Capitalized intangibles and financial analysts

Matolcsy, Zoltan and Wyatt, Anne (2006) Capitalized intangibles and financial analysts. Accounting and Finance, 46 3: 457-479. doi:10.1111/j.1467-629x.2006.00177.x

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Author Matolcsy, Zoltan
Wyatt, Anne
Title Capitalized intangibles and financial analysts
Journal name Accounting and Finance   Check publisher's open access policy
ISSN 0810-5391
1467-629X
0110-5159
Publication date 2006-09
Sub-type Article (original research)
DOI 10.1111/j.1467-629x.2006.00177.x
Open Access Status File (Author Post-print)
Volume 46
Issue 3
Start page 457
End page 479
Total pages 23
Place of publication Oxford, England
Publisher Blackwell
Language eng
Subject 15 Commerce, Management, Tourism and Services
1503 Business and Management
Abstract 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.
Keyword Intangible assets
Analyst following
Forecast dispersion
Forecast errors
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collections: Faculty of Business, Economics and Law -- Publications
Excellence in Research Australia (ERA) - Collection
 
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Created: Fri, 08 Jan 2010, 09:29:26 EST by Christine Ouslinis on behalf of Faculty of Business, Economics & Law