Value relevance of investment properties’ fair value and board characteristics in Malaysian Real Estate Investment Trusts
Prior studies in Malaysia indicate that fair value of investment properties are not value relevant in various industries. Unlike those industries, Malaysian Real Estate Investment Trusts (MREITs) is a capital-intensive industry where the investment properties made up the majority of the MREITs tot...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Fakulti Ekonomi dan Pengurusan
2014
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| Online Access: | http://journalarticle.ukm.my/8503/ http://journalarticle.ukm.my/8503/ http://journalarticle.ukm.my/8503/1/6693-23240-1-PB.pdf |
| Summary: | Prior studies in Malaysia indicate that fair value of investment properties are not value relevant in various industries.
Unlike those industries, Malaysian Real Estate Investment Trusts (MREITs) is a capital-intensive industry where the
investment properties made up the majority of the MREITs total assets. Furthermore this industry is subjected to stringent
monitoring by the Securities Commission (SC) which requires MREITs to adopt the fair value model and revalue their
investment properties for at least once in every three years. Therefore, results from previous studies cannot be generalized
to this industry. Hence, this study investigates whether fair value on investment properties is value relevant in the MREIT
industry. It also examines the effect of board characteristics on the share prices of MREITs. Secondary data was obtained
from annual reports of twelve listed MREITs on Bursa Malaysia from 2006 to 2011 and analyzed using multiple regression
analysis. The results indicate that the information on the fair value of investment properties (as presented in balance
sheet) is significantly related to share price of MREITs. However, the changes in fair value (revaluation surplus), as
presented in income statement is not significantly related to the share price. The findings suggest that only fair value of
investment properties (FVIP) is useful for investors to make their investment decisions. This study also found a positive
and significant association between board independence and share prices of MREITs. It indicates that independence of
directors in MREIT firms is also important to investors that it is reflected in the share price. This study adds to the limited
literature on MREITs. The results indicate that investors do value the fair value information provided by MREITs and
support the fair value accounting in REITs. The findings of this study could be used by regulators in improving the future
revaluation guidelines for the REIT industry. |
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