among credit access, output and productivity in the agricultural sector for a large set of countries, over the period 2000–2012, using an Artificial Neural Networks approach. Empirical findings show that these three variables influence each other reciprocally, although marked differences exist among groups of countries. The role of credit access is more prominent for the OECD countries and less important for countries with a lower level of economic de-elopement. Our analysis allows us to highlight the specific effects of credit in stimulating the development of the agricultural sector: in developing countries, credit access significantly affects production, whereas in developed countries, it also has an impact on productivity