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The revaluation of assets as a signalling device: a theoretical and an empirical analysis

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  • Ann Gaeremynck
  • Reinhilde Veugelers

Abstract

In many countries, firms can choose whether or not to report a revaluation in the financial statements. An analytical model is developed to indicate conditions in which it is more likely that successful firms will choose not to revalue assets as a credible signal to potential investors. These industry settings include a high variance in performance and low equity-to-debt ratios. The empirical results for Belgium confirm that successful firms are less likely to revalue assets in those industries. However, only the revaluation of fixed tangible assets and not financial assets seems to be a credible signal. Finally, the results support the choice to revalue, but not the amount of revaluation, as a signalling device.

Suggested Citation

  • Ann Gaeremynck & Reinhilde Veugelers, 1999. "The revaluation of assets as a signalling device: a theoretical and an empirical analysis," Accounting and Business Research, Taylor & Francis Journals, vol. 29(2), pages 123-138.
    • Handle: RePEc:taf:acctbr:v:29:y:1999:i:2:p:123-138
    DOI: 10.1080/00014788.1999.9729574
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    1. A. Gaeremynck & L. Van De Gucht, 2004. "The Recognition and Timing of Deferred Tax Liabilities," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(7‐8), pages 985-1014, September.
    2. 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.
    3. Crisan Sorana Adina, 2012. "FROM ACCOUNTING REGULATIONS TO VALUATION PRACTICE - THE APPRAISER'(tm)S ROLE IN TANGIBLE ASSETS'(tm) REVALUATION," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 648-654, December.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. Neil Garrod & Urska Kosi & Aljosa Valentincic, 2008. "Asset Write‐Offs in the Absence of Agency Problems," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(3‐4), pages 307-330, April.
    9. 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.
    10. 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.

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