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[연구]Demand for fair value accounting: The case of the asset revaluation boom in Korea during the global

2017.07.17 Views 1550 경영학연구분석센터

Journal of Business Finance and Accounting
Volume 45, Issue 1-2, January/Februaryy 2018, Pages 92-114


Yoo, C.-Y.(a)Choi, T.H.(b)Pae, J.(c)
a Korea Advanced Institute of Science and Technology (KAIST) College of Business, South Korea
b KDI School of Public Policy and Management, South Korea
c Korea University Business School, South Korea



Abstract

When the fair value accounting (FVA) option for property, plant, and equipment was introduced in the midst of the global financial crisis, a significant proportion of Korean firms elected FVA. We attribute this unusual boom in asset revaluations to the nation's culture of government intervention and civilian compliance, which was particularly espoused during this period of financialturmoil, and a foreseeable option to switch back to historical cost accounting. We find that among those firms whose debt-to-equity ratios are low, public firms opt for the FVA option more often than private firms, suggesting that the need to communicate fair value information with diversified equity holders is more important than the need to do so with creditors. In contrast, among those firms whose debt-to-equity ratios are high enough to warrant such unfavorable dispositions as new debt freezes and monitoring by regulators, we find no difference in the FVA choice between private and public firms. These findings imply that during the global financial crisis, private firms that rely heavily on debt financing have a strong incentive to utilize FVA to comply with government guidelines for the debt-to-equity ratio and to ease a potential hold-up problem by influential creditors. © 2017 John Wiley & Sons Ltd


Keywords
asset revaluation;
early adoption;
IFRS;
policy;
private firms

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