Timing, Recurrence, and Effects of Fixed Asset Revaluation: Evidence from Bangladesh

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Abstract

This study intended to explore when and how often fixed asset revaluation (FAR) is practiced in Bangladesh and explain the impacts of FAR on net asset value (NAV), stock prices, and debts of companies. Based on 175 listed companies on the Dhaka Stock Exchange, this study found increasing use of the revaluation model where the textile industry witnessed the highest number of revaluations. Most of the listed companies were irregular revaluer, and they performed FAR during the bull market in 2010. Most newly listed companies did it just before their initial public offerings (IPO). The results of the Wilcoxon signed-rank test imply that the changes in NAV, stock prices, and total debts after revaluation were statistically significant. This study found evidence of enhancing debt capacity and stock prices of several companies through improved NAV. The findings will assist regulators to recognize the consequence of revaluation and enable them to take an appropriate stance for controlling abusive and creative reporting. The study will also make investors cautious about companies with revaluation induced assets. This study suggests that companies practicing the revaluation model should perform FAR on regular intervals to reduce information asymmetry about assets' value and thus help improve investors' confidence.Keywords: Fair value accounting, IAS 16, PP&E, Bull-bear market, Information asymmetry, NAVJEL Classifications: G1, G11, M41, M48DOI: https://doi.org/10.32479/ijefi.10828

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Author Biographies

Md. Tahidur Rahman, Bangladesh Army International University of Science and Technology

Md. Tahidur Rahman is an Associate Professor of Accounting at Bangladesh Army International University of Science & Technology. He possesses 14 years' experience of teaching and researches at three universities in Bangladesh. Mr. Rahman's areas of interests include Financial Reporting, Asset revaluation, Capital market, and Corporate frauds. He has published 12 articles in different national and international journals. Most recently, he has submitted his Ph.D. dissertation on Asset Revaluation from Bangladesh Perspective. Before that he did M.Phil. on Financial Reporting Practices in the Banking Sector. Mr. Rahman has also passed the professional examination of Income Tax Practitioners (ITP). Mr. Rahman can be contacted at: towhidais@gmail.com

Syed Zabid Hossain, University of Rajshahi

Dr. Syed Hossain is a Professor of Accounting at the University of Rajshahi, Bangladesh. He has published on corporate governance, financial reporting, capital market, working capital management, risk management, financial restructuring, corporate taxation, and CSR. Many of his articles are published in the journals of renowned publishers, such as Emerald, Springer, Elsevier, and so forth. He has supervised 14 PhD and 04 MPhil theses. He possesses more than 34 years of teaching, research, academic administration, and corporate experience at different private and public institutions at home and abroad. As a Visiting Professor of Finance, he taught at Tecnologico de Monterrey, Mexico. He achieved the Commonwealth Fellowship for faculty development program at the Indian Institute of Management, Ahmedabad. He has completed a project entitled “Promotion of Interactive Teaching Learning in the Department of Accounting and Information Systems at the University of Rajshahi” under the Higher Education Quality Enhancement Project of the World Bank. Professor Hossain can be contacted at  syed6205@gmail.com

Md. Anwarul Haque, University of Rajshahi

Dr. Md. Anwarul Haque is an Associate Professor in the Department of Accounting and Information Systems under the University of Rajshahi.

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Published

2021-03-15

How to Cite

Rahman, M. T., Hossain, S. Z., & Haque, M. A. (2021). Timing, Recurrence, and Effects of Fixed Asset Revaluation: Evidence from Bangladesh. International Journal of Economics and Financial Issues, 11(2), 67–75. Retrieved from https://econjournals.com.tr/index.php/ijefi/article/view/10828

Issue

Vol. 11 No. 2 (2021)

Section

Articles
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