Deriatives disclosure in corporate annual reports: bank analysts; perceptions of usefulness

Responding to mixed evidence on the decision-usefulness of annual report disclosures for derivative financial instruments to capital market participants, and concerns identified by practice, this paper examines usefulness in a direct study of user perceptions. Interviews with analysts from Australia’s four major banks reveal essential usefulness, limited by the disclosures’ failure to reflect companies’ actual use of derivatives throughout the period, and inability of users to understand companies’ off-balance sheet risk and risk management practices from information considered generic and boilerplate. The research complements and extends existing archival and survey research and provides new evidence suggesting low-cost ways for increasing usefulness. It supports the International Accounting Standards Board’s disclosure recommendations in its recent Discussion Paper: A Review of the Conceptual Framework for Financial Reporting, but, at the same time, highlights that for these proposed measures to be successful in relation to IFRS 7, they may need to address other issues. The research increases knowledge of the informational requirements of lenders, an important class of financial information user, and supports calls from practice for companies to improve their disclosure of material economic risks.

Persistent organic pollutants in matched breast milk and infant faeces samples

Assessing blood concentration of persistent organic pollutants (POPs) in infants is difficult due to the ethical and practical difficulties in obtaining sufficient quantities of blood. To determine whether measuring POPs in faeces might reflect blood concentration during infancy, we measured the concentrations of a range of POPs (i.e. polychlorinated biphenyls (PCBs), polybrominated diphenyl ethers (PBDEs) and organochlorine pesticides (OCPs)) in a pilot study using matched breast milk and infant faecal samples obtained from ten mother-child pairs. All infants were breast fed, with 8 of them also receiving solid food at the time of faecal sampling. In this small dataset faecal concentrations (range 0.01-41ngg-1 lipid) are strongly associated with milk concentrations (range 0.02-230ngg-1 lipid). Associations with other factors generally could not be detected in this dataset, with the exception of a small effect of age or growth. Different sources (external or internal) of exposure appeared to directly influence faecal concentrations of different chemicals based on different inter-individual variability in the faeces-to-milk concentration ratio Rfm. Overall, the matrix of faeces as an external measure of internal exposure in infants looks promising for some chemicals and is worth assessing further in larger datasets.

The channels of monetary policy triggered by central bank actions and statements in the Australian equity market

Owing to the discrete disclosure practices of the Reserve Bank of Australia, this paper provides new evidence on the channels of monetary policy triggered by central bank actions (monetary policy announcements) and statements (explanatory minutes releases), in the Australian equity market. Both monetary policy announcements and explanatory minutes releases are shown to have a significant and comparable impact on the returns and volatility of the Australian equity market. Further, distinct from US and European studies that find strong evidence of the interest rate, bank loan and balance sheet channels and no evidence of the exchange rate channel following central bank actions, this paper finds that monetary policy impacts the Australian equity market via the exchange rate, interest rate and bank loan channels of monetary policy, with only weak evidence of the balance sheet channel of monetary policy. These channels are found to be operating irrespective of the trigger (monetary policy announcements or explanatory minutes releases), though results are somewhat weaker when examining the explanatory minutes releases. These results have important implications for central bank officials and financial market participants alike: by confirming a comparable avenue to affect monetary policy; and providing an explication of its impact on the Australian equity market.