Motives for and Effects of Asset Revaluation: An Examination of South Korean Data

Baek, Hyungkee Young; Lee, Dong Hoon

doi:10.1080/1540496x.2016.1209360

Cited by 10 publications

(14 citation statements)

References 13 publications

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“…Prior research of Easley and O'Hara (2004) argues that not only the scope of information presented but also the structure of information was relevant for determining the cost of capital (this was certainly related to the measurement of the value of assets). In this context, studies by Baek and Lee (2016) also merit attention, as they mention the issue of fair value and revaluation of the assets, which can affect the cost of capital. 1 The disclosure issue is also mentioned by Dutta and Nezlobin (2017), who point out that: 'a firm's cost of capital decreases (increases) in the precision of public disclosure if the firm's growth rate is below (above) a certain threshold.…”

Section: Understanding the Cost Of Capitalmentioning

confidence: 99%

Cost of Agricultural Business Equity Capital—A Theoretical and Empirical Study for Poland

2018

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This paper proposes a methodology for calculating the cost of equity for unlisted agricultural companies in Poland. An analysis of a fixed effects panel model was conducted on a sample of 79 agricultural enterprises from the Farm Accountancy Data Network (FADN) field of observation in 2012-2015. The empirical model includes a value of land, agricultural area, depreciation, sale earnings, and payables. The study confirmed that in the valuation of the cost of equity capital in agricultural enterprises, factors that are specific to this sector must be taken into account. As the basic source of production is agricultural land, it must be taken into consideration while estimating the cost of equity capital. This factor was included in the theoretical model.

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Section: Understanding the Cost Of Capitalmentioning

confidence: 99%

Cost of Agricultural Business Equity Capital—A Theoretical and Empirical Study for Poland

2018

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“…Tabari and Adi (2014) found a significant relationship of FAR with DAR, operating cash flow, total assets, and the intensity of fixed assets of the companies before revaluation. Baek and Lee (2016) found a positive relationship between higher equity cost and leverage, and a negative relationship of profitability, cash flow, and Tobin's Q with FAR in South Korean companies. Nijam (2018) found that companies with a high share of land and building and financial leverage apply the revaluation model.…”

Section: Entity-specific Factors and Farmentioning

confidence: 88%

“…Most of the studies on FAR are managed by the Positive accounting theory (PAT), which implies that materialistic self-interest is the basis of every economic activity and, thus, it influences the selection of accounting methods and policies (Gaffikin, 2007). To explain the motives behind FAR, researchers such as Gaeremynck and Veugelers (1999), Godfrey, Hodgson, and Scott (2000), Jaggi and Tusi (2001), Gaffikin (2007), Chainirun and Narktabtee (2009), Lopes and Walker (2012), Christensen and Nikolaev (2013), Yao, Percy, and Hu (2015), Baek and Lee (2016), Jefriyanto and Mulya (2019), and others have applied one or more of the three hypotheses of PAT, namely, the Debt covenant hypothesis, the Signaling hypothesis, and the Political cost hypothesis. On the other hand, Ronen (2008), Abdel-Khalik (2010), Madison (2014), andPalea (2014) are among others who explained FAR decisions based on the Stewardship theory.…”

Section: Accounting Theories and Farmentioning

confidence: 99%

“…The Iranian study of Jamshidian and Sharifabadi (2016) identified FAR as a technique of capital enhancement. Baek and Lee (2016) found that South Korean companies reduced debt costs after revaluation. The Malaysian study of Khalil, Asad, and Khan (2018) discovered the primary motive of FAR is to raise more funds by satisfying investors.…”

Section: Revaluation Decision and Far Motivesmentioning

confidence: 99%

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Does Fixed Assets Revaluation Create Avenues for Financial Numbers Game? Evidence from a Developing Country

Rahman¹,

Hossain²

2020

JAFEB

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The study reveals the extent of changes in selective financial numbers caused by fixed asset revaluation (FAR) and explores whether there was a management motive for playing the financial numbers game through using the FAR model. The data set consists of a sample of 142 listed companies purposively selected from 13 industries. The study found a significant impact of FAR on the net asset value (NAV), fixed asset intensity (FAI), and debt-to-equity ratio (DER). These findings are supported by the political cost and the debt covenant hypotheses. The study also observed a high growth of fixed assets by 9.5% to 14,603.8% resulting from FAR. More revealing is that FAR increased NAV in revaluer companies by an average of 427.20% as compared to 6.86% in non-revaluer companies. Even some companies with negative NAV took resort on FAR to show positive NAV. Besides, revaluer companies managed to reduce their DER by 70.45% as opposed to an increase of 8.45% in non-revaluer companies. Hence, the study concludes that most of the publicly-listed companies are involved in financial numbers game by the use of the FAR model. To build confidence among investors, companies should practice FAR rightly and disclose related information to help reduce information asymmetry.

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“…Local governments agree that determining fair value is very important to increase transparency and objectivity. While Baek and Lee (2016) found that asset revaluation that results in fair value in financial statements could provide more relevant information and reduce information asymmetry.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Human Resources and Information Technology on the Revaluation of Government Fixed Assets

Indra

2020

JTAKEN

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The central government has implemented a government fixed asset revaluation policy. The main objective of the policy is to present the fair value of fixed assets in the government's financial statements. However, the results of fixed asset revaluation are not accepted by the BPK and must be corrected and recorded in the government financial statements for the 2019 fiscal year. Competent human resources and the use of information technology are considered two factors needed to achieve the revaluation objectives. This study was conducted to determine the level of significance of these two factors by distributing questionnaires to BMN officers and assessors from 82 ministries/agencies throughout Indonesia. The research data were processed by path analysis method using the Structural Equation Model (SEM) partial least squares (PLS) through Smart PLS 3.3.2 software used to assess measurement models and research structural models. The results of data processing concluded that the competence of human resources and information technology has a significant effect on the revaluation of government fixed assets. However, information technology needs to be improved again because the significance value is only half that of the human resources competency value.

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Motives for and Effects of Asset Revaluation: An Examination of South Korean Data

Cited by 10 publications

References 13 publications

Cost of Agricultural Business Equity Capital—A Theoretical and Empirical Study for Poland

Cost of Agricultural Business Equity Capital—A Theoretical and Empirical Study for Poland

Does Fixed Assets Revaluation Create Avenues for Financial Numbers Game? Evidence from a Developing Country

The Effect of Human Resources and Information Technology on the Revaluation of Government Fixed Assets

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