Cotter, Julie and Zimmer, Ian (1995) Asset revaluations and assessment of borrowing capacity. Abacus, 31 (2). pp. 136-151. ISSN 0001-3072
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Prior research has found support for contracting, political cost and information asymmetry explanations for managements' decision to revalue non-current assets. This study proposes that asset revaluations occur to signal available borrowing capacity via an increase in collateral values at the time of increases in secured debt and that the economic benefits associated with an asset revaluation will be greatest for firms when they are experiencing times of declining cash flows from operations. Results imply that firms that have undertaken an asset revaluation are more likely to be experiencing declining cash flows from operations than firms that have not revalued. This study also investigates whether the incidence of valuations coincides with increases in levels of secured borrowings due to lenders' demands for current values of assets offered as collateral. The evidence indicates that firms are more likely to record an asset revaluation if they have increased their secured borrowings, and that most non-year-end revaluations emanate directly from contracting with lenders.
|Item Type:||Article (Commonwealth Reporting Category C)|
|Additional Information:||Permanent restricted access to published version due to publisher copyright policy.|
|Uncontrolled Keywords:||valuation; assets; borrowing; liquidity|
|Fields of Research (FOR2008):||15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150103 Financial Accounting|
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150203 Financial Institutions (incl. Banking)
14 Economics > 1401 Economic Theory > 140104 Microeconomic Theory
|Socio-Economic Objective (SEO2008):||B Ecomonic Development > 91 Economic Framework > 9104 Management and Productivity > 910402 Management|
|Deposited On:||13 Jul 2011 14:27|
|Last Modified:||14 Feb 2012 16:20|
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