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Does the Prohibition of Long‐lived Asset Impairment Reversals Affect Corporate Innovation? Evidence from a Quasi‐experiment in China

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  • Huilong Liu
  • Jianqiu Liu
  • Hong Wang
  • Dan Yang

Abstract

China modified the asset impairment standard in 2007, prohibiting long‐lived asset impairment reversal, which it had previously allowed. Using this setting as a quasi‐experiment, we investigate how the prohibition of long‐lived asset impairment reversal affects corporate technological innovation. Our empirical results demonstrate that the prohibition of impairment reversal has negative impacts on corporate innovation outputs. Further analyses reveal that the negative effect of this prohibition on corporate innovation is more prominent in companies with high discretionary accruals, high shareholding ratios for the largest shareholders, and companies in highly competitive markets.

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  • Huilong Liu & Jianqiu Liu & Hong Wang & Dan Yang, 2023. "Does the Prohibition of Long‐lived Asset Impairment Reversals Affect Corporate Innovation? Evidence from a Quasi‐experiment in China," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 134-162, March.
    • Handle: RePEc:bla:abacus:v:59:y:2023:i:1:p:134-162
    DOI: 10.1111/abac.12267
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