Managerial Investment and Changes in GAAP: An Internal Consequence ofExternal Reporting.

Corporate Investment;Generally Accepted Accounting Principles;Information Processing Costs;Financial Accounting;Debt Contracts;Covenants;Economics;Business;Business Administration

Shroff, Nemit OmprakashMiller, Gregory Smith ;

University of Michigan

关键词: Corporate Investment;    Generally Accepted Accounting Principles;    Information Processing Costs;    Financial Accounting;    Debt Contracts;    Covenants;    Economics;    Business;    Business Administration;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/84460/nemit_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

This paper investigates whether mandatory changes in Generally Accepted Accounting Principles (GAAP) affect investment in physical capital and research and development. Using a sample containing forty–nine changes in GAAP, I find evidence that changes in accounting rules affect investment decisions. I then examine two mechanisms through which changes in GAAP affect investment. First, I show that the process of complying with certain mandatory changes in financial reporting alters managers’ information sets and consequently changes the quality of their investment decisions. Second, I show that firms with financial covenants likely to be affected by changes in GAAP invest more (less) when the change in GAAP increases (decreases) covenant slack. This paper contributes to the literature on the real effects of accounting by showing that accounting rules affect investment decisions and by documenting specific mechanisms through which the relation manifests.