IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2021-02-10.html
   My bibliography  Save this article

Timing, Recurrence, and Effects of Fixed Asset Revaluation: Evidence from Bangladesh

Author

Listed:
  • Md. Tahidur Rahman

    (Department of Business Administration, Bangladesh Army International University of Science and Technology, Cumilla-3501, Bangladesh,)

  • Syed Zabid Hossain

    (Department of Accounting and Information Systems, University of Rajshahi, Rajshahi-6205, Bangladesh.)

  • Md. Anwarul Haque

    (Department of Accounting and Information Systems, University of Rajshahi, Rajshahi-6205, Bangladesh.)

Abstract

This study intended to explore when and how often fixed asset revaluation (FAR) is practiced in Bangladesh and explain the impacts of FAR on net asset value (NAV), stock prices, and debts of companies. Based on 175 listed companies on the Dhaka Stock Exchange, this study found increasing use of the revaluation model where the textile industry witnessed the highest number of revaluations. Most of the listed companies were irregular revaluer, and they performed FAR during the bull market in 2010. Most newly listed companies did it just before their initial public offerings (IPO). The results of the Wilcoxon signed-rank test imply that the changes in NAV, stock prices, and total debts after revaluation were statistically significant. This study found evidence of enhancing debt capacity and stock prices of several companies through improved NAV. The findings will assist regulators to recognize the consequence of revaluation and enable them to take an appropriate stance for controlling abusive and creative reporting. The study will also make investors cautious about companies with revaluation induced assets. This study suggests that companies practicing the revaluation model should perform FAR on regular intervals to reduce information asymmetry about assets value and thus help improve investors confidence.

Suggested Citation

  • Md. Tahidur Rahman & Syed Zabid Hossain & Md. Anwarul Haque, 2021. "Timing, Recurrence, and Effects of Fixed Asset Revaluation: Evidence from Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 11(2), pages 67-75.
    • Handle: RePEc:eco:journ1:2021-02-10
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/10828/pdf
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/10828/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tadeusz Dudycz & Jadwiga Praźników, 2020. "Does the Mark-to-Model Fair Value Measure Make Assets Impairment Noisy?: A Literature Review," Sustainability, MDPI, vol. 12(4), pages 1-24, February.
    2. Senda Wali, 2015. "Mechanisms of corporate governance and fixed asset revaluation," International Journal of Accounting and Finance, Inderscience Enterprises Ltd, vol. 5(1), pages 82-97.
    3. Y.C. Lin & Ken V. Peasnell, 2000. "Fixed Asset Revaluation and Equity Depletion in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3-4), pages 359-394.
    4. Joshua Ronen, 2008. "To Fair Value or Not to Fair Value: A Broader Perspective," Abacus, Accounting Foundation, University of Sydney, vol. 44(2), pages 181-208, June.
    5. Jincheol Bae & Jaehong Lee & Eunsoo Kim, 2019. "Does Fixed Asset Revaluation Build Trust between Management and Investors?," Sustainability, MDPI, vol. 11(13), pages 1-22, July.
    6. Aboody, David & Barth, Mary E. & Kasznik, Ron, 1999. "Revaluations of fixed assets and future firm performance: Evidence from the UK1," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 149-178, January.
    7. George Emmanuel Iatridis & George Kilirgiotis, 2012. "Incentives for fixed asset revaluations: the UK evidence," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 13(1), pages 5-20, May.
    8. Y.C. Lin & Ken V. Peasnell, 2000. "Fixed Asset Revaluation and Equity Depletion in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3‐4), pages 359-394, April.
    9. Benzion Barlev & Dov Fried & Joshua Rene Haddad & Joshua Livnat, 2007. "Reevaluation of Revaluations: A Cross‐Country Examination of the Motives and Effects on Future Performance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(7‐8), pages 1025-1050, September.
    10. Missonier-Piera, Franck, 2007. "Reply to discussion of "Motives for fixed asset revaluation: An empirical analysis with Swiss data"," The International Journal of Accounting, Elsevier, vol. 42(2), pages 210-212.
    11. Choong†Yuel Yoo & Tae Hee Choi & Jinhan Pae, 2018. "Demand for fair value accounting: The case of the asset revaluation boom in Korea during the global financial crisis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(1-2), pages 92-114, January.
    12. Joerg-Markus Hitz, 2007. "The Decision Usefulness of Fair Value Accounting - A Theoretical Perspective," European Accounting Review, Taylor & Francis Journals, vol. 16(2), pages 323-362.
    13. Y.C. Lin & Ken V. Peasnell, 2000. "Fixed Asset Revaluation and Equity Depletion in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3&4), pages 359-394.
    14. Benzion Barlev & Dov Fried & Joshua Rene Haddad & Joshua Livnat, 2007. "Reevaluation of Revaluations: A Cross-Country Examination of the Motives and Effects on Future Performance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(7-8), pages 1025-1050.
    15. Missonier-Piera, Franck, 2007. "Motives for fixed-asset revaluation: An empirical analysis with Swiss data," The International Journal of Accounting, Elsevier, vol. 42(2), pages 186-205.
    16. Apostolos Ballas & Vaia Panagiotou & Christos Tzovas, 2014. "Accounting Choices for Tangible Assets: A Study of Greek Firms," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 64(4), pages 18-38, October-D.
    17. Vera Palea, 2014. "Fair value accounting and its usefulness to financial statement users," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 12(2), pages 102-116, September.
    18. Daniela Majercakova & Miroslav Skoda, 2015. "Fair value in financial statements after financial crisis," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 16(3), pages 312-332, November.
    19. H. Young Baek & Dong Young Lee, 2016. "Motives for and Effects of Asset Revaluation: An Examination of South Korean Data," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(12), pages 2808-2817, December.
    20. Lopes, Alexsandro Broedel & Walker, Martin, 2012. "Asset revaluations, future firm performance and firm-level corporate governance arrangements: New evidence from Brazil," The British Accounting Review, Elsevier, vol. 44(2), pages 53-67.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Habeeb Mohamed Nijam, 2018. "Motives for Reporting Fixed Assets at Revalued Amount: Evidence from a Developing Economy," Global Business Review, International Management Institute, vol. 19(3), pages 604-622, June.
    2. Lopes, Alexsandro Broedel & Walker, Martin, 2012. "Asset revaluations, future firm performance and firm-level corporate governance arrangements: New evidence from Brazil," The British Accounting Review, Elsevier, vol. 44(2), pages 53-67.
    3. Jung, Boochun & Pourjalali, Hamid & Wen, Eric & Daniel, Shirley J., 2013. "The association between firm characteristics and CFO's opinions on the fair value option for non-financial assets," Advances in accounting, Elsevier, vol. 29(2), pages 255-266.
    4. Cho, Hyungjin & Chung, Ju Ryum & Kim, Young Jun, 2021. "Fixed asset revaluation and external financing during the financial crisis: Evidence from Korea," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    5. Salvatore Madonna & Greta Cestari & Francesca Giuliani, 2021. "Asset revaluation: scelte manageriali in tempo di crisi," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2021(3), pages 41-64.
    6. Jincheol Bae & Jaehong Lee & Eunsoo Kim, 2019. "Does Fixed Asset Revaluation Build Trust between Management and Investors?," Sustainability, MDPI, vol. 11(13), pages 1-22, July.
    7. Ryan McDonough & Argyro Panaretou & Catherine Shakespeare, 2020. "Fair value accounting: Current practice and perspectives for future research," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(3-4), pages 303-332, March.
    8. Fábio Moraes da Costa & Carol Liu & Gina Cavalier Rosa & Samuel L. Tiras, 2020. "The Commitment to Income‐Decreasing Accounting Choices As a Credible Signal to Reducing Information Asymmetry: The Case of Asset Revaluations," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2501-2522, December.
    9. Anastasios Tsamis & Konstantinos Liapis, 2014. "Fair Value and Cost Accounting, Depreciation Methods, Recognition and Measurement for Fixed Assets," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 115-133.
    10. Konstantinos J. Liapis & Christos L.Galanos, 2010. "Accounting GAAPs and Accounting Treatments for Management of Property: Case Studies from Greek Real Estate Market," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 169-194.
    11. Mirjana Hladika & Danimir Gulin & Ivana Bernat, 2021. "Revaluation as a Model of Subsequent Measurement of Property, Plant, and Equipment – Case of Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 23(1), pages 63-95, June.
    12. Apostolos Ballas & Vaia Panagiotou & Christos Tzovas, 2014. "Accounting Choices for Tangible Assets: A Study of Greek Firms," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 64(4), pages 18-38, October-D.
    13. George Emmanuel Iatridis & George Kilirgiotis, 2012. "Incentives for fixed asset revaluations: the UK evidence," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 13(1), pages 5-20, May.
    14. Muresan Diana, 2013. "Crisis Effects On Tangible Assets Revaluations A Study Over Romanian Buildings," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 197-203, April.
    15. Cairns, David & Massoudi, Dianne & Taplin, Ross & Tarca, Ann, 2011. "IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia," The British Accounting Review, Elsevier, vol. 43(1), pages 1-21.
    16. Mao, Yaping & Renneboog, Luc, 2015. "Do managers manipulate earnings prior to management buyouts?," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 43-61.
    17. Benzion Barlev & Dov Fried & Joshua Rene Haddad & Joshua Livnat, 2007. "Reevaluation of Revaluations: A Cross‐Country Examination of the Motives and Effects on Future Performance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(7‐8), pages 1025-1050, September.
    18. Missonier-Piera, Franck, 2007. "Motives for fixed-asset revaluation: An empirical analysis with Swiss data," The International Journal of Accounting, Elsevier, vol. 42(2), pages 186-205.
    19. Anastasios Tsamis & Konstantinos Liapis, 2014. "Property Assets Fair Value Accounting Under Uncertainty," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 35-54.
    20. Hong, Philip K. & Paik, Daniel Gyung & Smith, Joyce Van Der Laan, 2018. "A study of long-lived asset impairment under U.S. GAAP and IFRS within the U.S. institutional environment," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 31(C), pages 74-89.

    More about this item

    Keywords

    Fair Value Accounting; IAS 16; PP&E; Bull-bear Market; Information Asymmetry; Net Asset Value;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2021-02-10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.