Do regulatory requirements influence managers’ information processing bias in impairment decisions?

& Ken Trotman
We conduct an experiment to investigate how regulatory requirements in the accounting for impairment, namely, reversibility of impairment losses and disclosure of impairment assumptions, influence managers’ bias in the processing of impairment information. Our results show that regulatory requirements influence managers’ information evaluation bias but not their bias in the search process. We find that managers’ evaluation of impairment information is not biased when impairment losses are reversible. When impairment losses are not reversible, the...
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