Accounting choices under ifrs and their effect on over-investment in capital expenditures
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- IFRS*OVER_INV
- IFRS*FV_HS*OVER_INV - -0.8284 **
- IFRS*OVER_INV - -0.2215 * -1.43 0.0768
- IFRS*HIGH*OVER_INV - -0.0774 -0.28 0.3905 IFRS*LOW*OVER_INV - -0.5671 **
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Pred. Sign Coefficient t-stat P-value Intercept +/- -6.2475 *** -7.32 <.0001 IFRS +/- -0.1260 -1.01 0.3142 OVER_INV + 4.3423 *** 3.63 0.0003 IFRS*OVER_INV - -0.1741 -0.89 0.1878 FV_HS +/- -0.4303 * -1.90 0.0603 IFRS*FV_HS +/- 0.3250 1.24 0.2188 FV_HS*OVER_INV +/- 0.7014 * 1.70 0.0918 IFRS*FV_HS*OVER_INV - -0.8284 ** -1.86 0.0328 SIZE + 0.0874 * 1.54 0.0631 TANGIBILITY + 1.2024 *** 5.04 <.0001 CFO_SALE +/- 0.2015 0.27 0.7867 OPERATING_CYCLE +/- 0.2612 1.53 0.1283 DIV +/- 0.0547 0.22 0.8284 MTB + 0.2090 * 1.48 0.0710 LOSS - -0.1803 -0.86 0.1954 CAP_STRUCTURE +/- 0.2972 0.76 0.4462 Z_SCORE - 0.0000 -0.47 0.3194 CLOSELY_HELD +/- -0.0027 -0.47 0.6385 BIG4_5 +/- 0.1141 0.28 0.7815 SIZE*OVER_INV - -0.1255 -1.23 0.1101 TANGIBILITY*OVER_INV + 0.5451 1.22 0.1121 CFO_SALE*OVER_INV +/- 1.0274 0.85 0.3950 OPERATING_CYCLE*OVER_INV +/- -0.8308 *** -3.76 0.0003 DIV*OVER_INV +/- 0.3425 0.83 0.4084 MTB*OVER_INV +/- -0.0618 -0.41 0.6801 LOSS*OVER_INV +/- -0.3539 -1.07 0.2878 CAP_STRUCTURE*OVER_INV +/- -0.7743 -1.25 0.2154 Z_SCORE*OVER_INV + 0.0000 1.14 0.1290 CLOSELY_HELD*OVER_INV - 0.0038 0.45 0.3273 BIG4_5*OVER_INV - 0.0744 0.13 0.4500 Industry Fixed Effects Observations Adjusted R 2 + β 5 IFRS it * FV_HS it + β 6 FV_HS it * OVER_INV it + β 7 IFRS it * FV_HS it * OVER_INV it + β 8-18 CONTROLSit + β 19-29 CONTROLS it * OVER_INV it + ε it Yes 776 This table presents the OLS regression estimates of the effect on over-investment for UK firms that used historical cost accounting with loose impairment rules (HL) under UK GAAP and historical cost accounting with strict impairment rules (HS) under IFRS relative to UK firms that used fair-value accounting (FV) under UK GAAP and then switched to historical cost accounting with strict impairment rules (HS) under IFRS. ***, **, * denote significance at the 1%, 5%, and 10% levels, respectively. P- values are one-tailed when a directional prediction is made. Statistics for all variables are from firm-years between 2000 and 2009. The model includes industry fixed effects. Standard errors are clustered at the firm-level. For variable definitions, see "List of Variable Definitions" in Appendix A. CAPEX it = β 0 + β 1 IFRS it + β 2 OVER_INV it + β 3 IFRS it * OVER_INV it + β 4 FV_HS it + 60.27% (7) (7) 53 TABLE C9 Multivariate Analysis of the Effect on Over-investment based on Managerial Ownership _______________________________________________________________ + β 6 IFRS it *HIGH it + β 7 IFRS it *LOW it + β 8 HIGH it *OVER_INV it + β 9 LOW it *OVER_INV it + β 10 IFRS it *HIGH it *OVER_INV it + β 11 IFRS it *LOW it *OVER_INV it + β 12-21 CONTROLS it + β 22-31 CONTROLS it *OVER_INV it + ε it Pred. Sign Coefficient t-stat P-value Intercept +/- -4.2221 *** -8.13 <.0001 IFRS +/- -0.0756 -0.88 0.3778 OVER_INV + 0.5931 0.82 0.2069 IFRS*OVER_INV - -0.2215 * -1.43 0.0768 HIGH +/- 0.0308 0.25 0.8062 LOW +/- -0.0325 -0.27 0.7867 IFRS*HIGH +/- 0.1194 0.85 0.3957 IFRS*LOW +/- 0.2276 1.55 0.1228 HIGH*OVER_INV - -0.0889 -0.40 0.3445 LOW*OVER_INV + -0.0248 -0.12 0.4520 IFRS*HIGH*OVER_INV - -0.0774 -0.28 0.3905 IFRS*LOW*OVER_INV - -0.5671 ** -2.04 0.0213 SIZE + 0.0547 ** 1.91 0.0283 TANGIBILITY + 0.8894 *** 6.29 <.0001 CFO_SALE +/- 0.5029 1.54 0.1247 OPERATING_CYCLE +/- -0.1129 -1.34 0.1802 DIV +/- -0.0529 -0.47 0.6391 MTB + 0.0382 *** 3.10 0.0011 LOSS - -0.2837 *** -2.79 0.0028 CAP_STRUCTURE +/- 0.0724 0.36 0.7224 Z_SCORE - 0.0000 * -1.60 0.0556 BIG4_5 +/- 0.2391 * 1.82 0.0695 SIZE*OVER_INV - -0.0006 -0.01 0.4951 TANGIBILITY*OVER_INV + 0.9984 *** 3.84 0.0001 CFO_SALE*OVER_INV +/- -0.4747 -1.11 0.2690 OPERATING_CYCLE*OVER_INV +/- -0.1241 -0.96 0.3386 DIV*OVER_INV +/- 0.2603 1.32 0.1893 MTB*OVER_INV +/- -0.0278 * -1.83 0.0687 LOSS*OVER_INV +/- -0.1287 -0.72 0.4690 CAP_STRUCTURE*OVER_INV +/- -0.6750 * -1.82 0.0695 Z_SCORE*OVER_INV + 0.0000 ** 1.68 0.0470 BIG4_5*OVER_INV - -0.3443 * -1.46 0.0731 Country Fixed Effects Industry Fixed Effects Observations Adjusted R 2 Test: β 10 = β 11 This table presents the OLS regression estimates of the effect on over-investment after IFRS mandatory adoption based on managerial ownership. ***, **, * denote significance at the 1%, 5%, and 10% levels, respectively. P-values are one- tailed when a directional prediction is made. Statistics for all variables are from firm-years between 2000 and 2009. The model includes country and industry fixed effects. Standard errors are clustered at the firm-level. For variable definitions, see "List of Variable Definitions" in Appendix A. F = 2.62 (p = 0.0728) Yes 2,568 CAPEX it = β 0 + β 1 IFRS it + β 2 OVER_INV it + β 3 IFRS it *OVER_INV it + β 4 HIGH it + β 5 LOW it Yes 50.25% (8) 54 REFERENCES Ahmed, A., and S. Duellman. 2010. Evidence on the role of accounting conservatism in monitoring managers’ investment decisions. Accounting and Finance 51: 609- 633. Ahmed, A., M. Neel, and D. Wang. 2010. Does mandatory adoption of IFRS improves accounting quality. Working paper. Texas A&M University. Altman, E. 1968. Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. Journal of Finance 23: 589-609. Ang, J., R. Cole, and J. Lin. 2000. Agency costs and ownership structure. 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