HCBE Faculty Articles

Title

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

Document Type

Article

Date

2016

Publication Title

Emerging Markets Finance and Trade

ISSN or ISBN

1540-496X

Volume

52

Issue

12

First Page

2808

Last Page

2817

Description

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.

DOI

10.1080/1540496X.2016.1209360

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