Revaluations of fixed assets and future firm performance: Evidence from the UK

We find, as predicted, that upward revaluations of fixed assets by UK firms are significantly positively related to changes in future performance, mea sured by operating income and cash from operations, indicating revaluations reflect asset value changes. Current year revaluations (revaluation balanc es) also are significantly positively related to annual returns (prices). R elations between revaluations and future performance and prices are weaker for higher debt-to-equity ratio firms, indicating motivation affects how re valuations reflect asset value changes. The relations also are weaker for c ross-listed firms and in a more volatile economic time period. Our inferenc es are robust to controlling for firms' acquisition activity. (C) 1999 Else vier Science B.V. All rights reserved. JEL classification: M4; G15; G18.