Revaluations of fixed assets and future firm performance: Evidence from the UK 1 We appreciate helpful comments from Greg Clinch, Ed Maydew, Sir David Tweedie, Ken Peasnell, participants at the 1998 Journal of Accounting and Economics Conference, especially Richard Sloan, the discussant, the 1998 American Accounting Association annual meeting, especially Elizabeth Gordon, the discussant, Ray Ball, the editor, and an anonymous reviewer. Mary Barth and Ron Kasznik gratefully acknowledge the support of the Stanford GSB Financial Research Initiative. David Aboody acknowledges the support of the Anderson School at UCLA. 1

Revaluations of fixed assets and future firm performance: Evidence from the UK 1 We appreciate... We find, as predicted, that upward revaluations of fixed assets by UK firms are significantly positively related to changes in future performance, measured by operating income and cash from operations, indicating revaluations reflect asset value changes. Current year revaluations (revaluation balances) also are significantly positively related to annual returns (prices). Relations between revaluations and future performance and prices are weaker for higher debt-to-equity ratio firms, indicating motivation affects how revaluations reflect asset value changes. The relations also are weaker for cross-listed firms and in a more volatile economic time period. Our inferences are robust to controlling for firms' acquisition activity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Revaluations of fixed assets and future firm performance: Evidence from the UK 1 We appreciate helpful comments from Greg Clinch, Ed Maydew, Sir David Tweedie, Ken Peasnell, participants at the 1998 Journal of Accounting and Economics Conference, especially Richard Sloan, the discussant, the 1998 American Accounting Association annual meeting, especially Elizabeth Gordon, the discussant, Ray Ball, the editor, and an anonymous reviewer. Mary Barth and Ron Kasznik gratefully acknowledge the support of the Stanford GSB Financial Research Initiative. David Aboody acknowledges the support of the Anderson School at UCLA. 1

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Publisher
Elsevier
Copyright
Copyright © 1999 Elsevier Science B.V.
ISSN
0165-4101
DOI
10.1016/S0165-4101(98)00040-8
Publisher site
See Article on Publisher Site

Abstract

We find, as predicted, that upward revaluations of fixed assets by UK firms are significantly positively related to changes in future performance, measured by operating income and cash from operations, indicating revaluations reflect asset value changes. Current year revaluations (revaluation balances) also are significantly positively related to annual returns (prices). Relations between revaluations and future performance and prices are weaker for higher debt-to-equity ratio firms, indicating motivation affects how revaluations reflect asset value changes. The relations also are weaker for cross-listed firms and in a more volatile economic time period. Our inferences are robust to controlling for firms' acquisition activity.

Journal

Journal of Accounting and EconomicsElsevier

Published: Jan 1, 1999

References

  • The effects of cross-sectional scale differences on regression results in empirical accounting research
    Barth, M.E.; Kallapur, S.

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