Management Motivation and Market Assessment: Revaluations of Fixed Assets

The study examines Hong Kong managers' motivation for upward revaluation of fixed assets. The results show that revaluations are positively associated with the firms' future operating performance, suggesting that the managers' primary motivation for upward revaluation of fixed assets has been to signal fair value of assets to financial statements users. Another motivation for revaluations has been to improve the firm's borrowing capacity. The results also indicate a significantly positive association between revaluations and stock prices and returns, suggesting that the market's assessment aligns with the managers' revaluations.