INVESTOR PERCEPTION OF FIXED ASSET REVALUATION PRACTICES IN PUBLICLY TRADED COMPANIES IN BANGLADESH

https://doi.org/10.5281/zenodo.8241557

Authors

  • Md. Tahidur Rahman Department of Business Administration, Bangladesh Army International University of Science and Technology, Cumilla – 3501,Bangladesh
  • Syed Zabid Hossain Department of Accounting and Information Systems, University of Rajshahi, Rajshahi – 6205, Bangladesh

Keywords:

INVESTOR PERCEPTION OF FIXED ASSET REVALUATION PRACTICES IN PUBLICLY TRADED COMPANIES IN BANGLADESH

Abstract

The selection between historical cost and revaluation models for reporting fixed assets in financial statements has been an enduring debate. This study aims to provide empirical evidence of investor perception of fixed asset revaluation (FAR) practices in publicly traded companies in Bangladesh. A sample of 191 general and institutional investors was selected using the convenience sampling technique. Data were gathered using a structured questionnaire with a five-point Likert scale to measure investor perceptions of FAR practices. The study revealed that the majority of respondents (87%) considered the fairly-practiced FAR model to be better than the cost model in showing the actual picture of companies' fixed assets. However, the respondents expressed their doubts about the motives and fairness of the FAR model in Bangladesh. Specifically, 86% of the respondents agreed that companies resort to FAR to increase their stock prices, while 90% agreed that companies undertake FAR to achieve easy access to loans. The study also found that FAR had an active role in creating stock market bubbles and their subsequent bursts in Bangladesh, according to a significant number of investors.

The study's findings provide important insights for investors, regulators, and other stakeholders. As investors view FAR practices with suspicion, regulators should enforce relevant statutes to avoid motivated, manipulated, and selective disclosure. The study also highlights the importance of fixed assets' fair value information in financial statements, which helps achieve the two primary objectives of financial statements-informativeness and managers' stewardship. The study concludes that the selection of the valuation model for reporting fixed assets significantly influences the figures in financial statements, as fixed tangible assets usually comprise a large share of a firm's total assets. Therefore, the fair and transparent application of FAR practices is necessary to maintain the integrity and trust of financial reporting in Bangladesh

Published

2023-08-12

How to Cite

Rahman, M. T., & Syed , Z. H. (2023). INVESTOR PERCEPTION OF FIXED ASSET REVALUATION PRACTICES IN PUBLICLY TRADED COMPANIES IN BANGLADESH. SADI International Journal of Management and Accounting (SIJMA), 10(3), 48–66. https://doi.org/10.5281/zenodo.8241557

Issue

Section

Original Peer Review Articles

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