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| Author: | Jackson, S.B. Liu, X.K. Cecchini, M. |
| Title: | Economic consequences of firms' depreciation method choice: Evidence from capital investments |
| Journal: | Journal of Accounting & Economics
2009 : OCT, VOL. 48:1, p. 54-68 |
| Index terms: | depreciation capital investment decision making managers |
| Language: | eng |
| Abstract: | The paper identifies several interrelated reasons why firms' depreciation method choice seems to influence managers' capital investment decisions. The results show that firms using accelerated depreciation make significantly larger capital investments than firms using straight-line depreciation. Further, there seems to have been a migration away from accelerated depreciation to straight-line depreciation over the past two decades. Firms making such accounting changes make smaller capital investments in the post-change periods than in the pre-change periods. The results suggest that a choice made for external financial reporting purposes have an impact on managers' capital investment decisions. |
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