This paper finds that private firms make the decision to write off, and write off more in terms of total amount, if they are: (i) more profitable, (ii) have more financial debt, and (iii) pay dividends. Our findings are contrary to expectations based on accounting standards and the existing revaluation literature. They are, however, consistent with the codified, high booktax alignment economic setting in which sample private firms operate. This includes agency problems faced by private firms' stakeholders. We use a comprehensive sample of German SMEs reporting in local GAAP, based on the German commercial code (Handelsgesetzbuch) in [2003][2004][2005][2006]. We view write-offs as corrections of departures of book values from their underlying economic values, in contrast to upward asset revaluations. This governs our choice of estimation -the tobit regression.

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We investigate the ex-post effects of the Basel II reform on the debt costs of German small and medium-sized enterprises (SMEs). We assume that Basel II formalized the credit assessment procedure of banks and that especially SMEs might face higher costs of debt as they tend to have comparably high proportions of bank credit, and consequently lower ratings than bigger companies. Beyond that, banks might try to refinance those additional rating costs by imposing higher interest rates on debtors. The results presented in our paper indicate a significant overall rise of debt costs of SMEs that have debt relations with IRBA-certified banks since 2007. Furthermore, low-risk companies benefit from comparably lower loan rates, whereas risky firms face comparably higher loan costs than before. The results are less obvious for SMEs that are rated under RSA, but still present for highly risky companies. We test for several influences of the financial crisis. However, we do not find convincing arguments that would reason a rise of the costs of debt in regard of the crisis. Yet, we still observe higher debt costs of SMEs, particularly of highly risky companies, since 2007 that indicate a change of bank lending behavior in Germany.

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Real earnings management, Accounting earnings management, Regulatory incentives, China Securities Regulatory Commission, M41 Accounting, G28 Government Policy and Regulation,