1、有關減值盈余管理決策原文earnings management concerning the impairment decision: a quantitative empirical analysis of german listed companies between 2004 and 2009abstractthis study investigates the determinants of the impairment decision of german listed companies between 2004 and 2009. we analyze the influence

2、 of economic factors and reporting incentives on this decision using a probit regression, reporting results for total impairments as well as separated by tangible and intangible asset impairments. we find strong evidence for a negative relationship between ebitda as well as market to book ratio chan

3、ge and impairments, while intangible assetimpairments show a positive relationship to operating cash flow. additionally we find that for both tangible and intangible asset impairment income smoothing is animportant determinant furthermore, intangible asset impairments are more probable in years of m

4、anagement changes.keywords: impairment loss, impairment probability, earnings management, reportingincentive, income smoothing, management change, probit regression.earnings management concerning the impairment decision: a quantitative empirical analysis of german listed companies between 2004 and 2

5、0091 tntroductionin this paper we investigate the determinants of the impairment decision of german listed companies.despite the relatively strict regulations for the impairment of assets (ias 36), managers st訂1 have a non-ncgligiblo discretion over the impairment decision. this results from the def

6、inition of the recoverable amount, which we wi11 discuss in more detai 1 st a later stage. prior studies which mainly focus on the u. s. -american market find strong evidence for the existence of earnings management (i.e income smoothing, big bath accounting, etc.) regarding the impairment decision

7、as well as the respective magnitude. in our study we focus on the factors that influence the impairment decision only. we therefore examine the impairment behavior of german listed companies between 2004 and 2009. excluding the years before mandatory ifrs adoption in 2005 does notchange our findings

8、 (see section 5. 3). in our study we assume that besides economic factors there are several other factors influencing a management/s decision to write off, such as management incentives, which were not incorporated in the regulations. as the decision to take an impainnent is a dichotomous variable,

9、we design our study using a probit regression.we find that the impairment decision regarding totai impairments on long- termassets is influenced negatively by earnings before interest, taxes, depreciation and amortization (ebitda) as wel1 as market to book ratio, while it is positively influoneed by

10、 firm size additionally, we find significant evidence for income smoothing. factors like management changes and big bath accounting, which prior studies have found to have a significant influenee on the decision to write off as wel1 as on the magnitude of impairments , do not seem to influence the d

11、ecision itself. differentiating in tangible and intangible assets, we find that management changes play an important role in the intangible setting.we enrich the existing literature in two importemt ways. first we examine the impairment behavior st the german market. to our knowledge no research has

12、 been conducted on publicly listed companies in germany models that were developed for the u. s-american market could have less validity in the german setting. regarding the national background, german companies are affected by a long history of principles like prudence (vorsichtsprinzipj and credit

13、or protection(g1aubi gerschutz) (see hoffmann (2010) and thus may have another approach to the impairment decision. secondly, we focus on the impairment decision and thus explicitly differentiate between those factors that influence the impairment decision and those that may have influence on the re

14、spective magni tude. one i mportanttechnical distinetion is that we use a panel analysis for our panel data, contrasting a lot of prior studies in which the panel data was pooled to conduct a cross-sectional analysis.the remainder of this paper is organized as follows. in section two we will give a

15、brief overview of the underlying accounting regulations and of prior literature. section three presents the hypotheses development. in section four we describe our research designseiection. section five reports our results and some sensitivity analysis, while section six concludes2 background2 1. ac

16、counting for impairmentsaccording to ias 36, a company has to evaluate for all assets armually if a triggering event has occurred, except for those that are explicitly excluded from the scope. if this is the case an impairment test has to be conducted. besides, goodwill and intangible assets with an

17、 indefinite useful life have to be tested for impairment annually. if an impairment test has to be conducted, the carrying amount is compared with the recoverable amount, the latter being defined as the higher of fair value less costs to sell and value in use. the fair value less costs to sell has t

18、o be derived from an active market if this is possible. altcrnatively, it can be calculated using a discounted cash flow approach. the value in use is defined as the present value of future cash flows- discretion arises because in the vast majority of cases both value in use and fair value less cost

19、s to sell are calculated based on subjective estimates of either company internal or external cash flow predictions. even though ias 36 requires extensive disclosures on the parameters used to calculate the impairment losses, there mostly remains enough room for earnings management regarding the imp

20、airment decision, especially if the non-complianee with the disclosure requirements is takeninto consideration see carlin, finch (2008).2 2 prior researchin this section we want to give a short overview on existing literature regarding the factors influencing the impairment of assets. we are aware t

21、hat there has been an extensive amount of research conducted in this area and thus try to concentrate our literaturc review on the most influential studies which additionally use similar regression models as we do.most of the prior literature examines the u. s. -american market and littleresearch ha

22、s been done which focuses on the impairment decision itself. minnick (2004) examines the impairment decision from a corporate governance point of view, findi ng that there is a signifi cant positive relationship between ceo turnover and the write-off probabi1ity. additionally, she finds that tho ceo

23、 compensation system is an important factor influencing the impairment decision process, and that companies with better governance are more likely to take a write-off and thus to rather show smaller amounts of impairment losses loh and tan (2002) analyze macroeconomic and firm specific factors that

24、influence the impairment decision of companios in singaporo. they find that the unemployment rate, the gdp growth rate, and the occupancy rate of properties and management changes are important determinants, whereas variables like the debt to asset ratio seem to be insignificant. francis, hanna and

25、vincent (1996) analyze the causes of discretionary asset write-offs ofu. s> american companies before the adoption of sfas 121 .accounting for the tmpairment of long-lived assets and for long-lived assets to be disposed of" and find signifiednt evidence for the influencc of management incent

26、ives, such asmanagement changes, big bath accounting and income smoothing on the magnitude of impairments. riedel (2004) compares the impairment characteristics ofu. s- -american companies before and after the adoption of sfas 121. he finds that impairments were more closely related to management in

27、centives and less closely related to economic effects after the change in accounting regulations. among other things, he shows that there is a significant relationship between management changes as well as big bath accounting and the magnitude of impairment losses recognied. beatty and weber (2006)

28、conduct a two-stage analysis estimating a joint probit and censored regression to analyze factors influencing the goodwill impairment decision and the respective magnitude in the sfas 142 goodwill and other intangible assets" adoption period they find that the impairment decision is influenced

29、significantly by management reporting incontives like the existence of an earnings based bonus system, the manager's tenure, or the listing in an exchange with explicit delisting requirements affected by goodwill impairments. cotter, stokes and wyatt (1998) investigate the determinants of the ma

30、gnitude of asset write-offs of australiancompanies focusing on management incentives. they find that an association between impairment magnitude and management incentives exists. they also find a relation to the amount of cash reserves, which they interpret as the capacity to write off. garrod, kosi

31、 and valentincic (2008) analyze the impairment decision and magnitude of smal1 privately held companies in slovenia. they report that, in the absenee of agency problems and in an environment with high alignment betwecn financial and taxreporting, companies tend to manage earnings using current asset

32、 write-offs, whereas fixed asset impairments seem to be influeneed mostly by regulatory factors.taken together, these studies report that for large listed companies there do exist strong incentives to use the impairment decision and the respective magnitude to manage earnings and thereby influenee s

33、takeholders in a given direction, independent of the accounting standards that apply.3 hypothesis development3. 1 impairnumt decisionfrom our point of view, two different motivations influence the impairment decision of a company"s management. first there are economic factors (e. g. earnings, c

34、ash flow) which should have significant influoncc. the coimterparts are reporting incentives which can be either explicit or perceived. the significance that is ascribed to these factors varies depending on the research referred to. rees, gi11 and gore (1996) find evidence for impairments reflecting

35、 a change in the company"s economic environment, consistently loh and tan (2002) find the return on assets to be the most significant influence factor on the impairment decision. other analyses reveal a strong relationship of reporting incentives and the impairment decision (e. g. strong andmey

36、er (1087) find management changes to be an important determinant, riedl (2004) finds evidenee for the influence of big bath accounting as wel1 as managementchanges on impairingnts and beatty and weber (2006) find that covenants, earnings based bonus payments, and ceo tenure as well as the listing on

37、 exchanges withfinancial-based listing requirements are determinants of the impairment decision). we assume that if there is not a reporting incentive calling for a different treatment, companies wi11 take a write-off if economic factors appear to make it nccossary.3. 2 economic factors influencing

38、the impairment probabilityaccording to ias 36, companies have to realize an impairment loss if the carrying amount of an asset exceeds its recoverable amount, the recoverable amount being calculated based on the expectations of either the market or the company. as these expectations are based on the

39、 actual economic situation of the company, we inelude different economic factors and related hypotheses in our analysis to reflect the necessity of realizing an impairment loss.accounting regulations demand for the calculation of a net present value of the cash flows that can be generated by further

40、 use of the asset either by the company under consideration or by a third company, meaning that we would ideally need knowledge on the management"s expectations of future performanee. as these expectations are presumably based on todays knowledge, wo include actual performance measures in our a

41、nalysis. thus our first proxy for the impairment probability is the actual cash flow from operations, which allows us to model the cash-related performanee attributes:hl: companies with a lower cash flow from operations have a higherimpairmentprobability.even though companies are obliged to base the

42、ir impairment decision onestimated cash flows it is possible that companies which use earnings to control atleast certain assets will also base their impairment decision mainly onearnings-measures. to incorporate accrual-related performance attributes, too, we include earnings before impairments in

43、our analysis, delivering our second hypothesis:h2: companios with lower earnings before impairments have a higherimpairmentprobability.as the necessity to realize an impainnent loss follows from the relation of the market value to the carrying amount of the asset we would optimally need a measure fo

44、r the relation of these two values- unfortunately, no such measure is available on the asset or cash generaling unit base. to proxy for this, we include the market to book ratio as well as its changc from the prior year in our analysis, which leads to the next hypotheses:h3a: companies with a lower

45、market to book ratio have a higher impairment probability.ii3b: companies with a decreasing market to book ratio have a higherimpairmentprobability.3. 3 reporting incentivesthe focus of our analysis lies on incentives which could lead the management to make a decision that does not in the first plac

46、e foilow from economic factors. this is what we cal 1 earnings management. the notion of earnings management is based on the assumption of asymmetric information. managers can make accounting decisions independently of the economic situation if and only if the information necessary to undo earnings

47、management is not publicly known (see schipper (1989). in the case of the impairment decision, we can assume that the respective information, namely the expected future cash flows, is not public the shareholders perception is one of the most important targets forthe management as actual and potentia

48、l shareholders are making the share price. thus positively influencing their perception is probably one of the managemcntus main inccnlives. one way to achieve this goal could be to manage the actual yearns earnings performance following the extensive income smoothing literature, we assume that a go

49、od earnings performance is related with a high impairment probability. the idea behind this is that the management tries to meet the shareholders' expectations. according to moses (1987), we can define income smoothing as an "effort to reduce fluctuations in reported earnings" , meanin

50、g that the management uses the impairment decision as smoothing device" to reduce the divergence of reported earnings from an expected number. the income smoothing theory is based on the assumption that shareholders perceive actual earnings as a signal for future earnings, and that smoothed ear

51、nings allow for more precise forecasts which the capital market rewards with higher share prices. consistently, kasznik and mcnichols (1999) report that even though financisl analysts do not adjust their forecasts for companies that consecutivcly meet their expectations the market grants a market pr

52、emiumprior research has found that under certain circumstancos income smoothing isalways worthwhile (see trueman, titman (1988) some empirical studies (e.g. francis hanna and vincent (1996) find significant evidenee for the existence of income smoothing; other studies find that there is no such rela

53、tionship (e. g. riedl (2004). we assume that managers apply income smoothing, meaning thatimpairments will be conducted in years with unexpected high income beforei mpai rments:114: the management uses income smoothing to positively influence theshareholders' perceptionclosely related to the ass

54、umption of income smoothing is that of big bathaccounting big bath accounting means that the management accumulates problems until it finally realizes a huge impairment loss in a year in which the company has realized an unexpectedly low income anyway. following this approach offers several advantag

55、es (see strong and meyer (1987) first the management in this wayestablishes a safety cushion for the next years in which it will be easier to meet the shareholders expectations. secondly, it is argued that realizing a large one time loss signals that past problems have been solved the third advantag

56、c is a moremathematical one: lowering earnings in the actual year ensures high earnings growth for the future. another more psychologi cal argument on which the bi g bath technique may be based is that if earnings are already small or negative, making the situation a little worse will in most cases

57、do no harm, ncithcr to management reputation nor to earnings expectations (see walsh, craig and clarke (1991). thus we assume that managers apply big bath accounting, meaning that impairments will be conducted in years with unexpectedly low income before impairments:h5: the management uses big bath

58、accounting to positively influcncc theshareholders' perception.whi1e h4 and h5 seem to be contradictory at first sight, kirschenheiter and melumad(2001) prove that if the reporting environment permits discretion the optimal strategy of management is to smooth income if good news occur and use bi

59、g bath accounting if bad news occur.another important target group of the management consists of actual as well as potential creditors the relation to actual creditors is mainly based on the design of credit agrecments. the leverage of the company imdor consideration influences these contracts in two ways. first the magnitude of borrowing costs is based on the assessment of financial risk for which the 1 everage is an important determinant, meaning that higher leverage ca