Accounting Rates of Return: Reply
American Economic Review
1989
Willem Buijink and Marc Jegers have pointed out that the conditional internal rate of return estimates contained in my 1985 paper are dependent on estimates of the useful life of the firms' depreciable assets and that my estimates of such useful lives are contaminated by depreciation method differences across the firms. I think their point is correct and the intent of this reply is to use their formulas to obtain corrected useful life and conditional internal rate of return estimates and to report the impact of these corrections on the relationship between profitability and firm size for the sample of firms that was the focus of my 1985 paper.
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