Biological Assets and Firm Value: Do Fair Value Measurement and Disclosure Matter?

Abstract

This study aims to investigate whether value of biological assets measured by fair value and disclosure of biological assets has influence on firm value. The samples are agricultural companies listed on the Indonesia Stock Exchange between 2018 and 2020 with 51 firm-year observations. Using multivariate analysis, this study found that value of biological assets measured by their fair value has a significantly positive effect on firm value, while the disclosure level of biological assets does have impact on firm value. The control variables, namely profitability, leverage, and growth, significantly affect firm value. This study provides a new perspective and empirical evidence in the research topic because this research focuses on the impact of the application of Indonesian statement of financial standard No. 69 regulating fair value of assets and disclosure of biological assets on firm value.

The impact of biological asset disclosures and economic sustainability on firm value: Evidence from agricultural companies in Indonesia

“…It is in line with previous research IOP Publishing doi:10.1088/1755-1315/1297/1/012069 7 [8], [16], [19], [22]. In Alfarisyi et al [15], the BIO from the previous year matches the FIV this year. Hence, different years of data entry will cause different statistical results.…”

“…The results that biological asset disclosure does not affect firm value consistent with Domo and Utami [22] but contradict with Alfarisyi et al [15]. The plausible reason for the different results relates to the different matching tabulations of BIO and FIV between the present study and Alfarisyi et al [15].…”

“…To what extent accounting information influences stock prices and, in turn, investors' decisions is the primary focus of value-relevance studies [10]. Researches on biological asset may be categorized in two main broad theme: determinants the extent of biological asset reporting [11][12][13]; and the value relevance of biological asset and biological asset disclosure [8], [10], [14][15][16][17]. Studies that explored the value relevance of biological assets measured at fair value and the disclosure of biological assets show inconsistent results.…”

“…Meanwhile, studies on the association between biological asset disclosure and the value of the firm exhibit contradictory results. In the Indonesian context, Alfarisyi et al [15] and Khodijah and Utami [21] find that the level of biological asset disclosures is likely to increase the value of the firm, while Domo and Utami's study [22] reveals that such disclosures have no relationship with firm value. The present study applies signaling theory to develop hypothesis of the positive effect of biological asset disclosures of firm value.…”