OHS liability, corporate officers and corporate groups

This article examines the new model for corporate officer liability under section 144 of the Occupational Health and Safety Act 2004 (Vic), and explores the extent to which this might effectively extend responsibility for OHS offences to members of corporate groups, such as holding companies. In doing so, the authors canvass the failure of corporate law to impose such obligations on corporate officers in general, and on holding companies as shadow officers. It is argued that provisions such as section 144 of the Victorian Act should be included in all OHS legislation.

Mind the insolvency gap : lessons to be learned from audit expectations gap theory

There is a general perception that public confidence in the insolvency profession is low as the result of the recent unethical practices of a few high profile liquidators. As a result, the effectiveness of the current regulatory mechanisms has been questioned, leading to a review of the performance of insolvency practitioners and subsequent regulation proposals. The challenge for the insolvency profession is balancing the expectations of the general public whilst ensuring that the obligations and duties imposed upon them are performed to acceptable and realistic standards. It is difficult (if not impossible) for the profession to meet this challenge in the absence of a cohesive framework which identifies those issues that require further regulation as opposed to those that relate to general education on the insolvency process. This paper will examine the audit expectations gap theory in the context of insolvency practitioners and suggests that a model based on this theory provides an effective framework for evaluating the regulation of the insolvency industry.

The contingent effects of differentiation and integration on corporate entrepreneurship

This paper develops a contingency view regarding the effects of structural differentiation and integration on levels of corporate entrepreneurship. Integrating notions of benefits and costs resulting from integration with structural contingency theory, we argue that the joint effects of structural differentiation and integration on corporate entrepreneurship levels are moderated by organizational size and environmental dynamism. Our findings from a time-separated sample demonstrate that in smaller organizations and more dynamic environments, the positive effects of integration on the structural differentiation-corporate entrepreneurship relationship strongly diminish. As such, with this research we begin to identify contingencies that influence the corporate entrepreneurship levels observed among firms striving to balance the needs for structural differentiation and integration.

Corporate governance and bankruptcy risk

We examine how firm characteristics, particularly the degree of firm complexity and the firm’s need for specialty knowledge, affect the relationship between corporate governance and the risk of bankruptcy. We find that having larger boards reduces the risk of bankruptcy only for complex firms. Our results also suggest that the proportion of inside directors on the board is inversely associated with the risk of bankruptcy in firms that require more specialist knowledge, and that the reverse is true in technically unsophisticated firms. The results further reveal that the additional explanatory power from corporate governance variables becomes stronger as the time to bankruptcy is increased, implying that although corporate governance variables are important predictors, governance changes are likely to be too late to save a firm on the verge of bankruptcy.

Agency problems of corporate philanthropy

Evaluating agency theory and optimal contracting theory views of corporate philanthropy, we find that as corporate giving increases, shareholders reduce their valuation of firm cash holdings. Dividend increases following the 2003 Tax Reform Act are associated with reduced corporate giving. Using a natural experiment, we find that corporate giving is positively (negatively) associated with CEO charity preferences (CEO shareholdings and corporate governance quality). Evidence from CEO-affiliated charity donations, market reactions to insider-affiliated donations, its relation to CEO compensation, and firm contributions to director-affiliated charities indicates that corporate donations advance CEO interests and suggests misuses of corporate resources that reduce firm value.

Corporate governance quality, audit fees and non-audit services fees

This paper extends prior research on the relationship between governance quality and auditor remuneration.We examine the influence of audit committee effectiveness (ACE), a proxy for governance quality, on audit fees (AF) and non-audit services fees (NASF) using a new composite measure comprising audit committee independence, expertise, diligence and size. We find that after controlling for board of director characteristics, there is a significant positive association between ACE and AF only for larger clients. Our results indicate that effective audit committees undertake more monitoring which results in wider audit scope and higher audit fees. Contrary to our expectations, we find the association between ACE and NASF to be positive and significant, especially for larger clients. This suggests that larger clients are more likely to purchase non-audit services (NAS) even in the presence of effective audit committees probably due to the complexity of their activities. Overall, our findings support regulatory initiatives aimed at improving corporate governance quality.

The Corporate Governance Effects of Audit Committee

This chapter provides a synthesis and evaluation of empirical research on the governance effects associated with audit committees. Given recent policy recommendations in several countries aimed at strengthening these committees, it is important to establish what research evidence demonstrates about their existing governance contribution. A framework for analyzing the impact of audit committees is described, identifying potential perceived effects which may have led to their adoption and documented effects on aspects of the audit function, on financial reporting quality and on corporate performance. It is also shown that most of the existing research has focused on factors associated with audit committee existence, characteristics, and measures of activity and there is very little evidence on the processes associated with the operation of audit committees and the manner in which they influence organizational behavior. It is clear that there is no automatic relationship between the adoption of audit committee structures or characteristics and the achievement of particular governance effects, and caution may be needed over expectations that greater codification around factors such as audit committee members’ independence and expertise as the means of ‘‘correcting’’ past weaknesses in the arrangements for audit committees. The most fundamental question concerning what difference audit committees make in practice continues to be an important area for research development. For future research we suggest: (1) greater consideration of the organizational and institutional contexts in which audit committees operate; (2) explicit theorization of the processes associated with audit committee operation; (3) complementing extant research methods with field studies; and (4) investigation of unintended as well as expected consequences of audit committees.

Corporate governance in 2010 : what will change?

2010 is expected to see the publication of a new UK Code on Corporate Governance, replacing the Combined Code. Why is a new code being issued? What significant changes are proposed? WIll it change the corporate governance world?

An Australian perspective on the ALI-III global principles for cooperation in International insolvency cases

In 2012, Professor Ian Fletcher (United Kingdom) and Professor Bob Wessels (The Netherlands) presented a Report to the American Law Institute and the International Insolvency Institute entitled Transnational Insolvency: Global Principles for Cooperation in International Insolvency Cases (“Global Principles”). This followed their appointment as Joint Reporters to investigate whether the essential provisions of the American Law Institute Principles of Cooperation among the North American Free Trade Agreement Countries with their annexed Guidelines Applicable to Court-to-Court Communication in Cross-border Cases may, with certain necessary modifications, be acceptable for use by jurisdictions across the world. This article comments on the Global Principles from the perspective of a jurisdiction which has adopted the UNCITRAL Model Law on Cross-border Insolvency (“Model Law”). In 2008, Australia enacted a standalone statute, the Cross-border Insolvency Act 2008 (Cth) to which is annexed the Model Law. In that process, it made minimal changes to the Model Law text. Against the background of the 2008 Act, related procedural laws as well as Australia’s general insolvency statutes and recent cross-border insolvency jurisprudence, this article comments on the potential relevance of the Transnational Insolvency Report as a point of reference for Australian courts and insolvency administrators when addressing international insolvency cases. By comparing the Global Principles with the Model Law as closely adopted in Australia, this analysis is a resource for other Model Law jurisdictions when considering the potential relevance of the Global Principles for their own international insolvency practice.

Developments in court to court communications in International insolvency cases

As business increasingly operates on a global basis, courts are called upon more often to adjudicate insolvency cases with international connections. The financial collapse of Lehman Brothers Holding Inc (‘Lehman Holdings’) provides a recent example where courts across many jurisdictions were called upon to determine issues arising from a multistate insolvent enterprise. Lehman Holdings filed for Chapter 11 bankruptcy protection in the United States on 15 September 2008. Lehman Brothers was the fourth largest investment bank in America and the largest company ever to file for bankruptcy in the United States. However the effects of its collapse were felt worldwide, including within Australia.

Institutional investors, risk/performance and corporate governance

Modern portfolio theory suggests that investors minimize risk for a given level of expected return by carefully choosing the proportions of various assets. This study sets out to determine the role of the institutional investor in monitoring risk and firm performance. Using a sample of Australian firms from 2006 to 2008, our empirical study shows a positive association between firm-specific risk, risk-management policy, and performance for firms with increasing institutional shareholdings. The study also finds that the significance of this association depends on the institutional investor's ability to influence management, which in turn depends on the size of ownership and whether the investee firm does not have potential business dealings with the investor. We also find that when firms are financially distressed, institutional investors engage in promoting short-term performance or exit rather than support long-term value creation. The results are robust while controlling the potential for endogeneity and using sensitivity tests to control for variants of performance and risk. These findings add to the growing body of literature examining institutional ownership and the importance of understanding the role of risk-management in the risk and return relation.

Perspectives on Australian bankruptcy law through the prism of the World Bank report on the treatment of the insolvency of natural persons

The insolvency of natural persons raises questions not only for a nation’s economy but also for its concern for equity. The World Bank has recently released a Report on the Treatment of the Insolvency of Natural Persons to guide nations in addressing the issues raised by an individual debtor’s insolvency. A brief review of Australia’s personal insolvency laws shows that it addresses many of the issues raised by the Report. However two areas are identified as worthy of further investigation by policy-makers and scholars to better address a concern for equity.

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.