The role of the audit committee and institutional investors in constraining earnings management : evidence from Chinese firms listed in Hong Kong

Using data from 2004 to 2008, we find that an audit committee is an important monitoring mechanism as audit committee independence, expertise and size are associated with reduced levels of abnormal accruals, our measure of earnings management. This study also attempts to discern when the monitoring role of the audit committee is more salient for the firm. We find that ownership concentration and the presence of government officials on the audit committee are important determinants of the negative association between audit committee characteristics and earnings management. In contrast, we find no significant associations between the audit committee and abnormal accruals for Chinese firms listed only on the Chinese domestic Stock Exchanges. The paper contributes to the corporate governance literature in a transitional economy. Identifying the role of audit committees of firms listed on markets other than the domicile market demonstrates the importance of considering the institutional setting in governance research.

Correlations and volatility spillovers across commodity and stock markets: Linking energies, food, and gold

This paper employs a VAR-GARCH model to investigate the return links and volatility transmission between the S&P 500 and commodity price indices for energy, food, gold and beverages over the turbulent period from 2000 to 2011. Understanding the price behavior of commodity prices and the volatility transmission mechanism between these markets and the stock exchanges are crucial for each participant, including governments, traders, portfolio managers, consumers, and producers. For return and volatility spillover, the results show significant transmission among the S&P 500 and commodity markets. The past shocks and volatility of the S&P 500 strongly influenced the oil and gold markets. This study finds that the highest conditional correlations are between the S&P 500 and gold index and the S&P 500 and WTI index. We also analyze the optimal weights and hedge ratios for commodities/S&P 500 portfolio holdings using the estimates for each index. Overall, our findings illustrate several important implications for portfolio hedgers for making optimal portfolio allocations, engaging in risk management and forecasting future volatility in equity and commodity markets. © 2013 Elsevier B.V.

Corporate governance mechanisms and earnings management in transitional countries – evidence from Chinese listed firms

The objective of this thesis is to investigate whether the corporate governance practices adopted by Chinese listed firms are associated with the quality of earnings information. Based on a review of agency and institutional theory, this study develops hypotheses that predict the monitoring effectiveness of the board and the audit committee. Using a combination of univariate and multivariate analyses, the association between corporate governance mechanisms and earnings management are tested from 2004 to 2008. Through analysing the empirical results, a number of findings are summarised as below. First, board independence is weakened by the introduction of government officials as independent directors on the boards. Government officials acting as independent directors, claim that they meet the definition of independent director set by the regulation. However, they have some connection with the State, which is the controlling shareholder in listed SOEs affiliated companies. Consequently, the effect of the independent director’s expertise in constraining earnings management is mitigated as demonstrated by an insignificant association between board expertise and earnings management. An alternative explanation for the inefficiency of board independence may point to the pre-selection of independent directors by the powerful CEO. It is argued that a CEO can manipulate the board composition and choose the "desirable" independent directors to monitor themselves. Second, a number of internal mechanisms, such as board size, board activities, and the separation of the roles of the CEO and chair are found to be significantly associated with discretionary accruals. This result suggests that there are advantages in having a large and active board in the Chinese setting. This can offset the disadvantages associated with large boards, such as increased bureaucracy, and hence, increase the constraining effects of a large and resourceful board. Third, factor analysis identifies two factors: CEO power and board power. CEO power is the factor which consists of CEO duality and turnover, and board power is composed of board size and board activity. The results of CEO power show that if a Chinese listed company has CEO duality and turnover at the same time, it is more likely to have a high level of earnings management. The significant and negative relationship between board power and accruals indicate that large boards with frequent meetings can be associated with low level of earnings management. Overall, the factor analysis suggests that certain governance mechanisms complement each other to become more efficient monitors of opportunistic earnings management. A combination of board characteristics can increase the negative association with earnings management. Fourth, the insignificant results between audit committees and earnings management in Chinese listed firms suggests that the Chinese regulator should strengthen the audit committee functions. This thesis calls for listed firms to disclose more information on audit committee composition and activities, which can facilitate future research on the Chinese audit committee’s monitoring role. Fifth, the interactive results between State ownership and board characteristics show that dominant State ownership has a moderating effect on board monitoring power as the State totally controls 42% of the issued shares. The high percentage of State ownership makes it difficult for the non-controlling institutional shareholders to challenge the State’s dominant status. As a result, the association between non-controlling institutional ownership and earnings management is insignificant in most situations. Lastly, firms audited by the international Big4 have lower abnormal accruals than firms audited by domestic Chinese audit firms. In addition, the inverse U-shape relationship between audit tenure and earnings quality demonstrates the changing effects of audit quality after a certain period of appointment. Furthermore, this thesis finds that listing in Hong Kong Stock Exchanges can be an alternative governance mechanism to discipline Chinese firms to follow strict Hong Kong listing requirements. Management of Hong Kong listed companies are exposed to the scrutiny of international investors and Hong Kong regulators. This in turn reduces their chances of conducting self-interested earnings manipulation. This study is designed to fill the gap in governance literature in China that is related to earnings management. Previous research on corporate governance mechanisms and earnings management in China is not conclusive. The current research builds on previous literature and provides some meaningful implications for practitioners, regulators, academic, and international investors who have investment interests in a transitional country. The findings of this study contribute to corporate governance and earnings management literature in the context of the transitional economy of China. The use of alternative measures for earnings management yields similar results compared with the accruals models and produces additional findings.

Accounting for forests in Fiji : the experience of Future Forests (Fiji) Limited

"in a world which is experiencing unprecedented deforestation and widespread global environmental threats there is something intuitively right about planting a tree" (Future Forests (Fiji) Limited) The above quote demonstrates that even in the wake of global environmental crisis that hope still remains and that humans can still control their destiny. This opportunity to effect positive environmental change is one of the main aims of the South Pacific Stock Exchange’s (SPSE) most recent publicly listed company: Future Forest (Fiji) Limited. Incorporated in 2004 and listed on SPSE in 2011, the company is Fiji’s first large-scale commercial hardwood forest plantation and nursery. Future Forest (FF) is the only company listed on the SPSE with biological assets or “living assets.” The accounting standard for biological assets is IAS 41: Agriculture. This standard prescribes the use of fair value as the basis of valuation. While a more relevant method of valuation, the application of fair value accounting can be more costly and burdensome for companies in developing economies (White 2008). In line with the journal’s theme of agriculture, this article explores the issues, challenges and potential benefits involved in applying fair value accounting for biological assets in a developing economy such as Fiji using the case of Future Forest (Fiji) Limited.

Corporate Social Responsibility Assurance: Theory, Regulations and Practice in China

This chapter aims to provide a comprehensive understanding of the theory, regulations and practice of corporate social responsibility (CSR) assurance in China. Built on stakeholder and related theories, it employs a demand-and-supply analytical framework to illustrate the development and current status of China’s CSR assurance market. It finds that government agencies, stock exchanges, accounting standard setters and industrial associations have collectively shaped the current regulatory framework on CSR reporting and assurance in China. Regarding demand, differences in the social and legal environments across such a large country influence the regional development of CSR assurance. Industries under intensive CSR regulations and/or social reporting pressure—for example, the finance, aviation and mining industries—more actively achieve CSR report assurance. Regarding supply, the CSR assurance market in China is shared by accounting firms and professional certification bodies. Different assurance standards adopted by the two streams of assurance providers have different foci, potentially leading to different assurance coverage and emphases.

Bioeconomic modelling and risk assessment of tiger prawn (Penaeus esculentus) stock enhancement in Exmouth Gulf, Australia

A bioeconomic model was developed to evaluate the potential performance of brown tiger prawn stock enhancement in Exmouth Gulf, Australia. This paper presents the framework for the bioeconomic model and risk assessment for all components of a stock enhancement operation, i.e. hatchery, grow-out, releasing, population dynamics, fishery, and monitoring, for a commercial scale enhancement of about 100 metric tonnes, a 25% increase in average annual catch in Exmouth Gulf. The model incorporates uncertainty in estimates of parameters by using a distribution for the parameter over a certain range, based on experiments, published data, or similar studies. Monte Carlo simulation was then used to quantify the effects of these uncertainties on the model-output and on the economic potential of a particular production target. The model incorporates density-dependent effects in the nursery grounds of brown tiger prawns. The results predict that a release of 21 million 1 g prawns would produce an estimated enhanced prawn catch of about 100 t. This scale of enhancement has a 66.5% chance of making a profit. The largest contributor to the overall uncertainty of the enhanced prawn catch was the post-release mortality, followed by the density-dependent mortality caused by released prawns. These two mortality rates are most difficult to estimate in practice and are much under-researched in stock enhancement.

Trial by media: An empirical investigation of corporate reputation and stock returns in Australia

This article examines whether investors are able to generate abnormal risk-adjusted returns in the Australian market based on media-specific firm reputational factors under market uncertainty between 2004 and 2012. The findings suggest that after controlling for crisis-centric time periods and market risk factors, contrarian trading strategies produce abnormal returns for poor corporate reputation firms but not for their good corporate reputation counterparts. Corporate reputation may be a driver of performance for poorly performing Australian firms and could be considered a stimulus for trading activity due to its explanatory capabilities.

Role of corporate governance in mitigating the selective disclosure of executive stock option information

We examine the nature and extent of statutory executive stock option (ESO) disclosures by Australian listed companies over the 2001 to 2004 period, and the influence of corporate governance mechanisms on these disclosures. Our results show a progressive increase in overall compliance from 2001 to 2004. However, despite the improved compliance, the results reveal managements’ continued reluctance to disclose more sensitive ESO information. Factors associated with good internal governance, including board independence, audit committee independence and effectiveness, and compensation committee independence and effectiveness are found to contribute to improved compliance. Similarly, certain external governance factors are associated with improved disclosure, including external auditor quality, shareholder activism (as proxied by companies identified as poor performers by the Australian Shareholders’ Association), and regulatory intervention.

The Profiling of Property, Plant & Equipment (PPE) Contributions in Australia and Malaysia Public Listed Construction Companies

The purpose of this paper is to study the profiling of property, plant and equipment (PPE) contributions in Australia and Malaysia construction companies. A company’s worth is usually based on the listed share price on the stock exchange. In arriving at the net profit, the contribution of PPE in the company’s assets is somehow being neglected. This paper will investigate the followings; firstly the level of PPE contribution in the construction firms by comparing the PPE contributions to the company’s asset as a whole which includes fixed (non-current) assets and current assets. This will determine the true strength of the companies, rather than relying on the share prices alone. Secondly, the paper will determine the trend of company’s asset ownership to show the company’s performance of the PPE ownership during the period of study. The data is based on the selected construction companies listed on the Australian Stock Exchange (ASX) and Malaysian Stock Exchange, known as Bursa Malaysia. The profiling will help to determine the strength of the construction firms based on the PPE holding, and the level of PPE ownerships in the two countries construction firms during the period of study.

Crime in Rural Australia

Contemporary rural crime is more varied and sophisticated than it once was. The new forms range from agricultural crimes, such as the theft of water designated for agricultural production, to environmental crimes such as the illegal dumping of waste. They take place side by side with “traditional” rural crimes such as cattle duffing while “urban” crimes such as drug and alcohol abuse and violent assaults are also prevalent, and on the rise. Crime in Rural Australia covers them all. It brings together leading academics who examine the major dimensions of crime and justice in rural and regional Australia including: •the extent of rural crime •farm crime •violence •juvenile crime •policing •Indigenous crime and justice •crime prevention •drugs •fear of crime, and •sentencing and punishment. It includes vignettes on rural policing and the stock squad from the perspectives of the NSW police. An ideal text for rural crime and criminology courses, Crime in Rural Australia will also be of interest to criminal justice practitioners, policy-makers, and criminology scholars. Three of the editors, Dr Elaine Barclay, Dr John Scott and Associate Professor Russell Hogg, are associated with the Centre for Rural Crime at the University of New England. Professor Joseph F. Donnermeyer is the International Research Co-ordinator for the Rural Crime Centre and is a leading US scholar on rural crime at Ohio State University.

Evaluation of implementation of a healthy food and drink supply strategy throughout the whole school environment in Queensland state schools, Australia

BACKGROUND/OBJECTIVES: This paper reports on the evaluation of the Smart Choices healthy food and drink supply strategy for Queensland schools (Smart Choices) implementation across the whole school environment in state government primary and secondary schools in Queensland, Australia. SUBJECTS/METHODS: Three concurrent surveys using different methods for each group of stakeholders that targeted all 1275 school Principals, all 1258 Parent and Citizens’ Associations (P&Cs) and a random sample of 526 tuckshop convenors throughout Queensland. Nine hundred and seventy-three Principals, 598 P&Cs and 513 tuckshop convenors participated with response rates of 78%, 48% and 98%, respectively. RESULTS: Nearly all Principals (97%), P&Cs (99%) and tuckshop convenors (97%) reported that their school tuckshop had implemented Smart Choices. The majority of Principals and P&Cs reported implementation, respectively, in: school breakfast programs (98 and 92%); vending machine stock (94 and 83%); vending machine advertising (85 and 84%); school events (87 and 88%); school sporting events (81 and 80%); sponsorship and advertising (93 and 84%); fundraising events (80 and 84%); and sporting clubs (73 and 75%). Implementation in curriculum activities, classroom rewards and class parties was reported, respectively, by 97%, 86% and 75% of Principals. Respondents also reported very high levels of understanding of Smart Choices and engagement of the school community. CONCLUSIONS: The results demonstrated that food supply interventions to promote nutrition across all domains of the school environment can be implemented successfully.

Motivations for eWOM exchanges in an online community : self-development, problem solving support, relaxation

Electronic word-of-mouth (eWOM) has gained significant attention from academics and practitioners since it has become an important source of consumers’ product information, which can influence consumer purchase intentions (Cheung & Lee, 2012). eWOM exchanges exist in two types of online communities: online communities of practice and online communities of interest. A few prior studies in online communities of interest have examined members’ motivations for product knowledge exchange (Hung & Li, 2007; Ma & Agarwal, 2007). However, there is a lack of understanding of member motivations for exchanging social bonds and enjoyment in addition to exchanging knowledge pertaining to products in the community. It is important to have an initial comprehension of motivation as an antecedent of these three eWOM exchanges so as to be able to determine the driving factors that lead members to generate eWOM communication. Thus, the research problem "What are the driving factors for members to exchange eWOM in an online community?" was justified for investigation. The purpose of this study was to examine different member motivations for exchanging three types of eWOM. Resource exchange theory and theory on consumer motivation and behavior were applied to develop a conceptual framework for this study. This study focused on an online beauty community since there is an increasing trend of consumers turning to online beauty resources so as to exchange useful beauty product information (SheSpot, 2011). As this study examined consumer motivation in an online beauty community, a web-based survey was the most effective and efficient way to gain responses from beauty community members and these members were appropriate samples from which to draw a conclusion about the whole population. Multiple regression analysis was used to test the relationships between member motivations and eWOM exchanges. It was found that members have different motivations for exchanging knowledge, social bonds, and enjoyment related to products: self-development, problem solving support, and relaxation, respectively. This study makes three theoretical contributions. First, this study identifies the influence of self-development motivation on knowledge exchange in an online community of interest, just as this motivation has previously been found in online communities of practice. This study highlights that members of the two different types of online communities share similar goals of knowledge exchange, despite the two communities evincing different attributes (e.g., member characteristics and tasks’ objectives). Further, this study will assist researchers to understand other motivations identified by prior research in online communities of practice since such motivations may be applicable to online communities of interest. Second, this study offers a new perspective on member motivation for social bonding. This study indicates that in addition to social support from friends and family, consumers are motivated to build social bonds with members in an online community of interest since they are an important source of problem solving support in regard to products. Finally, this study extends the body of knowledge pertaining to member motivation for enjoyment exchange. This study provides a basis for researchers to understand that members in an online community of interest value experiential aspects of enjoyable consumption activities, and thus based on group norms, members have a mutual desire for relaxation from enjoyment exchange. The major practical contribution is that this study provides an important guideline for marketing managers to develop different marketing strategies based on member motivations for exchanging three types of eWOM in an online community of interest, such as an online beauty community. This will potentially help marketing managers increase online traffic and revenue, and thus bring success to the community. Although, this study contributes to the literature by highlighting three distinctive member motivations for eWOM exchanges in an online community of interest, there are some possible research limitations. First, this study was conducted in an online beauty community in Australia. Hence, further research should replicate this study in other industries and nations so as to give the findings greater generalisability. Next, online beauty community members are female skewed. Thus, future research should examine whether similar patterns of motivations would emerge in other online communities that tend to be populated by males (e.g., communities focused on football). Further, a web-based survey has its limitations in terms of self-selection and self-reporting (Bhatnagar & Ghose, 2004). Therefore, further studies should test the framework by employing different research methods in order to overcome these weaknesses.

Climate Change and the Resilience of Commodity Food Production in Australia

The current view of Australian state and national governments about the effects of climate change on agriculture is that farmers – through the adoption of mitigation and adaptation strategies – will remain resilient, and agricultural production will continue to expand. The assumption is that neoliberalism will provide the best ‘free market’ options for climate change mitigation and adaptation in farming. In contrast, we argue that neoliberalism will increase the move towards productivis (‘high-tech’) agriculture – the very system that has caused major environmental damage to the Australian continent. High-tech farming is highly dependent upon access to water and fossil fuels, both of which would appear to be the main limits to production in future decades. Productivist agriculture is a system highly reliant upon fertilizers and fuels that are derived from the petrochemical industry, and are currently increasing in cost as the price of oil increases.

Australian stock indexes and the four-factor model

Stock indexes are passive 'value-weighted' portfolios and should not have alphas which are significantly different from zero. If an index produces an insignificant alphan, then significant alphas for equity funds using this index can be attributed solely to manager performance. However, recent literature sugests that US Stock indexes can demonstrate significant alphas, which ultimately raise questions regarding equity fund manager performance in both the US and abroad. in this paper, we employ the Carhart four-factor model and newly available Asian-Pacific risk factors to generate alphas and risk factor loadings for eight Australian stock indexes from January 2004 to December 2012. We ifnd that the initial full sample period analysis does not provide indication of significant alphas in the indexes examined. However, by carrying out 36-month rolling regressions, we discover at least four significant alphas in seven of the eight indexes and factor loading variability. As previously reported in the US, this paper confirms similar issues with the four-factor model using Australian stock indexes and performance benchmarking. In effectively measuring Australian equity fund manager performance, it is therefore essential to evaluate a fund's alpha and risk factors relative to the alpha and risk factors of the appropriate benchmark index.

Mid-Holocene Aboriginal occupation of offshore islands in northern Australia? A reassessment of Wurdukanhan, Mornington Island, southern Gulf of Carpentaria, Australia

Claims for mid-Holocene Aboriginal occupation at the shell matrix site of Wurdukanhan, Mornington Island, Gulf of Carpentaria, Australia, are reassessed through an analysis of the excavated assemblage coupled with new surveys and an extensive dating program. Memmott et al. (2006, pp. 38, 39) reported basal ages of c.5000–5500 years from Wurdukanhan as 'the oldest date yet obtained for any archaeological site on the coast of the southern Gulf of Carpentaria' and used these dates to argue for 'a relatively lengthy occupation since at least the mid-Holocene'. If substantiated, with the exception of western Torres Strait, these claims make Mornington Island the only offshore island used across northern Australia in the mid-Holocene where it is conventionally thought that Aboriginal people only (re)colonised islands after sea-level maximum was achieved after the mid-Holocene. Our analysis of Wurdukanhan demonstrates high shellfish taxa diversity, high rates of natural shell predation and high densities of foraminifera throughout the deposit demonstrating a natural origin for the assemblage. Results are considered in the context of other dated shell matrix sites in the area and a geomorphological model for landscape development of the Sandalwood River catchment.