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

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  • H. Young Baek
  • Dong Young Lee

Abstract

Examining a sample of South Korean firms, of which 201 revalued assets and 899 did not during the period 2008–2009, we find that the average debt cost, equity cost, and weighted average cost of capital (WACC) are higher among the firms that revalued. Firms with higher equity costs and leverage are more likely to revalue and the propensity has a negative relationship with profitability, cash flow, and Tobin’s q. Firms that engage in revaluation experience reductions in all capital costs from year −1 to +1, comparable to those among firms that did not revalue. Our results support both the information hypothesis and the debt-cost hypothesis.

Suggested Citation

  • 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.
    • Handle: RePEc:mes:emfitr:v:52:y:2016:i:12:p:2808-2817
    DOI: 10.1080/1540496X.2016.1209360
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    Cited by:

    1. Justyna Franc-Dąbrowska & Magdalena Mądra-Sawicka & Joanna Bereżnicka, 2018. "Cost of Agricultural Business Equity Capital—A Theoretical and Empirical Study for Poland," Economies, MDPI, vol. 6(3), pages 1-15, June.
    2. Nemanja Karapavlović & Vladimir Obradović & Jasmina Bogićević, 2020. "The Use Of Historical Cost And Fair Value For Property And Plant And Equipment Measurement – Evidence From The Republic Of Serbia," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(227), pages 95-118, October –.
    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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