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.