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The Effect of Straight-Line and Accelerated Depreciation Rules on Risky Investment Decisions—An Experimental Study

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  • Hagen Ackermann

    (Chair in Business Taxation, Faculty of Economics and Management, University of Magdeburg, Postbox 4120, D-39016 Magdeburg, Germany)

  • Martin Fochmann

    (Behavioral Accounting/Taxation/Finance, Faculty of Management, Economics and Social Sciences, University of Cologne, Albertus-Magnus-Platz, D-50923 Köln, Germany)

  • Nadja Wolf

    (Institute of Company Taxation and Tax Theory, Faculty of Economics and Management, University of Hanover, Königsworther Platz 1, D-30167 Hanover, Germany)

Abstract

The aim of this study is to analyze how depreciation rules influence the decision behavior of investors. For this purpose, we conduct a laboratory experiment in which participants decide on the composition of an asset portfolio in different choice situations. Using an experimental setting with different payment periods, we show that accelerated compared to straight-line depreciation can increase the willingness to invest as hypothesized by theory. However, this expected behavior is only observed in a more complex environment (with a subsidy) and not in a less complex environment (without a subsidy).

Suggested Citation

  • Hagen Ackermann & Martin Fochmann & Nadja Wolf, 2016. "The Effect of Straight-Line and Accelerated Depreciation Rules on Risky Investment Decisions—An Experimental Study," IJFS, MDPI, vol. 4(4), pages 1-26, October.
    • Handle: RePEc:gam:jijfss:v:4:y:2016:i:4:p:19-:d:80417
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    References listed on IDEAS

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