If target prices reflect the true values of stocks, they should direct prices towards intrinsic values. But analysts’ optimism and use of less sophisticated valuation methods have been found to impede target price informativeness. We find that target price optimism has a positive effect on the...

This paper examines the effect of conditional conservatism (CC) on analysts’ target prices. Due to the long-term nature of target prices, the dynamic effects of CC are more difficult to incorporate in target prices than in earnings forecasts. Accordingly, we expect and find that the effect of...

This paper analyzes the capitalization of Research & Development (R&D) expenditures under IFRS. Discretionary R&D capitalization can be exercised by managers to signal private information on future economic benefits to the market. It can, however, also serve as opportunistic earnings management....

With its standards FAS 141 and 142 the Financial Accounting Standard Board has revolutionized the accounting for business combinations. One of the major changes is the abolishment of goodwill-amortization, which has been replaced by an annual impairment test at the level of a reporting unit....

The German Tax Reform Act of 2000 has had significant influence on the taxation of the income distributed by German corporations. Part of these regulations are rules on how to tax distributions from earnings retained during the period before the new regulations became effective. These rules...

This paper derives the pre-tax-hurdle rates for the reinvestment of retained earnings of German corporations. We show that, contrary to the extant literature, in a system of double-taxation as is prevalent in Germany, the retention of earnings to shareholders is not necessarily beneficial....

The value of a levered firm depends to a large extent upon the value of the tax shields. The German Corporate Tax Reform Act 2008 changes the tax system dramatically and introduces a new ceiling for the tax-deduction of interest payments. A central objective of this reform has been the tax...