Fixed Asset Revaluations and Managerial Incentives
The study attempts to explain why Australian companies revalue their fixed assets, when a revaluation, by itself, has no discernible direct effect on cash flows and is costly to carry out. A revaluation is hypothesised to affect contracting and political costs. It may also help resolve problems associated with information asymmetries, or be used to signal information to investors. The results support the proposition that economic forces help explain the decision to revalue assets.
Key words: Fixed assets; Incentives; Management; Revaluation; Valuation.
An asset revaluation refers to the restatement of the asset’s book value (carrying amount) to approximate ...
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