Causes and effects of discretionary asset write-offs

Article Abstract:

The causes and shareholder wealth effects of discretionary asset write-offs are investigated. The term 'write-off' is used to refer to both complete and partial downward asset revaluations. Sample write-offs are described as discretionary because of the lack of authoritative guidance on accounting for the majority of asset impairments, with the exception of inventory, over the sample period 1989-1992. Focus is on the impact of manipulation and impairment on write-off decisions and the dependence of market reactions to write-offs on both factors. Although both factors are found to be significant determinants, incentives are found to have little or no significance in determining inventory and write-offs but help explain other discretionary items, such as goodwill write-offs and restructuring charges.

Assets (Accounting), Disposable income

---

Corporate compliance with debt covenants

Article Abstract:

A model for analyzing corporate compliance with debt covenants is presented. The model analyzes the costs influencing decisions by shareholders to violate or comply with a specific debt covenant, the payment of a current obligation. Costs include those related to bondholders' reactions to the possibility of a default. The model predicts a default by shareholders when interest rates decline relative to the debt issue's coupon rates, when there is a high probability of paying future obligations, and when there is a high cost of securing funds to pay off the obligations. The model had an 87% accuracy rate in classifying compliance or default decisions in a sample of 450 outstanding debt obligations between 1982 and 1984.

Stockholders, Default (Finance)

---

Covenants in U.S. public debt agreements

Article Abstract:

This study examines the covenants contained in a sample of 45 public debentures issued by U.S. corporations. A survey identified six covenants among the debt agreements. Interestingly, none of the sample debt issues included constraints on working capital, net worth or current ratios. Without exception, the covenants noted in the agreements were identical to those reported in Moody's Industrial Manual. Descriptive information on selected characteristics of the debt issues is also provided. (Reprinted by permission of the publisher.)

Finance, National debt, Corporations, Public debts, Corporate finance

Similar abstracts:

• Abstracts: The effect of sequential information arrival on asset prices: an experimental study. On the feasibility of automated market making by a programmed specialist
• Abstracts: The effect of sequential information arrival on asset prices: an experimental study. part 2 Forward markets, stock markets, and the theory of the firm
• Abstracts: The effects of presentation format on the effectiveness and efficiency of auditors' analytical review judgments
• Abstracts: Marketing academicians' perceptions of ethical research and publishing behavior. Extending the concept of shopping: an investigation of browsing activity
• Abstracts: A good press and how to get it. A new and complex art

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.