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

2016 ◽  
Vol 4 (4) ◽  
pp. 19
Author(s):  
Hagen Ackermann ◽  
Martin Fochmann ◽  
Nadja Wolf
Keyword(s):  
Experimental Study ◽  
Investment Decisions ◽  
Risky Investment ◽  
Straight Line ◽  
Accelerated Depreciation

The Effect of Firms' Depreciation Method Choice on Managers' Capital Investment Decisions

2008 ◽  
Vol 83 (2) ◽  
pp. 351-376 ◽  
Author(s):  
Scott B. Jackson
Keyword(s):  
Financial Reporting ◽  
Capital Investment ◽  
Investment Decision ◽  
Investment Decisions ◽  
Cash Flows ◽  
Method Choice ◽  
Straight Line ◽  
Replacement Decisions ◽  
Accelerated Depreciation ◽  
Executive Managers

This study examines whether straight-line depreciation, relative to accelerated depreciation, causes non-executive managers to make non-value-maximizing capital investment decisions. To do this, I conduct experiments in which managers must decide whether to continue using an existing asset or invest in a replacement asset. By design, replacing the existing asset yields higher cash flows and managers are aware of this fact. However, if the asset is replaced, then the greater remaining book value under straight-line depreciation relative to accelerated depreciation causes earnings to be lower. Lower earnings and psychological forces may push managers of firms that use straight-line depreciation away from making the economically efficient capital investment decision. The results suggest that managers of firms that use straight-line depreciation are less likely to invest in a replacement asset than are managers of firms that use accelerated depreciation. Further, the results suggest that managers perceive that an asset depreciated using straight-line depreciation has provided less retrospective utility than an asset depreciated using accelerated depreciation. In turn, I find that depreciation method-induced differences in managers' retrospective utility perceptions influence their prospective utility perceptions, which, in turn, influence managers' asset replacement decisions. By theoretically and empirically linking firms' depreciation method choice to managers' capital investment decisions, I provide evidence that a seemingly innocuous choice made for external financial reporting purposes can cause managers to make non-value-maximizing capital investment decisions.

scholarly journals EFEK INTERAKSI LITERASI KEUANGAN DALAM KEPUTUSAN INVESTASI: PENGUJIAN BIAS-BIAS PSIKOLOGI

2021 ◽  
Vol 10 (1) ◽  
pp. 36
Author(s):  
Wendy Wendy
Keyword(s):  
Financial Literacy ◽  
Investment Decisions ◽  
Interaction Model ◽  
Investor Behavior ◽  
Disposition Effect ◽  
Herding Behavior ◽  
Risky Investment ◽  
Managerial Implications ◽  
Comprehensive Manner ◽  
Positive Effect

                                                        ABSTRACTThis research aims to analyze psychological biases that occur when investors make risky investment decisions. There are five behavioral factors analyzed (herding, overconfidence, disposition effect, conservatism, and availability). Financial literacy is used as moderator in analyzing the effect of those bahaviors towards risky investment decisions. This research examines four econometric equations in explaining financial literacy as a moderator. Interaction effect testing is carried out using moderating variable regression. The results show that psychological biases occur in making risky investment decisions. Herding behavior, overconfidence, disposition effect, and conservatism show a positive effect, while availability does not show a significant effect. Testing on the interaction model finds that financial literacy is able to reduce these psychological biases. This finding also explains the managerial implications that investors with high levels of financial literacy have the potential to experience relatively low psychological biases compared to investors with limited levels of financial literacy. In terms of limitations, this research uses a questionnaire survey that has not been able to reveal aspects of investor behavior in a comprehensive manner. In addition, the number of respondents who are more dominated by beginner investors also adds to the limitations in carrying out the generalization.                                                    ABSTRAKRiset ini bertujuan untuk menganalisis bias-bias psikologi yang terjadi ketika pemodal mengambil keputusan investasi berisiko. Terdapat lima faktor perilaku yang dianalisis, yaitu perilaku herding, overconfidence, disposition effect, conservatism, dan availability. Literasi keuangan digunakan sebagai pemoderasi dalam menganalisis pengaruh faktor-faktor keperilakuan tersebut terhadap keputusan investasi berisiko. Riset ini menguji empat persamaan ekonometrika dalam menjelaskan peran literasi keuangan sebagai pemoderasi. Pengujian efek interaksi dilakukan dengan menggunakan regresi variabel moderasi. Hasil analisis menunjukkan bahwa bias-bias psikologi terjadi dalam pengambilan keputusan investasi berisiko. Perilaku herding, overconfidence, disposition effect, dan conservatism menunjukkan pengaruh positif terhadap pengambilan keputusan investasi berisiko, sementara bias availability tidak menunjukkan pengaruh yang bermakna dalam riset ini. Pengujian pada model interaksi menemukan bahwa literasi keuangan mampu mereduksi bias-bias psikologi tersebut. Temuan ini sekaligus menjelaskan implikasi manajerial bahwa pemodal dengan tingkat literasi keuangan yang baik berpotensi mengalami bias-bias psikologi yang relatif lebih rendah dibandingkan pemodal dengan tingkat lietrasi keuangan yang terbatas. Dari sisi keterbatasan, riset ini menggunakan survei kuesioner yang belum mampu mengungkap aspek perilaku pemodal secara komprehensif. Selain itu, jumlah responden yang lebih didominasi oleh pemodal pemula juga menambah keterbatasan dalam melakukan generalisasi hasil penelitian.

scholarly journals Can longer gaze duration determine risky investment decisions? An interactive perspective

2021 ◽  
Vol 14 (4) ◽  
Author(s):  
Yiheng Wang ◽  
Yanping Liu
Keyword(s):  
Diffusion Model ◽  
Investment Decisions ◽  
Expected Value ◽  
Current Experiment ◽  
Choice Process ◽  
The Gaze ◽  
Risky Investment ◽  
Underlying Mechanisms ◽  
Computational Difficulty ◽  
Decision Difficulty

Can longer gaze duration determine risky investment decisions? Recent studies have tested how gaze influences people’s decisions and the boundary of the gaze effect. The current experiment used adaptive gaze-contingent manipulation by adding a self-determined option to test whether longer gaze duration can determine risky investment decisions. The results showed that both the expected value of each option and the gaze duration influenced people’s decisions. This result was consistent with the attentional diffusion model (aDDM) proposed by Krajbich et al. (2010), which suggests that gaze can influence the choice process by amplify the value of the choice. Therefore, the gaze duration would influence the decision when people do not have clear preference.The result also showed that the similarity between options and the computational difficulty would also influence the gaze effect. This result was inconsistent with prior research that used option similarities to represent difficulty, suggesting that both similarity between options and computational difficulty induce different underlying mechanisms of decision difficulty.

scholarly journals Depreciation Choice and Future Operating Performance

2019 ◽  
Vol 9 (1) ◽  
pp. 89
Author(s):  
Marcus L. Caylor ◽  
Scott Whisenant
Keyword(s):  
Information Asymmetry ◽  
Adverse Selection ◽  
Operating Performance ◽  
Signaling Theory ◽  
Cash Flows ◽  
Future Prospects ◽  
Future Earnings ◽  
Accounting Choices ◽  
Straight Line ◽  
Accelerated Depreciation

In this study we test the argument that information asymmetry and the problems of adverse selection provide incentives for managers to use accounting choices to signal relatively higher future prospects. Specifically, we contend that firms use accelerated depreciation to credibly signal higher future earnings and cash flows, consistent with signaling theory. Compared to straight-line depreciation, accelerated depreciation reduces earnings in the earlier years of asset lives and produces more variability in earnings. Despite these drawbacks, hundreds of firms voluntarily use accelerated depreciation for at least some of their depreciable assets. Our results indicate that the use of accelerated depreciation foreshadows higher future earnings and cash flows for horizons of one, two, and three years ahead.

scholarly journals Intrinsic and extrinsic effects on behavioral tax biases in risky investment decisions

2016 ◽  
Vol 56 ◽  
pp. 218-231 ◽  
Author(s):  
Martin Fochmann ◽  
Kristina Hemmerich ◽  
Dirk Kiesewetter
Keyword(s):  
Investment Decisions ◽  
Risky Investment ◽  
Extrinsic Effects

An Experimental Study of Linear Inclination

1974 ◽  
Vol 26 (1) ◽  
pp. 52-62 ◽  
Author(s):  
Gerald H. Fisher
Keyword(s):  
Experimental Study ◽  
Angular Distortion ◽  
Perceptual Distortion ◽  
Single Straight Line ◽  
Straight Line ◽  
Two Component

Two mechanisms have been proposed to account for perceptual distortion of angular subtension. The first implies that errors made when estimating sizes of angles should correspond to inaccuracies of estimating the inclinations of their two component lines. From the second it follows that the two types of judgement are unrelated. This paper considers which of these mechanisms accounts most consistently for apparent angular distortion. Two experiments are reported. In the first, four independent groups of subjects estimated the bearing of a single straight line presented in a series of inclinations throughout the entire circular range. Subjects themselves attempted to place the same line into specified inclinations in the second experiment. The results reveal errors in both tasks. An attempt is made to distinguish between the two proposed mechanisms by predicting angular distortions from those of corresponding linear inclinations. Possible reasons for failure of this prediction are discussed.

An experimental study of the vertical travel accuracy of the treatment table used in radiotherapy

2012 ◽  
Vol 12 (2) ◽  
pp. 114-123
Author(s):  
Hans L. Riis ◽  
Sune J. Zimmermann
Keyword(s):  
Experimental Study ◽  
Full Range ◽  
Measured Data ◽  
Rotational Axis ◽  
Alignment Procedure ◽  
Straight Line ◽  
The Wire ◽  
Orthogonal Set ◽  
Vertical Travel ◽  
Treatment Table

AbstractThe idea of the present work was to investigate general features of the vertical travel of the treatment table in different configurations and the limitations of an optimised alignment. The investigations were carried out on two tables for different load cases, lateral positions and turntable angles. A wire was held vertically nearby the rotational axis of the table. The wire was used as reference in the investigations. A digital USB-microscope was attached to the tabletop. An orthogonal set of images of the wire was acquired at different vertical table positions. By analysing the images the vertical travel accuracy of the table was extracted. The two tables were found to travel linearly with the same characteristics over the full range of 110 cm with deviations less than 0.5 mm relative to a straight line. A divergence from a vertical travel above 0.5 mm was found to originate from misalignment. An alignment procedure to attain the optimal vertical performance with a minimum of inclination was presented. This procedure must be relayed on objective measured data of the travel with uncertainties far beyond 0.5 mm. Our suggested experimental method was found to have the potential to obtain the required data.

Sign in / Sign up

Export Citation Format

Share Document