The impact of debt on market reactions to the revaluation of noncurrent assets

Courtenay, Stephen M.; Cahan, Steven F.

doi:10.1016/s0927-538x(03)00021-0

Cited by 15 publications

(17 citation statements)

References 19 publications

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“…The market reaction to these revaluations depends on whether the market views a revaluation as decreasing information asymmetry (at low levels of debt) or as opportunistic (high levels of debt) (Courtenay and Cahan, ).…”

mentioning

confidence: 99%

Asset Write‐offs in Private Firms – The Case of German SMEs

Szczesny¹,

Valentincic²

2013

Business Fin & Account

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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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confidence: 99%

Asset Write‐offs in Private Firms – The Case of German SMEs

Szczesny¹,

Valentincic²

2013

Business Fin & Account

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“…Aboody et al (1999) indicate that revaluations of fixed assets among UK firms are positively related to share prices. Courtenay and Cahan (2004) extended Aboody et al (1999) study and indicate that revaluations of fixed assets are more value relevant for firms with low leverage than for firms with high leverage. The most relevant study to the current setting is by Hassan and Mohd-Saleh (2010).…”

Section: Literature Review and Hypotheses Development Value Relevancementioning

confidence: 60%

“…Their findings indicate that fair values of different classes of assets are significantly associated with the share prices as they have implications for firms' future profitability (Barth & Clinch, 1998). Their results are supported by Aboody et al (1999), Courtenay and Cahan (2004) and Hassan and Mohd-Saleh (2010). Aboody et al (1999) indicate that revaluations of fixed assets among UK firms are positively related to share prices.…”

Section: Literature Review and Hypotheses Development Value Relevancementioning

confidence: 70%

Value Relevance of Investment Properties’ Fair Value and Board Characteristics in Malaysian Real Estate Investment Trusts

Mei

Hassan

Embong

2014

AJAG

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“…Though there is no conclusive evidence grossly disproving the cost model over the revaluation model, Gaeremynck and Veugelers (1999) hold that revaluation often provides a reliable indication for potential investors. Thus, prior studies have found that revaluation of fixed asset has significant impact on firms’ valuation (Aboody, Barth, & Kasznik, 1999; Barth & Clinch, 1998; Courtney & Cahan, 2004; Easton, Eddey, & Trevor, 1993; Emanuel, 1989; Ghicas, Hevas, & Papadaki, 1996; Jaggi & Tsui, 2001; Standish & Ung, 1982). Iatridis and Kilirgiotis (2012) show that asset revaluation causes favourable effect on firms’ financial plans and position.…”

Section: Introductionmentioning

confidence: 99%

Motives for Reporting Fixed Assets at Revalued Amount: Evidence from a Developing Economy

Nijam

2018

Global Business Review

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The purpose of this study is to examine firms’ motives for reporting fixed assets at revalued amount. The study analysed 30 manufacturing firms listed in Colombo Stock Exchange (CSE) for a period of two years from 2012 to 2013, employing Mann–Whitney U test and bivariate and multivariate logistic regression. It is found that manufacturing firms tend to report their property, plant and equipment (PP&E) at revalued amount, when land and building dominates their fixed assets, and firms whose PP&E is dominated by plant and machinery are inclined towards reporting fixed assets at historical cost. However, all such other factors investigated as firm size, carrying amount of PP&E ( ppe), intensity of PP&E ( ippe), returns on total assets ( roa) and return on equity ( roe) fail to explain the accounting choice between cost and revaluation models. The probability for a revaluation to occur, on the other hand, is found to be significantly and positively associated to financial leverage, indicating that highly levered manufacturing firms tend to revalue their assets, may be with the expectation of creating possibilities for additional borrowing. Further, no other variables investigated associate with the probability for a revaluation to occur, though prior researches support such association. Findings reveal that fixed assets revaluation motives may be characterized by the nature of fixed assets and their market dynamics characterized by the nature of economy in which firms operate. Findings also suggest that fair value accounting is relevant to manufacturers with high levels of land and building within their asset structure. Fixed assets revaluation motives may differ across countries which should accordingly be valued by financial analyst and investors. Future research should focus on value relevance of revaluation decision of firms in developing countries. Revaluation decisions should be analysed as first-time revaluation and frequency of subsequent revaluations. This is the first study in Sri Lanka reporting the evidence for fixed asset revaluation motives.

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The impact of debt on market reactions to the revaluation of noncurrent assets

Cited by 15 publications

References 19 publications

Asset Write‐offs in Private Firms – The Case of German SMEs

Asset Write‐offs in Private Firms – The Case of German SMEs

Value Relevance of Investment Properties’ Fair Value and Board Characteristics in Malaysian Real Estate Investment Trusts

Motives for Reporting Fixed Assets at Revalued Amount: Evidence from a Developing Economy

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