Realization or reversal of revaluation reserve: determinants of choice of companies in brazil after the enactment of act 11.638/07

Abstract

The objective of this work is to identify the determinants of the choice made by public companies in Brazil with respect to the treatment of revaluation reserve after the enactment of Act 11.638/07. This is because such Law removed the possibility of performing the revaluation of assets, and the companies that owned the remaining reserve balance had the option to void it or keep it to perform via depreciation or disposal. This research is based on studies of Choices Accounting and assumes that companies use the alternatives in corporate law to maximize their interests. The research sample consisted of all companies listed on the BOVESPA, which had a balance of revaluation for the year ended 2007. To try to explain the treatment given by companies, six hypotheses were tested on the following factors: (i) size, (ii) profitability, (iii) indebtedness, (iv) corporate governance, (v) the audit firm and (vi) value revaluation reserve. Aiming to determine the influence of each of these variables on the binary dependent variable, we chose to use the logit model. The results demonstrate that despite the logit model is not significant, so it was not possible to associate the decisions taken by the companies to the set of independent variables, analyzing individually, the variable related to the amount of the revaluation reserve was significant, indicating the existence of a possible relationship between this variable and the company's decision.