The Effects Of Prior Involvement And Accountability On Asset Impairment Decisions

This study examines whether long-lived asset impairment decisions are biased when the decision maker was also involved in the original decision to invest in the asset. In addition, the study tests whether accountability for impairment decisions attenuates bias in the judgments made by individuals who were involved in the investment decision. The theoretical bases for the study's research question and hypothesis come from the accountability and escalation of commitment literatures as well as a psychological theory previously untested in the accounting domain, the Catastrophe Theory of Attitudes (CTA). The study's findings suggest that CTA may have potential to explain certain behaviors of accountants. Furthermore, accountability appears to mitigate bias stemming from prior involvement in the investment decision.