Real Asset Liquidity and Asset Impairments

Schonberger, Bryce

doi:10.2139/ssrn.2597138

Cited by 2 publications

(4 citation statements)

References 76 publications

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“…Therefore, we expect managers/auditors of firms with highly specific assets to perform less frequent impairment tests. This is also consistent with the findings of Schonberger () that firms with liquid assets are more likely to record an impairment. In the second step, to perform fair value test, a verifiable benchmark (fair value) is needed.…”

Section: Hypotheses Developmentsupporting

confidence: 92%

“…It is difficult for managers/auditors in firms with highly specific assets to obtain the resale value from the market due to lack of an active market. Auditors of these firms may choose to delay recognizing impairment either to avoid recording impairments related to temporary fluctuations in market prices that introduce noise into earnings, or to counteract managers’ incentives to take big bath write‐offs (Schonberger, ). In addition, when market value is unavailable, management's ongoing analysis and review of their operations are more likely to be a basis for determining impairment (Ernst &Young LLP, ).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…In addition, the low liquidation value feature of specific assets can attenuate agency‐based demand for TLR (Myers & Rajan, ). Moreover, firms with more specific assets are less likely to write down the assets due to lack of readily available resale values as a verifiable benchmark for current asset values (Schonberger, ). All the above may reduce demand and supply for conservatism.…”

Section: Introductionmentioning

confidence: 99%

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Asset specificity and conditional accounting conservatism

2018

Business Fin & Account

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Asset specificity, the redeployability of an asset to alternative uses, is a key determinant of an asset's resale value. Asset specificity has a direct impact on a firm's ongoing fair value determination, bankruptcy risk, liquidation value, and abandonment option. We document a significant negative association between asset specificity and conditional conservatism. Further tests reveal that this inverse relation manifests as bad news being less quickly incorporated in earnings as asset specificity increases. We find no difference in the extent to which good news is delayed in earnings for firms conditional on asset specificity. In addition, the documented association is stronger when asset specificity arises from lower within‐industry acquisition activity. The association is also more pronounced for firms that are in less competitive industries, have institutional investors, have limited access to the public debt market, and/or have more unsecured debt. Our findings are noteworthy for regulators and researchers given the recent interest in the determinants of conservatism.

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Section: Hypotheses Developmentsupporting

confidence: 92%

Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Asset specificity and conditional accounting conservatism

2018

Business Fin & Account

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“…The high cost of specific assets and the market price of specific assets that cannot be valued based on their fair value makes the recovery rate of these assets if the assets are liquidated very low (Benmelech, 2009). On the other hand, due to the lack of available resale value as a verified current asset value benchmark, companies with more specific assets tend to write down assets (Schonberger, 2015). Previous research has shown that the huge relationship between asset specificity and asymmetric information is due to their uniqueness (Aboody and Baruch, 2000).…”

Section: Introductionmentioning

confidence: 99%

Asset Specificity On Conditional Conservatism

Jati

Mohammad

Arisanti

et al. 2021

JRAK

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Asset specificity, an asset creates company’s distinctive competency that tough to be imitated by competitor. Howere asset specificity features a direct impact on a firm’s in progress truthful price determination, bankruptcy risk, liquidation value, and abandonment option. On alternative hand, the ownerhip of this quality specificity has serious consequences on finance strategy. Bank faces serious issue to create a correct valuation of specific and opaque asset so bank charges higher value of debt. we discover no distinction within the extent to that good news is delayed in earnings for corporations conditional on asset specificity. This study use 280 non finance service and non agriculture type listed in IDX on 2018. However The information assortment used documentation technique and also the data analysis utilized was multiple correlation analysis. we have a tendency to document a significant negative association between quality specificity and conditional conservatism especially in Mining, Miscellaneous industry, and good consumer Industry But we notice new findings within the infrastructure sector there's a significant positive impact of specificity Asset specificity on conservatism.

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Real Asset Liquidity and Asset Impairments

Cited by 2 publications

References 76 publications

Asset specificity and conditional accounting conservatism

Asset specificity and conditional accounting conservatism

Asset Specificity On Conditional Conservatism

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