Capitalized intangibles and financial analysts
Zoltan Matolcsy and
Accounting and Finance, 2006, vol. 46, issue 3, 457-479
We examine whether firms that capitalize a higher proportion of their underlying intangible assets have higher analyst following, lower dispersion of analysts’ earnings forecasts and more accurate earnings forecasts relative to firms that capitalize a lower proportion. Under Australian generally accepted accounting principles, capitalization of intangible assets has become increasingly ‘routine’ since the late 1980s. It is predicted that this experience leads Australian analysts to expect firms with relatively more certain intangible investments to signal this fact by capitalizing intangible assets. Our results are consistent with this. We find that capitalization of intangible assets is associated with higher analyst following and lower absolute earnings forecast error for firms with a stock of underlying intangible assets. Our tests suggest a weaker association between capitalization and lower earnings forecast dispersion. We conclude that there are benefits for analysts, for management to have the option to capitalize intangible assets. These findings suggest that IAS 38 Intangible Assets and AASB 138 Intangible Assets reduce the usefulness of financial statements.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:acctfi:v:46:y:2006:i:3:p:457-479
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391
Access Statistics for this article
Accounting and Finance is currently edited by Robert Faff
More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().