An analysis of factors influencing asset writedowns

Cotter, Julie and Stokes, Donald and Wyatt, Anne-Marie (1998) An analysis of factors influencing asset writedowns. Accounting and Finance, 38 (2). pp. 157-179. ISSN 0810-5391

Abstract

This study investigates the magnitude of total asset writedowns for a random sample of Australian industrial companies. We adopt an income strategy approach in operationalising our magnitude of writedowns construct to consider the set of accounting policies and negative accruals potentially available to managers. Our focus is on the incentives for and constraints on management to make asset writedowns. We find that the magnitude of writedowns observed are associated with managers' incentives to writedown impaired assets that have declined in value, as well as the firm's capacity to absorb the financial statement effects of the writedown. The number of senior management changes found to be associated with greater writedowns in prior studies is also supported in this study when only writedowns taken to the income statement are considered. The quality of corporate governance mechanisms does not vary systematically with the magnitude of writedowns.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Permanent restricted access to published version due to publisher copyright policy.
Depositing User: Prof. Julie Cotter
Faculty / Department / School: Historic - Faculty of Business - Department of Accounting
Date Deposited: 31 May 2011 05:23
Last Modified: 03 Jul 2013 00:40
Uncontrolled Keywords: asset writedowns; managerial incentives and constraints
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150103 Financial Accounting
15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150303 Corporate Governance and Stakeholder Engagement
14 Economics > 1402 Applied Economics > 140207 Financial Economics
Socio-Economic Objective (SEO2008): B Economic Development > 91 Economic Framework > 9102 Microeconomics > 910207 Microeconomic Effects of Taxation
Identification Number or DOI: doi: 10.1111/1467-629X.00008
URI: http://eprints.usq.edu.au/id/eprint/19164

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