IDEAS home Printed from https://ideas.repec.org/p/kob/dpaper/dp2020-31.html
   My bibliography  Save this paper

Incorporating Piecewi se-linear Variables into an Empirical Model of Non-current Asset Impairment Timeliness

Author

Listed:
  • Keishi Fujiyama

    (Research Institute for Economics and Business Administration, Kobe University, JAPAN)

Abstract

While prior research employs linear stock returns as a proxy for economic losses, this study uses piecewise-linear stock returns to separate positive and negative stock returns. It also examines the relationships of non-current asset impairments with changes in sales and cash flows from operations, which can be viewed as short-term indicators of economic impairments. I find a negative relationship between non-current asset impairments and negative stock returns in year t–5, consistent with prior research. I also find such a relationship in year t, contrary to prior research. The results indicate that the relationships are stronger in years t–1 and t–2 than in years t and t–3. These results suggest that non-current asset impairment losses reported by Japanese firms are consistent with the Japanese accounting standard, although such losses are not necessarily reported in a timely manner. In addition, I find evidence suggesting that changes in sales and cash flows from operations in year t are short-term indicators of non-current asset impairments. Overall, incorporating piecewise-linear variables improves the empirical model of non-current asset impairment timeliness.

Suggested Citation

  • Keishi Fujiyama, 2020. "Incorporating Piecewi se-linear Variables into an Empirical Model of Non-current Asset Impairment Timeliness," Discussion Paper Series DP2020-31, Research Institute for Economics & Business Administration, Kobe University, revised Oct 2021.
    • Handle: RePEc:kob:dpaper:dp2020-31
    as

    Download full text from publisher

    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2020-31.pdf
    File Function: Revised version, 2021
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Keishi Fujiyama, 2014. "The Influence of Informal Institutions on Impaired Asset Write-Offs: Securing Future and Current Pies for Payouts in Japan," Advances in Japanese Business and Economics, in: Kunio Ito & Makoto Nakano (ed.), International Perspectives on Accounting and Corporate Behavior, edition 127, pages 161-186, Springer.
    2. Lapointe-Antunes, Pascale & Cormier, Denis & Magnan, Michel, 2009. "Value relevance and timeliness of transitional goodwill-impairment losses: Evidence from Canada," The International Journal of Accounting, Elsevier, vol. 44(1), pages 56-78, March.
    3. Ray Ball & Lakshmanan Shivakumar, 2006. "The Role of Accruals in Asymmetrically Timely Gain and Loss Recognition," Journal of Accounting Research, Wiley Blackwell, vol. 44(2), pages 207-242, May.
    4. Takashi Obinata & Takako Okuda, 2008. "Accounting Behavior of Firms Recognizing Impairment Losses," CARF J-Series CARF-J-049, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    5. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    6. Takashi Obinata & Takako Okuda, 2008. ""Accounting Behavior of Firms Recognizing Impairment Losses"(in Japanese)," CIRJE J-Series CIRJE-J-194, CIRJE, Faculty of Economics, University of Tokyo.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dimitropoulos, Panagiotis E. & Asteriou, Dimitrios, 2010. "The effect of board composition on the informativeness and quality of annual earnings: Empirical evidence from Greece," Research in International Business and Finance, Elsevier, vol. 24(2), pages 190-205, June.
    2. Chahine, Salim & Mansi, Sattar & Mazboudi, Mohamad, 2015. "Media news and earnings management prior to equity offerings," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 177-195.
    3. Gul, Ferdinand A. & Fung, Simon Yu Kit & Jaggi, Bikki, 2009. "Earnings quality: Some evidence on the role of auditor tenure and auditors' industry expertise," Journal of Accounting and Economics, Elsevier, vol. 47(3), pages 265-287, June.
    4. Theodosia Konstantinidi & Arthur Kraft & Peter F. Pope, 2016. "Asymmetric Persistence and the Market Pricing of Accruals and Cash Flows," Abacus, Accounting Foundation, University of Sydney, vol. 52(1), pages 140-165, March.
    5. Kim, Young Sang & Kim, Yura & Yi, Ha-Chin, 2021. "Vice or virtue? The impact of earnings management on bank loan agreements," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 303-324.
    6. Inder K. Khurana & Changjiang Wang, 2015. "Debt Maturity Structure and Accounting Conservatism," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(1-2), pages 167-203, January.
    7. Jeff Boone & Inder K. Khurana & K. K. Raman, 2012. "Audit Market Concentration and Auditor Tolerance for Earnings Management," Working Papers 0014, College of Business, University of Texas at San Antonio.
    8. Lyu, Meng & Christine Sun, Xiaojie & Wang, Bing, 2022. "Does CFO vertical duality affect financial outcomes? Evidence from the CFO acting as the head of accounting," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    9. Dimitropoulos, Panagiotis E. & Asteriou, Dimitrios & Kousenidis, Dimitrios & Leventis, Stergios, 2013. "The impact of IFRS on accounting quality: Evidence from Greece," Advances in accounting, Elsevier, vol. 29(1), pages 108-123.
    10. Fargher, Neil & Wee, Marvin, 2019. "The impact of Ball and Brown (1968) on generations of research," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 55-72.
    11. Bikki Jaggi & Santanu Mitra & Mahmud Hossain, 2015. "Earnings quality, internal control weaknesses and industry-specialist audits," Review of Quantitative Finance and Accounting, Springer, vol. 45(1), pages 1-32, July.
    12. Yijiang Zhao & Kung H. Chen, 2008. "The Influence of Takeover Protection on Earnings Management," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(3‐4), pages 347-375, April.
    13. Nico Lehmann, 2016. "The role of corporate governance in shaping accruals manipulation prior to acquisitions," Accounting and Business Research, Taylor & Francis Journals, vol. 46(4), pages 327-364, June.
    14. Xingqiang Du, 2019. "Does CEO-Auditor Dialect Sharing Impair Pre-IPO Audit Quality? Evidence from China," Journal of Business Ethics, Springer, vol. 156(3), pages 699-735, May.
    15. Dominik Schreyer, 2019. "Football spectator no-show behaviour in the German Bundesliga," Applied Economics, Taylor & Francis Journals, vol. 51(45), pages 4882-4901, September.
    16. Fors, Gunnar & Zejan, Mario, 1996. "Overseas R&D by Multinationals in foreign Centers of Excellence," SSE/EFI Working Paper Series in Economics and Finance 111, Stockholm School of Economics.
    17. repec:spo:wpmain:info:hdl:2441/7172 is not listed on IDEAS
    18. MacKinnon, J G, 1989. "Heteroskedasticity-Robust Tests for Structural Change," Empirical Economics, Springer, vol. 14(2), pages 77-92.
    19. Fenech, Jean-Pierre & Skully, Michael & Xuguang, Han, 2014. "Franking credits and market reactions: Evidence from the Australian convertible security market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 1-19.
    20. Bliss, Mark A. & Gul, Ferdinand A., 2012. "Political connection and leverage: Some Malaysian evidence," Journal of Banking & Finance, Elsevier, vol. 36(8), pages 2344-2350.
    21. Gu, Chen & Kurov, Alexander & Wolfe, Marketa Halova, 2018. "Relief Rallies after FOMC Announcements as a Resolution of Uncertainty," Journal of Empirical Finance, Elsevier, vol. 49(C), pages 1-18.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2020-31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University (email available below). General contact details of provider: https://edirc.repec.org/data/rikobjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.