Asset Write-Offs in the Absence of Agency Problems

24 Pages Posted: 22 Apr 2008

See all articles by Neil Garrod

Neil Garrod

Thames Valley University - Professional Studies

Urska Kosi

Independent

Aljosa Valentincic

University of Ljubljana - Faculty of Economics

Abstract

Using a large sample of small private companies, we show incremental influence of economic incentives over prescriptions from accounting standards by financial statement preparers in a code-law setting with high alignment between financial and tax reporting and no agency problems. Contrary to predictions from standards, more profitable companies are more likely to write-off and the write-off magnitude is greater, reflecting tax minimisation. Larger companies are more likely to write-off, but the magnitude decreases with size, reflecting increasing political costs due to greater visibility to tax authorities. Previous write-off patterns and magnitudes are persistent, reflecting institutional learning linked to regulatory changes.

JEL Classification: M41, M44, D82, H25

Suggested Citation

Garrod, Neil W. and Kosi, Urska and Valentincic, Aljosa, Asset Write-Offs in the Absence of Agency Problems. Journal of Business Finance & Accounting, Vol. 35, Nos. 3-4, pp. 307-330, April/May 2008. Available at SSRN: https://ssrn.com/abstract=1122933 or http://dx.doi.org/10.1111/j.1468-5957.2008.02078.x

Neil W. Garrod (Contact Author)

Thames Valley University - Professional Studies ( email )

Kings Road
Reading, Berkshire RG1 4HJ UK
United Kingdom

Urska Kosi

Independent

Aljosa Valentincic

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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