The background of board, compensation, leverage, and fixed asset revaluation decision

Zaenal Fanani, Arika Kamelia

Abstract


This research aims to obtain empirical evidence in Indonesia whether it is true that companies with boards of commissioners and directors with political, accounting, military background, and the amount of compensation received will affect the selection of revaluation methods to measure their fixed assets that revaluation is commonly used to facilitate the company in obtaining additional loan funds and attract investors to invest. This can occur because in the revaluation method, the company's fixed assets are presented under fair conditions. In addition, this study also wants to test whether a company with high debt levels will tend to revalue its fixed assets measured by the leverage of the company. This research used the entire company population in all types of industries listed on the IDX for the period 2016. The final sample used in this research was 458 using logistic regression analysis. In this research, it is found that political background and accounting background has no positive effect, military background had positive effect, and compensation and leverage had no negative effect on the asset revaluation decision remains.

JEL Classification: M48, D72, G32

DOI: https://doi.org/10.26905/jkdp.v24i3.4220


Keywords


Background; Compensation; Fixed asset revaluation; Leverage

References


Aboody, D., Barth, M. E., & Kasznik, R. (1999). Revaluations of fixed assets and future firm performance: Evidence from the UK. Journal of Accounting and Economics, 26(1-3), 149–178. https://doi.org/10.1016/s0165-4101(98)00040-8

Andison, A., & Nasser, E. M. (2017). Operating cash flow, earning response coefficient, and fixed asset revaluation: study on manufacturing company. Etikonomi, 16(1), 93–102. https://doi.org/10.15408/etk.v16i1.4820

Barać, A. Ž., & S. Šodan. (2011). Motives for asset revaluation policy choice in Croatia. Croatian Operational Research Review, 2(1), 60-70.

Benmelech, E., & Frydman, C. (2015). Military CEOs. Journal of Financial Economics, 117(1), 43–59. https://doi.org/10.1016/j.jfineco.2014.04.009

Brown, P., Izan, H. Y., & Loh, A. L. (1992). Fixed asset revaluations and managerial incentives. Abacus, 28(1), 36–57. https://doi.org/10.1111/j.1467-6281.1992.tb00268.x

Conyon, M. J., & He, L. (2012). CEO compensation and corporate governance in China. Corporate Governance: An International Review, 20(6), 575–592. https://doi.org/10.1111/j.1467-8683.2012.00935.x

Cotter, J. (1999). Asset revaluations and debt contracting. Abacus, 35(3), 268-285. https://doi.org/10.1111/1467-6281.00046

Cotter, J., & Zimmer I. (1995). Asset revaluations and assessment of borrowing capacity. Abacus, 31(2), 136-151. https://doi.org/10.1111/j.1467-6281.1995.tb00359.x

Faccio, M. (2006). Politically Connected Firms. American Economic Review, 96(1), 369-386. https://doi.org/10.1257/000282806776157704

Faccio, M. (2010). Differences between politically connected and nonconnected firms: A cross-country analysis. Financial Management, 39(3), 905-928. https://doi.org/10.1111/j.1755-053x.2010.01099.x

Farahmita, A., & Siregar, S. V. (2014). Faktor–faktor yang mempengaruhi kemungkinan perusahaan memilih metode nilai wajar untuk properti investasi. Working Paper. Simposium Nasional Akuntansi (SNA), 17, 1-21.

Firmansyah, E., & Sherlita, E. (2012). Pengaruh negosiasi debt contracts dan political cost terhadap perusahaan untuk melakukan revaluasi aset tetap. Working Paper. Seminar Nasional Akuntansi dan Bisnis 2012 Perkembangan Peran Akuntansi Dalam Bisnis yang Profesional, Bandung.

Harymawan, I. (2018). Why do firms appoint former military personnel as directors? Evidence of loan interest rate in militarily connected firms in Indonesia. Asian Review of Accounting, 26(1), 2-18. https://doi.org/10.1108/ara-07-2016-0086

Hidayat, M., & Hati, R. P. (2017). Pemilihan model revaluasi aset tetap dan dampaknya terhadap nilai perusahaan pada sektor perbankan. Jurnal Dimesi, 6(3), 362-379. https://doi.org/10.33373/dms.v6i3.1116

Hu, N., Huang, R., Li, X., & Liu, L. (2017). The impact of CEOs’ accounting backgrounds on earnings management and conservatism. Journal of Centrum Cathedra, 10(1), 4-24. https://doi.org/10.1108/jcc-10-2016-0016

Iatridis, G. E., & Kilirgiotis, G. (2012). Incentives for fixed asset revaluations: The UK evidence. Journal of Applied Accounting Research, 13(1), 5-20. https://doi.org/10.1108/09675421211231871

Jaggi, B., & Tsui, J. (2001). Management motivation and market assessment: Revaluations of fixed assets. Journal of International Financial Management and Accounting, 12(2), 160–187. https://doi.org/10.1111/1467-646x.00070

Januarti, I. (2004). Pendekatan dan kritik teori akuntansi positif. Jurnal Akuntansi dan Auditing (JAA), 1(1), 83-94.

Karakose, T. (2014). The effects of nepotism, cronyism and political favoritism on the doctors working in public hospitals. Studies on Ethno-Medicine, 8(3), 245-250. https://doi.org/10.1080/09735070.2014.11917640

Lang, L., Ofek, E., & Stulz, R. (1996). Leverage, investment, and firm growth. Journal of Financial Economics, 40(1), 3–29. https://doi.org/10.1016/0304-405x(95)00842-3

Latifa, C. A., & Haridhi, M. (2016). Pengaruh negosiasi debt contracts, political cost, fixed asset intensity, dan market to book ratio terhadap perusahaan melakukan revaluasi aset tetap (Studi pada perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia tahun 2010-2014). Jurnal Ilmiah Mahasiswa Ekonomi Akuntansi, 1(2), 166-176.

Lin, C., Ma, Y., Officer, M. S., & Zou, H. (2011). CEOs’ military experience and acquisition decisions. Working Paper. Chinese University of Hong Kong, City University of Hong Kong and Loyola Marymount University, Hong Kong.

Lopes, A. B., & Walker, M. (2012). Asset revaluations, future firm performance and firm-level corporate governance arrangements: New evidence from Brazil. The British Accounting Review, 44(2), 53-67. https://doi.org/10.1016/j.bar.2012.03.007

Manihuruk, T. N. H., & Farahmita, A. (2015). Analisis faktor-faktor yang mempengaruhi pemilihan metode revaluasi aset tetap pada perusahaan yang terdaftar di bursa saham beberapa negara ASEAN. Paper presented at the Simposium Nasional Akuntansi 18 Universitas Sumatera Utara, Medan 16-19 September 2015, Medan. Retrieved from: http://lib.ibs.ac.id/materi/Prosiding/SNA%20XVIII/makalah/055.pdf

Margaretha, M. A. L. (2017). Determinan kebijakan revaluasi aset tetap di Indonesia. Thesis. Airlangga University, Indonesia.

Martani, D. (2016a). Revaluasi aset tetap. Dwi Martani Accounting & Finance Corner. Retrieved from: https://staff.blog.ui.ac.id/martani/about/pemikiran-yang-disajikan-dalam-koranmajalah-populerumum/kasus-revaluasi-aset-tetap/

Martani, D. (2016b). Revaluasi aset tetap. Dwi Martani Accounting & Finance Corner. Retrieved from: http://dwimartani.com/revaluasi-aset-tetap/

Mauliana, V. A. (2018). Skor Indonesia membaik di indeks persepsi korupsi dalam 5 tahun, (online). Liputan6. Retrieved from:

https://www.liputan6.com/bisnis/read/3313462/skor-indonesia-membaik-di-indeks-persepsi-korupsi-dalam-5-tahun

Mediani, M. (2018). Indeks persepsi korupsi mandek, politikus tak banyak upaya, (online). CNN Indonesia. Retrieved from:

https://www.cnnindonesia.com/nasional/20180222181804-12-278132/indeks-persepsi-korupsi-mandek-politikus-tak-banyak-upaya

Ozkan, N. (2011). CEO compensation and firm performance: An empirical investigation of UK panel data. European Financial Management, 17(2), 260-285. https://doi.org/10.1111/j.1468-036x.2009.00511.x

Piera, F. M. (2007). Motives for Fixed-Asset Revaluation: An empirical analysis with Swiss data. The International Journal of Accounting, 42(2), 186-205. https://doi.org/10.1016/j.intacc.2007.04.006

Prendergast, C., & Topel, R. H. (1996). Favoritism in organizations. Journal of Political Economy, 104(5), 958-978. https://doi.org/10.1086/262048

Tay, I. C. (2009). Fixed asset revaluation: Management incentives and market reactions. Thesis. Lincoln University, New Zealand.

Tollison, R. D. (2012). The economic theory of rent seeking. Public Choice, 152(1-2), 73-82. https://doi.org/10.1007/s11127-011-9852-5

Watts, R. L., & Zimmerman, J. L. (1986). Positive accounting theory. Working Paper. Prentice Hall, Inc., Englewood Cliffs.

Whittred, G., & Chan, Y. K. (1992). Asset revaluations and the mitigation of underinvestment. Abacus, 28(1), 58-74. https://doi.org/10.1111/j.1467-6281.1992.tb00269.x

Yulistia, R. (2015). Pengaruh leverage, arus kas operasi, ukuran perusahaan dan fixed asset intensity terhadap revaluasi aset tetap. Working Paper. Simposium Nasional Akuntansi XVIII, USU Medan.


Full Text: PDF

Refbacks

  • There are currently no refbacks.




Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:

2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 812-2710-3387 or +62 813-3180-1534
Email: jkp@unmer.ac.id

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0