The Economics of Earnings Manipulation and Managerial Compensation

This paper examines managerial compensation in an environment where managers may take a hidden action that affects the actual earnings of the firm. When realized, these earnings constitute hidden information that is privately observed by the manager, who may expend resources to generate an inflated earnings report. We characterize the optimal managerial compensation contract in this setting, and demonstrate that contracts contingent on reported earnings cannot provide managers with the incentive both to maximize profits, and to report those profits honestly. As a result, some degree of earnings management must be tolerated as a necessary part of an efficient agreement.

Corporate Tax Evasion with Agency Costs

This paper examines corporate tax evasion in the context of the contractual relationship between the shareholders of a firm and a tax manager who possesses private information regarding the extent of legally permissible reductions in taxable income, and who may also undertake illegal tax evasion. Using a costly state falsification framework, we characterize formally the optimal incentive compensation contract for the tax manager and, in particular, how the form of that contract changes in response to alternative enforcement policies imposed by the taxing authority. The optimal contract may adjust to offset, at least partially, the effect of sanctions against illegal evasion, and we find a new and policy-relevant non-equivalence result: penalties imposed on the tax manager are more effective in reducing evasion than are those imposed on shareholders.

Controllability and stabilizability of distributed bilinear systems: Recent results and open problems

This paper describes recent results for controlling and stabilizing control systems of the form ú(t) = Au(t) + p(t) B(u(t)) where A is the infinitesimal generator C∞ semigroup on a Banach space X, B' map from X into X, and p(t) is a real valued control. Application to a vibrating beam problem is given for illusstration of the theory

Controllability for Distributed Bilinear Systems

This paper studies controllability of systems of the form ${{dw} / {dt}} = \mathcal {A}w + p(t)\mathcal {B}w$ where $\mathcal{A}$ is the infinitesimal generator of a $C^0$ semigroup of bounded linear operators $e^{\mathcal{A}t}$ on a Banach space $X$, $\mathcal{B}:X \to X$ is a $C^1$ map, and $p \in L^1 ([0,T];\mathbb{R})$ is a control. The paper (i) gives conditions for elements of $X$ to be accessible from a given initial state $w_0$ and (ii) shows that controllability to a full neighborhood in $X$ of $w_0$ is impossible for $\dim X = \infty$. Examples of hyperbolic partial differential equations are provided

Theory of a general class of dissipative processes

General theory of dissipative periodic processes for systems defined by partial, functional, or neutral differential equation

The Return To Tax Simplification: an Econometric Analysis

This article provides estimates of the probable saving in the resource cost of complying with the tax law that would result from simplifying the individual Abstract income tax law. These estimates are based on an econometric analysis of the tax-filing behavior in 1982 of a sample of Minnesota taxpayers. A simple model of tax-compliance behavior based on utility maximization is first presented in order to suggest the important determinants of compliance behavior. The empirical model treats the discrete choices of whether to itemize deductions and whether to hire professional tax advice, and the choice of how much time and money to spend, conditional on the discrete choices made. Simulations based on the econometric results suggest that significant resource saving could be expected from eliminating the system of itemized deductions, although no significant saving from changing to a single-rate tax structure can be confidently predicted. Results suggest that the Tax Reform Act of 1986 will, in the long run, decrease the use ofprofessional tax assistance, but its net effect on the use of taxpayer's own time is unclear.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/68711/2/10.1177_109114218901700101.pd

Company Taxation in the European Union

This paper investigates different measures of corporate tax burden ranging from the most basic ones such as the statutory tax rate to the effective tax rates. Each of these measures has advantages and disadvantages and they may lead to different rankings of countries. One of the reasons lies the fact that they measure different things. The comparison of the statutory tax rates to the effective ones for the EU-27 during the period of 1998-2009 sometimes reveals very significant differences between these indicators. Taking this into consideration, the paper suggests that corporate tax burden analysis should not be limited to the most basic and readily available measure in the form of the statutory tax rate. Different measures are tailored to answer different research questions. Moreover, the article presents changes of company taxation for the EU-27 within 1998-2009.W artykule dokonano przeglądu miar obciążenia podatkowego przedsiębiorstw. Rozpoczynając od wielkości najprostszych, jak stopa nominalna, a kończąc na miarach efektywnych. Każdy ze wskaźników ma wady i zalety, a jego wykorzystanie może prowadzić do różnego uszeregowania państw ze względu na poziom opodatkowania. Jedną z przyczyn jest fakt, iż wielkości te mierzą inne rzeczy. Porównanie stóp nominalnych i efektywnych w krajach UE-27, w latach 1998-2009, wskazuje na istnienie niekiedy bardzo istotnych różnic pomiędzy analizowanymi wskaźnikami. W związku z tym artykuł sugeruje, iż nie należy ograniczać analiz opodatkowania przedsiębiorstw, do najprostszego i najłatwiej dostępnego wskaźnika w postaci ustawowej stopy podatkowej a rozszerzyć je o miary efektywne. Wielkości te, stanowiące lepszy instrument do porównań międzynarodowych, umożliwiają przeprowadzenie wszechstronnych badań

Non-Uniqueness in Plane Fluid Flows

Examples of dynamical systems proposed by Artstein and Dafermos admit non-unique solutions that track a one parameter family of closed circular orbits contiguous at a single point. Switching between orbits at this single point produces an infinite number of solutions with the same initial data. Dafermos appeals to a maximal entropy rate criterion to recover uniqueness. These results are here interpreted as non-unique Lagrange trajectories on a particular spatial region. The corresponding velocity is proved consistent with plane steady compressible fluid flows that for specified pressure and mass density satisfy not only the Euler equations but also the Navier-Stokes equations for specially chosen volume and (positive) shear viscosities. The maximal entropy rate criterion recovers uniqueness.Comment: 25 pages, 10 figure