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The Financial Burden of Regulation – Exploring Macroeconomic and Institutional Ties with the Demand for Accounting Services

23 Pages Posted: 21 Jan 2016  

Thomas R. Loy

University of Bayreuth - Business Administration

Marcus Bravidor

Heinrich Heine University Düsseldorf

Date Written: January 20, 2016

Abstract

We empirically analyze the determinants of regulatory costs associated with accounting, audit and tax rules in the European Union. Regulatory costs include transfer payments from losers to beneficiaries of such legislation. Hence, building upon a novel dataset, we estimate regulatory costs as the actual revenues earned from accounting, audit and tax advisory services. Potential determinants include governance mechanisms, financing sources as well as country-specific tax and audit requirements. Our results indicate that regulatory cost strongly depend on the economy’s size. However, their share of GDP decreases in larger economies. We find further evidence that large companies bear the majority of regulatory costs. Strong governance and enforcement institutions cannot fully compensate this effect. Competitive income tax systems do not lower regulatory costs, indicating tax advisory as the “price tag” of maximizing tax benefits.

Keywords: Corporate Governance; Regulatory Costs, Compliance Costs, Audit, Taxation, Legal Enforcement, European Union

JEL Classification: G18, G30, K22, K34, L51, M41, M42

Suggested Citation

Loy, Thomas R. and Bravidor, Marcus, The Financial Burden of Regulation – Exploring Macroeconomic and Institutional Ties with the Demand for Accounting Services (January 20, 2016). Available at SSRN: https://ssrn.com/abstract=2719067 or http://dx.doi.org/10.2139/ssrn.2719067

Thomas R. Loy (Contact Author)

University of Bayreuth - Business Administration ( email )

Universitätsstr. 30
Bayreuth, 95447
Germany

HOME PAGE: http://www.wp.uni-bayreuth.de

Marcus Bravidor

Heinrich Heine University Düsseldorf ( email )

Universitätsstrasse 1
Duesseldorf, NRW 40225
Germany
+49 221 81 15272 (Phone)

HOME PAGE: http://www.wirtschaftspruefung.hhu.de/

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