Discretionary Accrual in the Knowledge-Based Economy

Authors

  • Pei-Hui Hsu California State University, East Bay
  • Ching-Lih Jan California State University, East Bay
  • Kim Shima California State University, East Bay

DOI:

https://doi.org/10.33423/jabe.v26i5.7296

Keywords:

business, economics, discretionary accrual, knowledge-based economy, negative book value, unreported intangibles

Abstract

The modern economy transit from manufacturing to knowledge-based industries that are dependent on investments in R&D, advertising, and employee talents. These investments and much of the value that they generate cannot be capitalized as assets. As these intangible assets are off-balance-sheet, a firm’s book value might be low. When book value fails to present a firm’s true value, we stipulate that management has incentive to manage its earnings to convey information that is not reflected in the balance sheet. We find that firms with negative book value and in the New Economy use more discretionary accruals.

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Published

2024-10-12

How to Cite

Hsu, P.-H., Jan, C.-L., & Shima, K. (2024). Discretionary Accrual in the Knowledge-Based Economy. Journal of Applied Business and Economics, 26(5). https://doi.org/10.33423/jabe.v26i5.7296

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