Capitalized intangibles and financial analysts
We examine whether firms that capitalize a higher proportion of their underlyingintangible assets have higher analyst following, lower dispersion of analysts?earnings forecasts and more accurate earnings forecasts relative to firms thatcapitalize a lower proportion. Under Australian generally accepted accountingprinciples, capitalization of intangible assets has become increasingly ?routine?since the late 1980s. It is predicted that this experience leads Australian analysts toexpect firms with relatively more certain intangible investments to signal thisfact by capitalizing intangible assets. Our results are consistent with this. Wefind that capitalization of intangible assets is associated with higher analyst followingand lower absolute earnings forecast error for firms with a stock ofunderlying intangible assets. Our tests suggest a weaker association betweencapitalization and lower earnings forecast dispersion. We conclude that thereare benefits for analysts, for management to have the option to capitalize intangibleassets. These findings suggest that IAS 38Intangible Assetsand AASB138Intangible Assetsreduce the usefulness of financial statements.
Year of publication: |
2002
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Authors: | Matolcsy Zoltan ; Wyatt Anne |
Publisher: |
Carfax Publishing |
Saved in:
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