Small Corporations Research Articles

Impact of Tax Rate Cut Cum Base Broadening Reforms on Heterogeneous Firms – Learning from the German Tax Reform 2008

The German corporate tax reform of 2008 has brought about important cuts in corporate tax rates, which were at the same time accompanied by significant changes in the determination of the tax base for both major German corporate taxes - corporate income tax and trade tax. The reform followed the distinct and internationally prevalent pattern of tax rate cut cum base broadening. Its implications are thus not unique to Germany. Especially in view of the current economic crisis, questions on the distribution of the tax burden among firms of different characteristics have arisen and still remain at the heart of the academic and political debate in Germany and other countries. In this paper we present a new corporate microsimulation model, ZEW TaxCoMM, which allows for the coherent micro-based analysis of revenue implications of tax reforms and the distribution of tax consequences among heterogeneous firms. The model processes firm-level financial accounting input data and derives the firm specific tax base and tax due endogenously in accordance with the tax code. To smooth out distortions between the sample and the population of German corporations, the sample is extrapolated on the basis of the corporate income tax statistic. The simulation results show inter alia that the average annual relief as measured by the average decline in the effective tax burden on cash flow amounts to 2.8 percentage points for large corporations and to 6 percentage points for small corporations. Furthermore, the results illustrate that firms with low profitability, high debt ratio and high capital intensity benefit least from the reform. As to tax revenues, the reform induced decrease amounts to € 9.8 billion and the trade tax gains fiscally in importance.

Assessing the relationship between firm resources and product innovation performance

PurposeThis paper seeks an answer to the question about which of a firm's resources contributes most to product innovation performance (PIP). The paper aims to adopt the resource‐based view (RBV) and consider both tangible and intangible assets.Design/methodology/approachA mail administrated survey was distributed to a randomly selected list of 700 small and medium enterprises (SMEs) in Malaysia. The response rate was 20.1 percent and the usable response rate was 15.4 percent which is favorable for this type of research. As comparable to other SME studies and particularly in Malaysia, this relatively low‐response rate is not surprising for mail administrated questionnaire.FindingsThe findings indicate that, in the Malaysian context, intangible resources are the main drivers of PIP. This is keeping with the expectations of the RBV.Research limitations/implicationsEstablishing a cooperative relationship with the Small and Medium Size Industries Development Corporation of Malaysia plays a significant role in helping us to garner a larger than expected response rate among the SMEs. Alliances such as this may help researchers improve survey response rates among smaller manufacturers.Originality/valueThis paper is unique in that it is the first paper to address the relationship between firm resources and PIP among Malaysian companies. While the paper is primarily descriptive in nature, it does provide some evidence that can be used in the development and testing of hypotheses concerning the relationship between PIP and firm's resources.

Investor Inattention and the Market Reaction to Merger Announcements

Prior studies suggest that investors have limited attention. Tests of the inattention hypothesis have been performed in the context of relatively small corporate events, particularly earnings announcements. Presumably, large corporate events would always attract sufficient investor attention. However, we find evidence indicating that inattention affects investors' information processing even in the context of one of the largest and most important corporate events—merger announcements. More specifically, consistent with the notion that investors are less attentive to Friday announcements, we find that the market reaction to Friday stock swap announcements is muted, as evidenced by lower acquirers' merger announcement abnormal trading volumes and less pronounced acquirers' merger announcement abnormal stock returns.

The Impact of Corporate Supplier Diversity Programs on Corporate Purchasers’ Intention to Purchase From Women-Owned Enterprises

This doctoral thesis examines the impact of corporate supplier diversity programs on corporate purchasers’ intention to purchase from women-owned enterprises using Ajzen’s theory of planned behavior. Two hundred and seventy-two corporate purchasers across a diverse range of industries and geographical regions in the United States participated in a mail survey in which the participants responded to questions (capturing the constructs of the theory of planned behavior) related to a selected scenario. These scenarios (a 2 × 2 factorial design) manipulated two constructs: male/female of the small enterprise owner and corporate purchasers’ familiarity/unfamiliarity with the enterprise. The goal of the experimental manipulation was to ensure sufficient variance in the study constructs. The results provided general support for the theory of planned behavior in capturing how corporate purchasers make decisions. The findings of the study show that programs designed to promote women-owned enterprises may be effective in gaining acceptance from corporate purchasers. Thus, the dissertation makes a contribution to the corporate social responsibility literature as it reveals that it is possible for business to incorporate positive duty into its core economic activities without compromising its financial gains and that the economic-aligned and duty-aligned orientations can be integrated.

Small Corporations: Better Controlling the Spigot of ‘Red Tape”

Regulation in Australia appears to be increasing at an exponential rate. For small businesses that, are often resource poor and isolated, compliance is a burden. They face a paradigm conflict with regulators, who often are imbued with the objective of maintaining quality standards and perceptions of servicing an industry, while the regulated see regulation as an evil and a cost to doing business. Two case studies illustrate the political minefields in alternative approaches to regulation. Finally, the paper reviews changes in regulation internationally and in Australia and puts forward some innovative options for the future implementation of regulation of small businesses.

20 Year Snap-Shot of the Developments in the Regulation of Small Corporations

This paper explored the history of the regulation of corporate bodies through State and Commonwealth systems beginning in 1989 that resulted in the development of the legislation impacting on small proprietary company for over 20 years. The introduction of the Corporate Governance Principles for listed companies by the Australian Securities Exchange added another layer of regulation intended to promote transparency and accountability. Research into corporate governance in small companies showed that, in contrast to opinions about the US Legislation, very few Australian companies expressed negative views about corporate governance regulation. The most recent addition to corporate governance regulation has been the expectation that companies have a responsibility for corporate social responsibility. This was illustrated by the James Hardy Industries case.

Book Review: China Uncovered by Jonathan Story

Biographical notes: Pier A. Abetti is a Professor at Rensselaer Polytechnic Institute (RPI). He worked for 32 years at GE in R&D and Project Management, and was a Manager of GE’s Strategic Planning for Europe, Middle East and Africa from 1973 to 1980. He has written three books and 150 technical and management papers in five languages. His present interests are focused on the management of technological innovation and entrepreneurship in large and small companies, globalisation, economic development and corporate social responsibility.

Investor Inattention and the Market Reaction to Merger Announcements

Prior studies suggest that investors have limited attention. Tests of the inattention hypothesis have been performed in the context of relatively small corporate events, particularly earnings announcements. Presumably, large corporate events would always attract sufficient investor attention. However, we find evidence indicating that inattention affects investors’ information processing even in the context of one of the largest and most important corporate events – merger announcements. More specifically, consistent with the notion that investors are less attentive to Friday announcements, we find that the market reaction to Friday stock swap announcements is muted, as evidenced by lower acquirers’ merger announcement abnormal trading volumes and less pronounced acquirers’ merger announcement abnormal stock returns.

연성정보와 정책자금 대출결정 요인 분석

본 연구에서는 중소기업진흥공단이 보유하고 있는 중소기업의 정책자금 대출신청자료를 활용해서 정책자금 대출심사 시에 연성정보와 경성정보를 어느 정도 활용되고 있는지에 대해서 분석하였다. 실증분석에 사용되는 주요데이터는 2004년 이후 중소기업진흥공단에서 정책자금 지원기업에 대한 심사 시에 사용하는 기업의 재무자료 및 비재무자료 관련 데이터이다. 본 연구에서는 비재무 정보를 연성정보(soft information)로 간주하였다. 정책자금 대출심사시에 사용되는 신용정보, 연성정보, 재무정보 등의 상대적 중요성을 로짓모형을 통해 살펴본 결과, 신용정보의 추정값이 가장 크며, 그 다음으로 연성정보, 재무정보의 추정값은 가장 작다. 대출심사에 있어서 신용정보의 추정값이 상대적으로 가장 큰 것은 중진공에서 최종적인 대출승인 여부를 재무정보와 비재무(연성)정보의 결합인 신용정보를 토대로 결정하기 때문에 나타난 당연한 결과라고 봐야한다. 그리고 신용정보의 구성요소인 재무정보와 연성정보의 상대적 중요성을 살펴보면, 상대적으로 연성정보가 대출결정여부에 더 결정적으로 기여하고 있다고 할 수 있다. 이는 중진공의 정책자금을 신청하는 중소기업의 대부분은 영세한 기업이어서 재무제표 정보의 신빙성이 낮은 반면, 상대적으로 재무정보 외의 정보들이 기업평가에 더 많은 중요성을 가지고 있기 때문이다. 결론적으로, 재무정보와 연성정보의 결합인 신용정보가 대출결정에 결정적인 영향을 미치고 있음을 알 수 있다. 그러나 연성정보와 재무정보를 비교해 보면, 연성정보가 대출결정에 더 많은 영향을 미치고 있음을 알 수 있다. 그리고 대출심사 시, 기업의 지역별 특성을 나타내는 변수들의 중요성은 없어졌다고 할 수 있다. This paper explored how soft information and hard information were used when SBC(Small Business Corporation, Korea) reviewed government loan applications. The data set is made up of financial and non-financial data of small-business firms since 2004. A non-financial data set is considered as soft information. Relative importance of three kinds information such as credit information, soft information, financial information is compared with each other by using the logit model. As a result, credit information is most critical to the loan approval, and then soft information follows, lastly financial information has the smallest effect on the loan approval. This is because the credit information is made up of the non-linear combination of soft information and financial information. When the relative importance of soft information and financial information is considered, soft information is relatively more critical to the loan approval then financial information. This is because financial ratios provided by small-business firms are not reliable enough.

Psychiatrists Key Ingredient in Medicine's Melting Pot

Psychiatrists Key Ingredient in Medicine's Melting Pot

Research on Logistics & Purchase System in Order-Driven Mode

Organizing production on orders is one important mode for small and medium corporations. In this mode, logistics and purchase are to be progressed on sale orders. To satisfy production demands of specific sale orders for zero stock is the goal of logistics and purchase. In this paper, the logistics & purchase procedure under order-driven is analyzed, with its integrated workflow model being built. The information model of logistics & purchase operation flow is designed in detail with UML method. The solution to main operation issues of logistics & purchase procedure management is discussed, with the system program hierarchy presented. This system has been implemented in an electric equipment enterprise and a distinct achievement is realized.

Financial Leverage and Corporate Taxation: Evidence from German Corporate Tax Return Data

We estimate the impact of effective profit taxation on the financial leverage of corporations on the basis of a pseudo-panel constructed from corporate tax return micro data for the period 1998-2001, a period which saw the introduction of a major corporate tax reform in Germany. The financial leverage is measured by the ratio of long-term debt to total capital. Endogeneity of the effective corporate tax rate is controlled for by an instrumental variable approach. Our instrument for the observed effective tax rate is the counterfactual tax rate a corporation would face in a particular period had there be no endogenous change of its financial structure. This counterfactual is obtained from a detailed microsimulation model of the corporate sector based on tax return micro data. We find a statistically significant and relatively large positive effect of the tax rate on corporate leverage: on average, an increase of the tax rate by 10 percent would increase the financial leverage by about 5 percent. We also find that the debt ratio is less responsive for small corporations and for corporations that benefit from various other forms of tax shields, in particular depreciation allowances and tax loss carry-forward. However, tax effects do not seem to depend on risk, although the level of economic risk does affect corporate leverage.

The Role of Environmental Management in Consumers Preferences for Corporate Social Responsibility

Consumers in modern societies are increasingly sensitive to environmental performance by large and small corporations, making it a crucial issue in the overall policy of corporate social responsibility. The objective of this paper is to study the role of environmental performance in the profile of corporate social responsibility as perceived by consumers. We utilize a stated preference approach to the study of consumer’s preferences. This approach allows for the evaluation in monetary terms of the trade-offs that individuals can make between various aspects of corporate policy decisions, including the extent of environmental performance. The data is modelled by means of a mixture heuristics approach that allows us to study the utilization of various decision rules in the choice of products with various degrees of environmental performance. The results show that the linear compensatory heuristic is the most extended across individuals and these subjects value most the policies concerned with environmental management. Those subjects opting for the non-compensatory decision rule tend to focus on the attribute of good labour relations as the most salient factor defining corporate social responsibility. In addition, policy measures are relatively more valued for some products rather than for others, suggesting that consumers discriminate between products when valuing companies’ environmental profiles.

The Diagnostic Analysis of Consortium Training Programs for Small and Middle-Sized Corporations, Using CIPP Evaluation Model

The Diagnostic Analysis of Consortium Training Programs for Small and Middle-Sized Corporations, Using CIPP Evaluation Model

Debt and Corporate Tax Evasion

Shareholder wealth may be maximized by borrowing, as it is tax preferred, or by under reporting firm profits; both shield income from taxation, legally in the case of the former. But does the utilization of one shield crowd out the use of the other? More specifically, does tax evasion lead to lower leverage, as the empirical literature suggests, or is it the other way around with highly leveraged firms cheating less? Using a unique random sample of small corporations thoroughly audited, the empirical results show that tax evasion declines with firm leverage; there is little support for the findings in the literature.

Analysis of Industrial Organizational Structure of West China

Comparing with developed areas of Mid-eastern China, the present industrial organizational structure of West China can far from adopt the objective requirements of economical development. In this article, we detailedly analyze the main problems existing in the industrial organizational structure of West China which include low level of scale economy, high proportional state-owned economy, low level of specialization division and collaboration, excessive large and complete, small and complete omnipotent corporations, and put forward the optimized methods of industrial organizational structure of West China.

Financial Leverage and Corporate Taxation - Evidence from German Corporate Tax Return Data

We estimate the impact of effective profit taxation on the financial leverage of corporations on the basis of a pseudo-panel constructed from corporate tax return micro data for the period 1998-2001, a period which saw the introduction of a major corporate tax reform in Germany. The financial leverage is measured by the ratio of long-term debt to total capital. Endogeneity of the effective corporate tax rate is controlled for by an instrumental variable approach. Our instrument for the observed effective tax rate is the counterfactual tax rate a corporation would face in a particular period had there been no endogenous change of its financial structure. This counterfactual is obtained from a detailed microsimulation model of the corporate sector based on tax return micro data. We find a statistically significant and relatively large positive effect of the tax rate on corporate leverage: on average, an increase of the tax rate by 10 percent would increase the financial leverage by about 5 percent. We also find that the debt ratio is less responsive for small corporations and for corporations that benefit from various other forms of tax shields, in particular depreciation allowances and tax loss carry-forward. However, tax effects do not seem to depend on risk, although the level of economic risk does affect corporate leverage.

Corporate Taxation and the Choice of Patent Location within Multinational Firms

Corporate patents are perceived to be the key profit-drivers in many multinational enterprises (MNEs). Moreover, as the transfer pricing process for royalty payments is often highly intransparent, they also constitute a major source of profit shifting opportunities between multinational entities. For both reasons, MNEs have an incentive to locate their patents at affiliates with a relatively small corporate tax rate. Our paper empirically tests for this relationship by exploiting a unique dataset which links information on patent applications to micro panel data for European MNEs. Our results suggest that the corporate tax rate (differential to other group members) indeed exerts a negative effect on the number of patents filed by a subsidiary. The effect is quantitatively large and robust against controlling for affiliate size. The findings prevail if we additionally account for royalty withholding taxes. Moreover, binding ‘Controlled Foreign Company’ rules tend to decrease the number of patent applications.

Measuring the perception of Malaysian SME towards e-commerce as an innovation

This paper presents a quantitative study in measuring the perception of Malaysian SME towards ecommerce as an innovation and factors affecting the adoption of it. It is concerned with initiatives that are intended to help SME in Malaysia to adopt E-commerce as an innovation. The research has two main emphases: First, it presents some preliminary findings on the perception of Malaysian SME towards E-commerce as an innovation; and the level of confidence towards E-commerce as an innovation. Second, it streamlines various initiatives by Ministry of International Trade and Industry (MITI), Small and Medium Industries Development Corporation (SMIDEC), BankNegara Malaysia and local governments in accelerating the acceptance of E-commerce by Malaysian SME. The study engaged 38 SME participants through a survey using a self-administered questionnaire. 32% of the surveyed SME are from the Type 1 Industry; comprising manufacturing, manufacturing related services, and agro-based services and about 68% are from Type 2 Industry comprising services, primary agriculture, and ICT. The self administered questionnaire consists of two sections. Section I contains demographic information and SME specification while Section II contains 37 items: 31 items utilised Likert Scales items ranging from 1 (strongly disagree) to 5(strongly agree), and six items utilised defined interval scales. Rogers' attributes of innovations (2003): relative advantage, compatibility, complexity, trial ability and observability were used in the construct of the research instrument. This research emphasizes on Rogers'framework, as it was found useful where the study sought to understand the diffusion and use of Ecommerce by Malaysian SME in the investigation. Descriptive statistics were used to analyse and present empirical data of the 38 SME. The results from the quantitative data provided information on addressing barriers to SME, and confirmed the characteristics of Rogers' adoption categories. The study shows that the instrument which was designed with seven constructs lacked internal consistency in two determinants: relative advantage and observability. Findings interpreted through Rogers' theory suggest that an action plan should include initiatives to help SME towards E-commerce as an innovation.

Treasury products for mid‐to‐small corporations

AbstractThe treasury and noncredit services market for mid‐size and smaller corporations is significantly different from the one for Fortune 500 companies—although the banks have focused mostly on the latter. As a result, bankers and other financial service professionals usually approach a “mid‐to‐small” business project using the wrong assumptions and techniques.The author examines this situation and suggests other ways for mid‐to‐small companies and banks to establish relationships. © 2008 Wiley Periodicals, Inc.