Real Value Of Assets Research Articles

Is there a price bubble in the exchange rates of the developing countries? The case of BRICS and Turkey

PurposeThe last decades have experienced increasingly integrated global political and economic dynamics ranging especially from the influence of exchange rates and trade amid other sources of uncertainties. The purpose of this study is to examine the exchange rate dynamics of Brazil, Russia, India, China, and South Africa (BRICS) and the Republic of Turkey.Design/methodology/approachGiven this perceived global dynamics, the current study examined the BRICS countries and the Republic of Turkey's exchange rate dynamics by using the United States (US) monthly dollar exchange rate data between January 2002 and August 2019. The price bubble which is expressed as exceeding the real value of assets' prices which is observably caused by speculative movements is investigated by using the Supremum Augmented Dickey-Fuller (SADF) and the Generalized Supremum Augmented Dickey-Fuller (GSADF) approaches.FindingsAccordingly, the GSADF test results opined that there are price bubbles in the dollar exchange rate of other countries except for the United States Dollar (USD)/Indian Rupee (INR) exchange rate. As the related countries are classified as developing countries in terms of their structure, they are also expectedly the subject of speculative exchange rate movements. Speculative movements in exchange rates may cause serious problems in national economies.Originality/valueThus, the current study provides a policy framework to the BRICS countries and the Republic of Turkey.

ФОРМУВАННЯ ОБЛІКОВОЇ ПОЛІТИКИ ЗА ПРИНЦИПОМ БЕЗПЕРЕРВНОСТІ ДІЯЛЬНОСТІ ПІДПРИЄМСТВ

Formulation of the problem. Based on the study, the prerequisites, features and components of the formation of accounting policies in the context of business continuity are revealed. The purpose of the article is to substantiate the theoretical and methodological and organizational provisions of accounting policy formation in the context of the implementation of the concept of continuity. The object of research is the process of formation of accounting policy and its impact on the quality of corporate financial reporting information. Methods used in the study: scientific knowledge, method of generalization, comparison, logical - meaningful, methods of induction and deduction. The main hypothesis is that the formation of accounting policies aimed at determining the regulations of accounting and reporting from the standpoint of reflecting complete and reliable information about the real value of assets and liabilities will help reconcile the interests of all stakeholders. Presenting main material. The article identifies the prerequisites, directions and elements of the formation of accounting policies on the principle of continuity of enterprises. Provisions on the development of theoretical and methodological foundations for the formation of accounting policies of enterprises on the basis of risk-oriented approach are revealed. The necessity of valuation of assets and liabilities according to the criteria: fair, discounted and market value of enterprises is substantiated and the methodological support of valuation of financial instruments in accounting is revealed. Originality and practical significance are proposals for the formation of methodological and organizational support and recommendations for the measurement of assets and liabilities at fair value in order to improve the quality of financial statements. Research findings. The formation of accounting policy in the context of the principle of continuity is based on the requirements of International Accounting Standards and National Accounting Standards and depends on the needs of management, methods and techniques of accounting. In the process of developing an accounting policy, it is necessary to take into account the information needs of various stakeholders to disclose information in corporate financial statements. The introduction of theoretical and methodological provisions for the formation of elements of accounting policy on the principle of continuity will meet the information needs of different users, improve the quality of financial reporting and assess the impact of accounting policies on the real value of enterprises in the future.

What Really Happens During Flight to Safety: Evidence from Real Estate Markets

Flight to safety (FTS) affects the markets for risky assets such as stocks, corporate bonds, and commodities. Yet, little is known about the effects on commercial real estate. We show that REITs offer a partial hedge against FTS, with daily total returns being less sensitive to FTS than many other industries and measures of REIT liquidity actually improving on FTS days. However, a cluster of FTS days signals a decline in economic fundamentals in the long run. We find that the odds of a drop in REIT quarterly revenue increase by 15% after an FTS cluster, ceteris paribus. This effect persists for up to four quarters. We also find that commercial real estate price appreciation is all but wiped out over up to four quarters following an FTS cluster. Our findings benefit investors by providing estimates of the short-term return and liquidity response of REITs to FTS episodes, and by documenting long-term effects on REIT revenues and real asset values.

ВПЛИВ ОБЛІКОВОЇ ПОЛІТИКИ НА БАЛАНСОВУ ВАРТІСТЬ ПІДПРИЄМСТВА

Content and purpose of accounting are identification, measurement, registration, accumulation, synthesis, storage and transfer of information about activities of an enterprise to external and internal users for adoption of management decisions. Business operations are recorded in prices at the time of transaction; that ensures a reliable determination of financial performance of enterprise for one or another period in prices of that period. However, its financial position is also affected by other factors: investment attractiveness of enterprise, its position in the market, inflation, emergencies, etc. As a result, the price of accounting objects can change. It was found out whether it is expedient to reflect such changes in accounting records. Peculiarities of the impact of accounting policies on the value of enterprise are researched. Solutions of problematic aspects of the valuation of some items of accounting are revealed and proposed. In particular, it concerns the order of reflection of revaluations in accounting items and presentation of information about them in financial statements as a source of information about value of enterprise. There are a number of methods for assessing the value of an enterprise, the main one among them is valuation based on financial statements, namely balance sheet (so-called book value). It is determined that under current conditions of managing and doing business, accounting policies is a powerful tool for managing not only accounting but also the results of financial and economic activity and the value of enterprise. To provide users with information about real value of assets, liabilities and equity, the balance sheet items at the reporting date, if necessary, should be re-evaluated, and the results filed in the statement of financial position. The difference between the data of balance sheet and statement of financial position should be disclosed in the notes to the financial statements.

Lack of Adjustment of the Cyprus Household Sector Results from the Eurosystemms Household Finance and Consumption Surveys

The results from the second wave of the Eurosysystem’s Household Finance and Consumption Survey (HFCS) indicate that Cyprus households experienced very large falls in their incomes and value of real assets between 2009/2010 and 2013/2014. However, despite their worsening financial situation households largely maintained their relatively high level of consumption during the crisis years from 2012 onward by taking on more debt and running down their financial assets. This relative failure of Cyprus households to adjust their expenditures and repair their balance sheets during recent years has resulted in huge debt problems for many households and their creditors. Indeed, HFCS estimates indicate that the ratio of required debt payments to income for Cyprus indebted households reached 35.7% in 2014 and was an overwhelming 64.1% for the least-wealthy bottom 20%. Policy recommendations for dealing with the serious financial difficulties of households are advanced including a program to write-off the debt of households which do not have the ability to repay.

An Assessment of Valuation Methods of Stock Initial Public offerings on Tehran Stock Exchange

Every day hundreds of companies all over the world are entering capital market for the first time by issuing stocks. By doing so, they decide to invest capital necessary for continuing activity and expanding operations accordingly. For this reason, it is important to the companies that price specified for their stock demonstrate real value of assets and their growth and development opportunities in the future. The purpose of this research is to study valuation methods of stock initial public offerings at the Tehran Stock Exchange. Population and study sample consisted of firms publicly offered their stocks for the first time at Tehran Stock Exchange during 2009-2014, and experienced no trading halt, i.e. 45 companies of which seven companies were eliminated due to lack of trading on the stock exchange and 38 firms were chosen. The research method is correlational-descriptive and the research is an applied research by purpose. The research is based on cross-sectional time regression analysis, for which simple multivariate regression estimation based on ordinary least square method was used, and models under consideration were examined by Eviews and SPSS. After analysis of results, the research findings showed that some variables such as firm size have no influence on the price of initial public offering but variables such as risk, size of initial offerings, amount of firm capital, etc. have significant effect on the price of stock initial public offering. In the end, it is recommended that companies price their stocks in the way that it paves the way for growth and development of their assets, given that there are a lot of factors and variables that affect the price of stock initial offering.

(A Study on the Effect of Subjective Prospect on the Debt Behavior of Households)

Korean Abstract: 본 연구는 가계의 주관적 전망이 부채행동에 미치는 영향을 파악하고자 하였다. 이를 위해 2012년도, 2013년도 한국복지패널조사 자료를 사용하여 실증 분석하였다. 실증분석 자료는 2012년과 2013년에 걸쳐 모두 응답한 총 6,001가계 자료이다. 실증분석 결과, 약간 나빠질 것으로 전망하는 우리나라 경제상황을 제외하고는 가계수입, 부동산자산가치, 금융자산가치의 미시 차원과 물가수준의 거시 차원은 비슷할 것으로 전망하였다. 금융자산가치 전망에 따라 부채변화 규모에 차이가 있었다. 가계수입, 부동산자산가치 및 금융자산가치 전망은 부채변화 특성과 관련이 있었다. 부동산자산가치 전망은 부채변화 규모에 정적인 영향을 미쳤고, 금융자산가치 전망은 부채변화 규모에 부적인 영향을 미쳤다. 부동산자산가치가 증가할 것으로 전망할수록 부채감소 가계에 속할 확률이 낮았고, 우리나라 경제상황이 나아질 것으로 전망할수록 부채증가 가계에 속할 확률이 높았다. 부채감소 가계는 부동산자산가치 전망이 부채변화 규모에 부적인 영향을 미쳤고, 부채증가 가계는 금융자산가치 전망이 부채변화 규모에 부적인 영향을 미쳤다. English Abstract: The purpose of this study was to examine the effect of subjective prospect on the debt behavior of households. The data for this study was from the 2012 year and the 2013 year of the Korea Welfare Panel Survey (KOWEPS), consisting of 6.001 households who responded in both the years. Descriptive statistics, t-test, one-way ANOVA, χ2-test, multiple regression, multinominal logit analyses and Chow-test were performed. In the regression analyses, the dependent variables for debt behavior were two: the amount of debt change and the characteristic of debt change. For the analyses, Stata 12.0 version was used. The results are as follows: Except economic condition, household earnings, real estate value, financial asset value and price level after one year tended to be expected as similar. There was a difference in the characteristics of debt change by the prospects on household income, real estate value and financial asset value. There were correlations between the prospect on household earnings and the characteristic of debt change, the prospect on real estate value and the characteristic of debt change, and the prospect on financial asset value and the characteristic of debt change. The more households expected real asset value to increase, the households were more likely to belong to the household with debt reduction. The better households expected economic condition to be, the households were more likely to belong to the household with debt increase. As for the households with debt reduction, the prospect on real estate value affected the amount of debt change negatively, and as for the households with debt increase, the prospect on financial asset value affected the amount of debt change negatively.

Fraud and Financial Scandals: A Historical Analysis of Opportunity and Impediment

The paper presents a conceptual framework of financial fraud based on the historical interaction of opportunity and impediment. In the long run the character of opportunity is determined by the technical characteristics of assets and their unique, unknowable or unverifiable features. Impediment is promoted by consensus about the real value of assets, such that through active governance processes, fraudulent deviations from real value can be easily monitored. Active governance requires individuals in positions of responsibility to exercise a duty of care beyond merely being honest themselves. Taking a long run historical perspective and reviewing a selection of British financial frauds and scandals, from the South Sea Bubble to the Global Financial Crisis, the paper notes the periodic occurrence of waves of opportunity and the evolutionary response of passive governance mechanisms.

Intellectual Capital, Firm Value and Ownership Structure as Moderating Variable: Empirical Study on Banking Listed in Indonesia Stock Exchange period 2009-2012

Intellectual capital has been known since the issue of the failure of traditional accounting reporting real asset values and the presence of an integrated reporting standard requiring disclosure on capital employed in the creation of corporate value. This study aims to determine the effect of intellectual capital on firm value by ownership structure as a moderating variable. Intellectual capital is measured by using a model of Value Added Intellectual Coefficient (VAICTM) while the value of the company is measured by using Tobin's Q. The ownership structure as a moderating variable is represented by the percentage of managerial ownership and institutional ownership. This study’s population is banking companies listed in Indonesia Stock Exchange (BEI) from 2009 to 2012. Based on purposive sampling method, the sample is obtained by 27 companies. The analytical method used is multiple regression equation for overall and path analysis for testing residual moderating variables. The results of this study indicate that intellectual capital has a positive and significant effect on firm value. This study also proves that managerial ownership is moderating variable that negatively affect the relationship of intellectual capital on firm value. While institutional ownership does not moderate the effect of intellectual capital on firm value.

Credit Rationing and Real Assets: Evidence from Italian Panel Data

This paper investigates empirically the role of real assets in credit rationing. When loans are collateralized, the amount borrowed is determined by the value of collateral. This happens because in a context of asymmetric information banks use real assets as a guarantee in the case of project's default. Although many papers have explained the relationships between the debt level and the value of real assets, empirical evidence is mainly based on large “listed” firms. The question as to the whether these arguments are valid for smaller firms has received limited attention.Many papers also show that specialized assets should fetch a low resale price. This suggests that a high resale price corresponds to a highly redeployable asset and that the reduction in resale value aggravates credit rationing, so that investment declines.My purpose is to show empirically how the value of real assets explains credit rationing of Italian small and medium firms. It is interesting to analyze small and medium firms because of their ownership structure and size they have fewer financial options. Large firms can obtain credit on the public markets while small firms depend on financial intermediaries. This implies that their main source of funds is banks. These firms are more likely to face credit rationing or very high cost of non collateralized debt because banks resolve asymmetric information by charging higher interest rates or collateral requirement on small firms.

Effect of Provisions on the Valuation of a Company

Provisioning means the evaluation of future costs and losses, the estimation of future liabilities towards one’s surroundings, an increase in equity, as well as the real value of assets. During asset valuation, the reserve balance may cause a reduction of the company's value - net assets. This could be a change of a few percentage points. Non-balance provisions cause a decrease in the value of assets, from which liabilities and reserves will be deducted. The value of the enterprise – through asset evaluation – will be lower by a few percentage points. However, it is supplementary capital (capital protection) which has the greatest importance in the methods a company uses in the valuation of assets. As research indicates, retained earnings and additional capital make up 30 -59% of owners equity. When using the multiplier method, reserves have a small indirect effect on the amount of dividends, net income decrease, etc. – due to the reducing of the financial result and taxes. The mixed method takes up an important position in the valuation of a company’s goodwill. Therefore, the relevance of provisions in this valuation, will be lower than the during the valuation of assets. When valuating income reserves do not play a significant role. They are taken into consideration during the adjustment of the financial result, directing it towards cash flow, and for determining the financial outflows in the form of income tax. Provisions may also have a slight influence on the cost of the capital of the enterprise, i.e. a factor discounting cash flow. Provisions are not cash outflows and therefore, in the most popular income methods, they do not play a significant role. Reserves that are tax-deductible costs may affect the amount of tax burdens and thus indirectly affect the cash flow. The biggest and most direct effect of provisions on the valuation of a company can be observed in the asset methods as well as in the mixed methods. However, in the reserve multiplier methods affect the value of the multiplier element of a listed company and the value of the company measured the base element.

Collateral fluctuations in a monetary economy

This paper studies economy-wide fluctuations that occur endogenously in the presence of monetary and real assets. Using a standard monetary search model, we consider an economy in which agents can increase consumption, over and above what their liquid monetary asset holdings would allow, pledging real assets as collateral for monetary loans. It is shown that, if the liquidation value of real assets is below full market value, a stable cyclical equilibrium can emerge in consumption and capital around the unstable steady state. We also provide conditions for the existence of cycles of higher order, chaos and sunspot equilibria.

The Economics of Gasification: A Market-Based Approach

This paper deals with the economics of gasification facilities in general and IGCC power plants in particular. Regarding the prospects of these systems, passing the technological test is one thing, passing the economic test can be quite another. In this respect, traditional valuations assume constant input and/or output prices. Since this is hardly realistic, we allow for uncertainty in prices. We naturally look at the markets where many of the products involved are regularly traded. Futures markets on commodities are particularly useful for valuing uncertain future cash flows. Thus, revenues and variable costs can be assessed by means of sound financial concepts and actual market data. On the other hand, these complex systems provide a number of flexibility options (e.g., to choose among several inputs, outputs, modes of operation, etc.). Typically, flexibility contributes significantly to the overall value of real assets. Indeed, maximization of the asset value requires the optimal exercise of any flexibility option available. Yet the economic value of flexibility is elusive, the more so under (price) uncertainty. And the right choice of input fuels and/or output products is a main concern for the facility managers. As a particular application, we deal with the valuation of input flexibility. We follow the Real Options approach. In addition to economic variables, we also address technical and environmental issues such as energy efficiency, utility performance characteristics and missions (note that carbon constraints are looming). Lastly, a brief introduction to some stochastic processes suitable for valuation purposes is provided.

Optimal Valuation of Claims on Noisy Real Assets: Theory and an Application

A theory for valuing claims on noisy real assets is developed and applied. Central to the theory is determination of the dynamics for the best estimate of real asset value. The dynamics of the value estimate are shown to differ from the dynamics of the true asset value only in the arrival rate of information. The rate of information arrival in the value estimate can be faster or slower than information arrival in the true asset value, which can lead to unexpected outcomes in the valuation and exercise of options on noisy real assets. The theory we develop is illustrated through an application. An imperfectly competitive market for real estate development is examined, in which agents compete over the timing of lead investment. Information spillover and free–rider incentives are shown to cause significant delay in lead investment. Delay together with a competitive response once lead investment has occurred explain observed patterns of development in gentrified urban land markets and multistage development projects.

The emergence of equilibrium cycles in a monetary economy with a separable utility function

This paper analyzes the dynamic properties of the monetary economy when money held during the period induces some utility. It is shown that the price level and real money balances may have chaotic dynamic paths even if the utility function is separable in real money balances and consumption. A crucial point is that a constraint on the utility of money yields the wealth effect that inflation will reduce the real value of assets. Hence, as in the overlapping generations model, the conflict between substitution and wealth effects may cause globally stable periodic orbits as well as the complicated dynamics.

Government Payments to Farmers and Real Agricultural Asset Values in the 1980s

AbstractThis study determines the effect of government payments on real agricultural asset values using Bayesian vector autoregression. In developing the empirical model, special attention is focused on the informational content of government payments. The results indicate that government payments to farmers have little effect on real asset values in the long run. In the short run, an increase in government payments to farmers may be associated with decline in asset values.

An Examination of Farm Sector Real Asset Dynamics: 1910–85

AbstractThe dynamic response of real farm asset values to changes in net returns and interest rates is studied using vector autoregression. Results show that a shock in real asset values, real returns to assets, or real interest rates leads to a process in which real asset values overreact. In the initial period, a reaction to a shock immediately occurs followed by a continued build‐up in the asset value for up to six years until finally the effect of the one‐time, transitory shock begins to die out. The results suggest a market with a propensity for bubbles.

The Borrower's Choice between Fixed and Adjustable Rate Loan Contracts

Previous research indicates that key variables in the choice between fixed and price index‐linked debt are the covariances between inflation and real income and between inflation and the real value of the asset financed by the debt. This model extends those results to adjustable rate loan contracts and examines the impact of covariance between the real interest rate and, in turn, real income and real asset values. Positive (negative) covariance between those terms shifts preference toward the adjustable (fixed) loan contract.

Discussion of On the Association between Net Monetary Position and Equity Security Prices

Robert Freeman proposes to investigate an aspect of general pricelevel accounting (GPLA): the effect of inflation on the value of corporations' net monetary position (NMP). This is not, however, what he actually investigates. His basic data are stock price changes, which are dominated by changes in expectations. General price-level accounting (GPLA) and current value accounting (CVA) deal with inflation in very different ways. GPLA addresses changes in the unit of account, whereas CVA attempts to reflect changes in market value. Because short-period changes in the real value of money-fixed claims of even modest duration are dominated by changes in expectations of future inflation, rather than by the impact of current inflation on the real value of the unit of account, any study of the impact of short-period changes on the corporate balance sheet is automatically in the province of CVA. In this respect, there is a minor problem with Freeman's use of NMP. If one is going to focus on changes in expectations, then, as Freeman realizes, duration becomes very important. But NMP adjusted for the durations of the relevant balance-sheet items really is no longer net monetary position: the adjustments can and often will change not merely the magnitude of NMP, but also its sign. This problem persists deep into the paper. A second problem with Freeman's choice of GPLA as the motivating framework for the present study is that GPLA attempts to reflect changes in the real value of assets and liabilities presented in the balance sheet in nominal terms. Yet by focusing on changes in nominal share values, the author is addressing the impact of changes in the nominal value of real assets and liabilities. But even if one chooses to view Freeman's paper (which, as noted, focuses on expectations) as a study of inflation-related aspects of CVA, rather than GPLA, it still has a serious conceptual problem. Freeman

THE INTEREST‐INDUCED WEALTH EFFECT AND THE BEHAVIOR OF REAL AND NOMINAL INTEREST RATES: A COMMENT

IN A RECENT ARTICLE published in this Journal Burton Zwick [6] investigates the implications of the interest-induced wealth effect for the response of interest rates to monetary change and to changes in the expected inflation rate. He argues that the introduction of the interest-induced wealth effect into an otherwise conventional macroeconomic model can explain the complete snap-back of interest rates to their original level after a monetary change but prior to a complete adjustment of the price level and the delay in the response of nominal interest rates to a change in the expected inflation rate. He also explores the implications of the interestinduced wealth effect for the existence of neutrality and the dynamic adjustment of interest rates to monetary change at full employment. Zwick's analysis of the interest induced wealth effect is flawed in three ways: (1) He incorrectly integrates the interest-induced wealth effect into his IS-LM framework. (2) Although Zwick's model with wealth effects includes both price and interest-induced wealth effects, Zwick ignores the implications of the price-induced wealth effect. Therefore, his comparative static results for increases in the money supply and the expected inflation rate are inconsistent with the model he presents; and (3) Zwick misspecifies his wealth variable. He assumes that the nominal value of real assets is unaffected by changes in the price level and that the valuation of real assets is affected by nominal rather than real interest rates. In Section I we will correct the specification of the wealth variable, demonstrate the way the interest-induced wealth effect affects the IS curve, and set out the cases that must be compared to determine the implications of the interest-induced wealth effect. In the remaining sections of the paper we assess the implications of the interest-induced wealth effect for the response of real and nominal rates to changes in the money supply and to changes in the expected inflation rate.