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

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 environment with different payment periods, we show that accelerated compared to straight-line depreciation can increase the willingness to invest as hypothesized by theory. Additionally, we are able to replicate the unexpected finding of Ackermann et al. (2013) – that introducing a subsidy leads to a lower willingness to take risk although the net returns are kept constant – with our setting which is different to their experimental environment.

• Publication year

  2016

• Venue

  International Journal of Financial Studies

• Publication date

  2016-10-13

• Fields of study

  Economics

• Identifiers
  DOI 10.3390/IJFS4040019
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

• Management Incentives Under Formula Apportionment - Tax-Induced Distortions of Effort and Compensation in a Principal-Agent Setting

  2014cited by this paper
• Biased effects of taxes and subsidies on portfolio choices

  2013influential reference
• Net Wage Illusion in a Real-Effort Experiment*

  2013cited by this paper
• The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment

  2013cited by this paper
• Tax affinity hypothesis: Do we really hate paying taxes?

  2012cited by this paper
• The Impact of Tax Exclusive and Inclusive Prices on Demand

  2012cited by this paper
• Investment Behavior and the Biased Perception of Limited Loss Deduction in Income Taxation

  2012cited by this paper
• The Biased Effect of Aggregated and Disaggregated Income Taxation on Investment Decisions

  2012cited by this paper
• Dynamic tax depreciation strategies

  2011cited by this paper
• Optimal tax depreciation with loss carry-forward and backward options

  2011cited by this paper
• Are We Taxing Ourselves? How Deliberation and Experience Shape Voting on Taxes

  2011cited by this paper
• Experimental Evidence of Tax Framing Effects on the Work/Leisure Decision

  2010cited by this paper
• A review of tax research

  2010cited by this paper
• Investment Incentives and Corporate Tax Asymmetries

  2010cited by this paper
• Incentive effects of bonus depreciation

  2010cited by this paper
• EZ-Tax: Tax Salience and Tax Rates

  2009cited by this paper
• Is Simple Better? A Conjoint Analysis of the Effects of Tax Complexity on Employee Preferences Concerning Company Pension Plans

  2009cited by this paper
• Economic Consequences of Firms' Depreciation Method Choice: Evidence from Capital Investments

  2009cited by this paper
• Forschungsergebnisse in der Betriebswirtschaftlichen Steuerlehre — eine Bestandsaufnahme

  2008cited by this paper
• Salience and Taxation: Theory and Evidence

  2008cited by this paper
• Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation

  2008cited by this paper
• Steuern und Risikobereitschaft in Modellen irreversibler Investitionen

  2008cited by this paper
• The Effect of Firms' Depreciation Method Choice on Managers' Capital Investment Decisions

  2008cited by this paper
• Experimental Evidence on the Role of Tax Complexity in Investment Decisions

  2006cited by this paper
• SAVING DECISIONS OF THE WORKING POOR: SHORT- AND LONG-TERM HORIZONS

  2005cited by this paper
• Investment, Overhang, and Tax Policy

  2005cited by this paper
• Testing the Mill hypothesis of fiscal illusion

  2005cited by this paper
• The Online Recruitment System ORSEE 2.0 - A Guide for the Organization of Experiments in Economics

  2004cited by this paper
• The Impact of Floors and Phase‐Outs on Taxpayers' Decisions and Understanding of Marginal Tax Rates

  2003cited by this paper
• The Effects of Temporary Partial Expensing on Investment Incentives in the United States

  2002cited by this paper
• Optimal Tax Depreciation Under A Progressive Tax System

  2002cited by this paper
• Optimal tax depreciation lives and charges under regulatory constraints

  2002cited by this paper
• Optimal tax depreciation with uncertain future cash-flows

  2001cited by this paper
• More on tax perception and labour supply: the Spanish case

  2000cited by this paper
• z-Tree: Zurich toolbox for ready-made economic experiments

  1999cited by this paper
• The magnitude effect: Temporal discount rates and restaurant tips

  1998cited by this paper
• Empirical Studies of Depreciation

  1996cited by this paper
• Delay-discounting probabilistic rewards: Rates decrease as amounts increase

  1996cited by this paper
• Tax Illusion and Labour Supply of Married Women: Evidence from German Data

  1995cited by this paper
• Empirical Studies of Depriciation

  1994cited by this paper
• Experimental Evidence on Tax Incentives and the Demand for Capital Investments

  1993cited by this paper
• THE EFFECTS OF TAXATION ON INVESTMENT: NEW EVIDENCE FROM FIRM LEVEL PANEL DATA

  1992cited by this paper
• Which tax rate do people use: Average or marginal?

  1991cited by this paper
• The Choice of Depreciation Method Under Uncertainty

  1989cited by this paper
• On the Accuracy of Tax Perceptions

  1988cited by this paper
• Discount rates inferred from decisions: an experimental study

  1987cited by this paper
• Investment Incentives and the Discounting of Depreciation Allowances

  1986cited by this paper
• Some empirical evidence on dynamic inconsistency

  1981cited by this paper
• The Influence of Tax Incentives on Capital Budgeting Decisions Under Uncertainty

  1981cited by this paper
• Optimal tax depreciation

  1980influential reference
• Inflation, Tax Rules, and Investment: Some Econometric Evidence

  1980cited by this paper
• Results from two national surveys of philanthropic activity

  1979cited by this paper
• Commission on Private Philanthropy and Public Needs

  1976cited by this paper
• AWARENESS OF MARGINAL INCOME TAX RATES AMONG HIGH-INCOME TAXPAYERS

  1965cited by this paper
• Author's Personal Copy Games and Economic Behavior Present-bias, Quasi-hyperbolic Discounting, and Fixed Costs

  year unknowncited by this paper

• Economic Assessment of Biochar-Based Controlled-Release Nitrogen Fertilizer Production at Different Industrial Scales

  2025cites this paper
• Accelerated depreciation and investment-driven growth: a Marx-Okishio approach

  2025cites this paper
• The Impact of Estimated Depreciation of Infrastructure Assets on Sales Profitability

  2025cites this paper
• Tax Incentives and Earnings Management: A Study Based on Accelerated Depreciation Policy in China

  2023cites this paper
• Critical Review on Financial Reporting Practices by Islamic Banks: (Comparison between AAOIFI and IFRS)

  2022cites this paper
• Análise dos Riscos em Projetos: Uma Aplicação do Método de Monte Carlo em uma Empresa do Setor Moveleiro

  2018influential citation
• The Effect of Depreciation Methods on the Profitability and Net Present Value (NPV): A Case Study of Nam Con Son 2 Phase Pipeline Project, Vietnam for the Period of 2019-2037

  2018cites this paper
• Zróżnicowanie ujęcia amortyzacji w sprawozdawczości finansowej współczesnych przedsiębiorstw

  2018cites this paper
• Net Wage Illusion in a Real-Effort Experiment*

  2013cites this paper