Reliability of asset revaluations: the impact of appraiser independence

Cotter, Julie and Richardson, Scott (2002) Reliability of asset revaluations: the impact of appraiser independence. Review of Accounting Studies, 7 (4). pp. 435-457. ISSN 1380-6653

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In this paper we examine whether there are differences in the reliability of asset revaluations made by boards of directors versus independent (external) appraisers. We use a sample of recognized Australian asset revaluations. As a first step we examine the determinants of the choice between director-based revaluations and those undertaken by independent appraisers. We find that independent appraisers are more likely to be used for revaluations of land and buildings and directors are more likely for investments, plant and equipment and identifiable intangibles. We interpret this as evidence of firms harnessing directors’ knowledge of asset specificities. We also find that firms with less independent boards are more likely to use independent appraisers. We interpret this as evidence of substitutability between governance mechanisms.

As for differences in reliability, we find that revaluations of plant and equipment that are made by independent appraisers are more reliable than those by directors. However, we are unable to detect a difference for other classes of non-current assets. We define reliability in terms of ex-post adjustments of recognized value increases. Reliability is determined by an examination of the extent to which upward revaluations are subsequently reversed.

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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: The original publication is available at
Depositing User: Prof. Julie Cotter
Faculty / Department / School: Historic - Faculty of Business - Department of Accounting
Date Deposited: 11 Oct 2007 01:09
Last Modified: 02 Jul 2013 22:45
Uncontrolled Keywords: assets; asset valuations; corporate governance; reliability
Fields of Research : 15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150303 Corporate Governance and Stakeholder Engagement
15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150102 Auditing and Accountability
15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150312 Organisational Planning and Management
Socio-Economic Objective: B Economic Development > 91 Economic Framework > 9102 Microeconomics > 910299 Microeconomics not elsewhere classified
Identification Number or DOI: doi: 10.1023/A:1020763612369

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