Business, Management and Accounting
4 years ago

Accelerated depreciation leads to larger capital investments, shaping firms' decisions.

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Journal of Accounting and Economics
Economic consequences of firms’ depreciation method choice: Evidence from capital investments
Scott B. Jackson, Xiaotao Liu, Mark Cecchini

Paper Summary

Firms that use accelerated depreciation tend to invest more in capital than those using straight-line depreciation. Over the past 20 years, more firms have switched from accelerated to straight-line depreciation, resulting in smaller capital investments after the change. This shows that how a company reports its finances can affect how much they invest in their business.

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