Fixed assets revaluations and their association with stock returns

Abstract

This study examines the association between annual stock returns of firms listed on the Athens Stock Exchange and the tax benefits of mandated fixed assets revaluations that occurred in the years 1982, 1988 and 1992. A significant association is found for the revaluations that occurred in 1992 but not for those that took place in 1988 or 1982 As the tax benefits are probably measured with error, we use the amount of the revaluation to explain stock returns with similar findings. When we extend the period over which we accumulate stock returns from one to two years, the association between stock returns and the amount of the revaluation is significant both in 1992 and in 1982. For the years 1992 and 1982, we also observe a significant association between stock prices and the revaluation amounts.