Journal of Accounting and Economics Vol. 28 No. 3 1999
Depreciation-policy changes: tax, earnings management, and investment opportunity incentives
Abstract
Contrary to previous studies, we find managers change depreciation policies in predictable ways. We identify three dimensions of depreciation-policy changes: whether it is a method change or an estimate revision; whether it is income-increasing or decreasing; and whether it applies to new assets only or both new and existing assets. This disaggregation leads to three findings: First, a 1981 tax law altered the frequency of estimate revisions and method changes. Second, firms adopting income-increasing method changes for all assets experience worse performance than those adopting such changes only for new assets. Finally, non-income-increasing policy changes are associated with changes in investment opportunities.
- DOI
- 10.1016/s0165-4101(00)00004-5
- Volume
- 28
- Issue
- 3
- Pages
- 359-389
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref