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Does Fixed Asset Revaluation Build Trust between Management and Investors?

Author

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  • Jincheol Bae

    (College of Business Administration, Inha University, Incheon 22212, Korea)

  • Jaehong Lee

    (College of Business, Sangmyung University, Seoul 03016, Korea)

  • Eunsoo Kim

    (College of Business, Sangmyung University, Seoul 03016, Korea)

Abstract

In this paper, we examine whether fixed asset revaluation has an impact on the timeliness and relevance of information disclosed in financial reporting. Using firms listed in the Korea Stock Exchange market during 2007–2017, this study investigates the change in transparency of the information disclosure environment as proxied by stock price crash risk. We find that, on average, fixed asset revaluation has a positive effect on sustainability by improving timeliness and relevance of disclosed information, thereby decreasing stock price crash risk. In contrast, firms with unhealthy financial conditions and a high degree of information asymmetry show an increase in crash likelihood after fixed asset revaluation. These findings suggest that the relationship between fixed asset revaluation and stock price cash risk is dependent upon management’s motivation for honesty during the revaluation process.

Suggested Citation

  • 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.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:13:p:3700-:d:246049
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    Cited by:

    1. Jaehong Lee & Eunjoo Cho & Jong Sung Park, 2019. "Towards a More Transparent Disclosure for Corporate Sustainability: Focusing on the Regulation of Unfaithful Disclosure Designation," Sustainability, MDPI, vol. 11(22), pages 1-26, November.
    2. Sarfraz Hussain & Mohammad Enamul Hoque & Perengki Susanto & Waqas Ahmad Watto & Samina Haque & Pradeep Mishra, 2022. "The Quality of Fair Revaluation of Fixed Assets and Additional Calculations Aimed at Facilitating Prospective Investors’ Decisions," Sustainability, MDPI, vol. 14(16), pages 1-14, August.
    3. 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.

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