The Effect of Straight-Line and Accelerated Depreciation Rules on Risky Investment Decisions – An Experimental Study

arqus Discussion Paper No. 158

34 Pages Posted: 13 Jun 2014

See all articles by Hagen Ackermann

Hagen Ackermann

Otto-von-Guericke-Universität Magdeburg

Martin Fochmann

Free University of Berlin; University of Cologne

Multiple version iconThere are 2 versions of this paper

Date Written: April 16, 2014

Abstract

The aim of this study is to analyze how depreciation rules influence the decision behavior of investors. For this purpose, we conduct a laboratory experiment in which participants decide on the composition of an asset portfolio in different choice situations. Using an experimental environment with different payment periods, we show that accelerated compared to straight-line depreciation can increase the willingness to invest as hypothesized by theory. Additionally, we are able to replicate the unexpected finding of Ackermann et al. (2013) – that introducing a subsidy leads to a lower willingness to take risk although the net returns are kept constant – with our setting which is different to their experimental environment.

Keywords: Taxation, Straight-line Depreciation, Accelerated Depreciation, Tax Perception, Risk Taking Behavior, Portfolio Choice, Behavioral Taxation

JEL Classification: C91, D14, H24

Suggested Citation

Ackermann, Hagen and Fochmann, Martin, The Effect of Straight-Line and Accelerated Depreciation Rules on Risky Investment Decisions – An Experimental Study (April 16, 2014). arqus Discussion Paper No. 158. Available at SSRN: https://ssrn.com/abstract=2449198 or http://dx.doi.org/10.2139/ssrn.2449198

Hagen Ackermann (Contact Author)

Otto-von-Guericke-Universität Magdeburg ( email )

Universitätspl. 2
PSF 4120
Magdeburg, D-39106
Germany

Martin Fochmann

Free University of Berlin ( email )

Thielallee 73
Accounting and Taxation
Berlin, 14195
Germany

University of Cologne ( email )

Albertus-Magnus-Platz
Behavioral Accounting/Taxation/Finance
Cologne, 50923
Germany

HOME PAGE: http://www.taxation.uni-koeln.de/de/team/prof-dr-martin-fochmann/

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