Skip to main content
Log in

Reliability of Asset Revaluations: The Impact of Appraiser Independence

  • Published:
Review of Accounting Studies Aims and scope Submit manuscript


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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or Ebook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others


  • Aboody, D., M. E. Barth and R. Kasznik. (1999). “Revaluations of Fixed Assets and Future Firm Performance: Evidence from the U.K.” Journal of Accounting and Economics 26, 149-178.

    Google Scholar 

  • Australian Securities and Investments Commission. (1998). Report of the Investigation into Burns Philp & Company Limited, December.

  • Baliga, B. R., R. C. Moyer and R. S. Rao. (1996). “CEO Duality and Firm Performance: What's the Fuss?” Strategic Management Journal 17, 41-53.

    Google Scholar 

  • Barth, M. E. and G. Clinch. (1998). “Revalued Financial, Tangible, and Intangible Assets: Associations with Share prices and Non Market-Based Value Estimates.” Forthcoming, Journal of Accounting Research, Supplement.

  • Basu, S., L. Hwang and C.-L. Jan. (2000). “Differences in Conservatism between Big Eight and Non-Big Eight Auditors.” Working Paper, Baruch College.

  • Bernard, V. L. (1993). “Discussion of An Investigation of Revaluations of Tangible Long-Lived Assets.” Journal of Accounting Research, Supplement, 39-45.

  • Bound, J., D. A. Jaager and R. M. Baker. (1995). “Problems with Instrumental Variable Estimation when the Correlation between the Instruments and the Endogenous ExplanatoryVariable isWeak.” Journal of the American Statistical Association, 443-450.

  • Brown, P. D., H. Y. Izan and A. L. Loh. (1992). “Fixed Asset Revaluations and Managerial Incentives.” Abacus, 36-57.

  • Bushman, R., Q. Chen, E. Engel and A. Smith. (2001). “The Sensitivity of Corporate Governance Mechanisms to the Timeliness of Accounting Earnings.” Working Paper, University of Chicago.

  • Cotter, J., D. Stokes and A. Wyatt. (1998). “An Analysis of Factors Influencing Asset Write-downs.” Accounting and Finance, 157-180.

  • Cotter, J., D. Stokes and I. Zimmer. (1995). “Asset Revaluations and Assessment of Borrowing Capacity.” Abacus 136-151.

  • DeFond, M. L. and K. R. Subramanyam. (1998). “Auditor Changes and Discretionary Accruals.” Journal of Accounting and Economics 25, 35-67.

    Google Scholar 

  • Easton, P. and P. H. Eddey. (1997). “The Relevance of Asset Revaluations over an Economic Cycle.” Australian Accounting Review, 22-30.

  • Easton, P., P. H. Eddey and T. S. Harris. (1993). “An Investigation of Revaluations of Tangible Long-Lived Assets.” Journal of Accounting Research, Supplement, 1-38.

  • Greene, W. H. (1997). Econometric Analysis, 3rd ed., Prentice Hall.

  • Gunther, M. (1998). “News Corp.'s Australian Accounting Advantage.” Fortune October 26, 104.

    Google Scholar 

  • Harris, M. S. and K. A. Muller III. (1998). “The Relative Informativeness of Fair Value versus Historical Cost Amounts for Long Lived Tangible Assets.” Working Paper, Penn State University.

  • McNichols, M. W. and P. G. Wilson. (1988). “Evidence of Earnings Management from the Provision for Bad Debts.” Journal of Accounting Research, Supplement, 1-40.

  • Rees, L., S. Gill and R. Gore. (1996). “AnInvestigation of Asset Write-Downs and Concurrent Abnormal Accruals.” Journal of Accounting Research, Supplement, 157-170.

  • Schroeder, M. (1998). “SEC, Amid Rise in Restatements, Boosts Accounting-Fraud Probes.” Wall Street Journal, December 9.

  • Sharpe, I. G. and R. G. Walker. (1975). “Asset Revaluations and Stock Market Prices.” Journal of Accounting Research, 293-310.

  • Sloan, R. G. (1999). “Evaluating the Reliability of Managers' Valuation Estimates.” Forthcoming, Journal of Accounting and Economics.

  • Whittred, G. and Y. K. Chan. (1992). “Asset Revaluations and the Mitigation of Underinvestment.” Abacus, 3-35.

Download references


Rights and permissions

Reprints and permissions

About this article

Cite this article

Cotter, J., Richardson, S. Reliability of Asset Revaluations: The Impact of Appraiser Independence. Review of Accounting Studies 7, 435–457 (2002).

Download citation

  • Issue Date:

  • DOI: