Profits versus Losses: Does Reporting an Accounting Loss Act as a Heuristic Trigger to Exercise the Abandonment Option and Divest Employees?

摘要: The binary classification of firms into profits or losses represents a powerful heuristic. literature that has examined the impact on firm this earnings heuristic focused management actions small profit firms. reporting accounting and decision‐making effects may have other than not been examined. In study we hypothesize an loss acts as trigger for to exercise abandonment option discard unproductive investments. results are consistent with hypothesis. We find there is sharp economically significant discontinuity around zero in level investment labor between due having lower‐than‐expected labor, given their economic fundamentals. Further tests show ...