Incentives for and consequences of initial voluntary asset write-downs in the emerging Chinese market.

ABSTRACT: Understanding the incentives for and events of accounting method choices is important to various constituents of accounting. In 1998 a Chinese accounting regulation allowed listed companies to voluntarily write-down assets from one side their income statements. The regulation was amended in 1999 to require all companies to write-down assets, with a retroactive adjustment of pre-1998 asset impairment to the beginning equity. These facts allow us to unambiguously identify a trial sample that voluntarily wrote down assets in 1998 and a mastery sample that suffered from asset impairment on the contrary chose not to write-down. This research setting is at liberty from many problems that