Abstract

http://ssrn.com/abstract=77468
 
 

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Fixed Asset Revaluation and Equity Depletion in the UK


Y.C. Lin


Lancaster University

Ken V. Peasnell


Lancaster University - Department of Accounting and Finance


WP 98/005

Abstract:     
UK GAAP allows the write-off of purchased goodwill directly to reserves, resulting in the widespread depletion of book equity. Companies are also permitted to revalue fixed assets at management's discretion. This study examines whether revaluations are associated with the depletion of book equity and with other costly contracting explanations identified in prior research. Our results provide strong support for the equity depletion hypothesis, both with regard to the decision to revalue and the timing of the revaluations. Other factors identified in prior research (indebtedness, liquidity, market-to-book, size, fixed asset intensity) are also consistently associated with revaluation.

JEL Classification: M41, M44

working papers series





Not Available For Download

Date posted: April 19, 1998  

Suggested Citation

Lin, Y.C. and Peasnell, Ken V., Fixed Asset Revaluation and Equity Depletion in the UK. WP 98/005. Available at SSRN: http://ssrn.com/abstract=77468

Contact Information

Y.C. Lin
Lancaster University
The Management School
Lancaster LA1 4YX
United Kingdom
Kenneth V. Peasnell (Contact Author)
Lancaster University - Department of Accounting and Finance ( email )
The Management School
Lancaster LA1 4YX
United Kingdom
+44 1524 593631 (Phone)
+44 1524 847321 (Fax)
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