Abstract

http://ssrn.com/abstract=2602
 


 



Accounting Depreciation and Product Prices


Ray Ball


University of Chicago

A. Scott Keating


University of Chicago - Booth School of Business

Jerold L. Zimmerman


University of Rochester - Simon School of Business

July 1995

Simon School of Business Working Paper No. FR 95-22

Abstract:     
We argue that accounting depreciation either is the firm s calculation of the cost of a durable factor, or is information used in determining (implicitly or explicitly) the factor cost. Simple competitive-economic theory then implies a relation between accounting depreciation and product prices. We hypothesize that this relation is strengthened by various accounting techniques, including the inclusion of depreciation charges in standard costs, budgets and actual performance measures, as well as asset write-offs when actual performance persistently falls below budget. Evidence from two steel industry samples shows a significant relation between percentage changes in accounting depreciation and product prices. The data are too aggregate to provide a direct test of the hypothesis, so we plan a more direct test on product-level data.

JEL Classification: M41

working papers series


Not Available For Download

Date posted: June 28, 1998  

Suggested Citation

Ball, Ray and Keating, A. Scott and Zimmerman, Jerold L., Accounting Depreciation and Product Prices (July 1995). Simon School of Business Working Paper No. FR 95-22. Available at SSRN: http://ssrn.com/abstract=2602

Contact Information

Ray Ball (Contact Author)
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-5941 (Phone)
773-702-0458 (Fax)
A. Scott Keating
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-4078 (Phone)
773-702-0458 (Fax)
Jerold L. Zimmerman
University of Rochester - Simon School of Business ( email )
Rochester, NY 14627
United States
585-275-3397 (Phone)
585-442-6323 (Fax)
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