Revaluation of investment properties and firm performance : evidence from companies in the property sector of the stock exchange of Hong Kong after the Asian financial turmoil

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Revaluation of investment properties and firm performance : evidence from companies in the property sector of the stock exchange of Hong Kong after the Asian financial turmoil

 

Author: Tang, Tin-sek
Title: Revaluation of investment properties and firm performance : evidence from companies in the property sector of the stock exchange of Hong Kong after the Asian financial turmoil
Degree: D.Acc.
Year: 2004
Subject: Hong Kong Polytechnic University -- Dissertations.
Real estate business -- China -- Hong Kong.
Financial crises -- China -- Hong Kong.
Real property -- Valuation -- China -- Hong Kong.
Department: Graduate School of Business
Pages: xiii, 163 leaves : ill. (some col.) ; 31 cm.
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2088951
URI: http://theses.lib.polyu.edu.hk/handle/200/1586
Abstract: This thesis studies the revaluations of investment property in respect of companies in the property sector of the Stock Exchange of Hong Kong from 1997 to 2002, which cover approximately five and a half years immediately after the Asian Financial Turmoil. During the period after the Asian Financial Turmoil, Hong Kong property market was on a downward trend and, therefore, the sample mainly consists of downward revaluations. This study examines the direct relation between revaluations of investment properties and rental income, being income derived from investment properties. The findings show that investment property revaluation decrements are significantly positively associated with future changes of operating income as well as of rental income in the next year subsequent to the revaluation. However, revaluation increments do not support this association. The findings also indicate that investment property revaluation balances are significantly positively associated with current operating income as well as current rental income. By analysing the results by location, my study indicates that there is a positive association for sub-groups, which hold mainly Hong Kong properties. There is no evidence for such association for the subgroup that holds properties outside Hong Kong (mainly represented by properties in the People's Republic of China) except for the association of investment property revaluation changes with future changes of rental income. This suggests that the reliability of revaluations might vary with location. The results also indicate that, as predicted, the investment property revaluation reserve balance is significantly positively associated with share prices. These findings reveal that investment property revaluations are value relevant. However, there is no evidence that the investment property revaluation change (increment/decrement) is positively associated with share price returns. This suggests that investment property revaluation change does not have strong power to predict stock return. The results also indicate that per share book value of equity (less investment property balance) and per share change of book value of equity (less investment property balance) are positively related to share price and share price return, respectively. This suggests that, for property firms in Hong Kong, book value is an important element to explain share price. My study indicated that the results obtained from the model developed by me for the test of association between investment property revaluation change and operating income change are better than those obtained from the model developed by Aboody et al. (1999). This suggests that the model developed by Aboody et al. (1999) is not appropriate for testing my sample.

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