Khadija S. Almaghrabi
Capitalised development costs and future cash flows: The effect of CEO overconfidence and board gender diversity
Almaghrabi, Khadija S.; Slack, Richard; Tsalavoutas, Ioannis; Tsoligkas, Fanis
Authors
Abstract
Capitalisation of development costs mandated under IAS 38 is an important accounting issue conveying a signal to users of accounting information regarding future economic benefits. Using a longitudinal sample of UK firms, firstly, we examine the adverse effect of CEO overconfidence levels on the association between capitalised development costs and future economic benefits, proxied by cash flows. Secondly, we examine the moderating influence of board gender diversity on this association. We find that the association between capitalised development costs and future cash flows, while positive, is significantly weaker for firms with higher levels of CEO overconfidence, implying that the signalling effect of capitalisation is diluted. Moreover, our results show that board gender diversity significantly moderates the managerial bias associated with high overconfidence levels, helping to restore the neutrality of accounting and the strength of signalling with regards to future economic benefits.
Citation
Almaghrabi, K. S., Slack, R., Tsalavoutas, I., & Tsoligkas, F. (2024). Capitalised development costs and future cash flows: The effect of CEO overconfidence and board gender diversity. The British Accounting Review, 56(6), Article 101426. https://doi.org/10.1016/j.bar.2024.101426
Journal Article Type | Article |
---|---|
Acceptance Date | Jun 15, 2024 |
Online Publication Date | Jun 17, 2024 |
Publication Date | 2024-11 |
Deposit Date | Jun 17, 2024 |
Publicly Available Date | Jul 12, 2024 |
Journal | The British Accounting Review |
Print ISSN | 0890-8389 |
Electronic ISSN | 1095-8347 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 56 |
Issue | 6 |
Article Number | 101426 |
DOI | https://doi.org/10.1016/j.bar.2024.101426 |
Public URL | https://durham-repository.worktribe.com/output/2485061 |
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Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
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Publisher Licence URL
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