Acquire a practical overview of 'good faith' in commercial contracting

The twists and turns in the ongoing development of the implied common law good faith obligation in the commercial contractual arena continue to prove fertile academic ground. Despite a lack of guidance from the High Court, the lower courts have been besieged by claims based, in part, on the implied obligation. Although lower court authority is lacking consistency and the ‘decisions in which lower courts have recognised the legitimacy of implication of a term of good faith vary in their suggested rationales’, the implied obligation may provide some comfort to a party to ‘at least some commercial contracts’ faced with a contractual counterpart exhibiting symptoms of bad faith.

Diversification and value-at-risk

A pervasive and puzzling feature of banks’ Value-at-Risk (VaR) is its abnormally high level, which leads to excessive regulatory capital. A possible explanation for the tendency of commercial banks to overstate their VaR is that they incompletely account for the diversification effect among broad risk categories (e.g., equity, interest rate, commodity, credit spread, and foreign exchange). By underestimating the diversification effect, bank’s proprietary VaR models produce overly prudent market risk assessments. In this paper, we examine empirically the validity of this hypothesis using actual VaR data from major US commercial banks. In contrast to the VaR diversification hypothesis, we find that US banks show no sign of systematic underestimation of the diversification effect. In particular, diversification effects used by banks is very close to (and quite often larger than) our empirical diversification estimates. A direct implication of this finding is that individual VaRs for each broad risk category, just like aggregate VaRs, are biased risk assessments.

The level and quality of Value-at-Risk disclosure by commercial banks

In this paper we study both the level of Value-at-Risk (VaR) disclosure and the accuracy of the disclosed VaR figures for a sample of US and international commercial banks. To measure the level of VaR disclosures, we develop a VaR Disclosure Index that captures many different facets of market risk disclosure. Using panel data over the period 1996–2005, we find an overall upward trend in the quantity of information released to the public. We also find that Historical Simulation is by far the most popular VaR method. We assess the accuracy of VaR figures by studying the number of VaR exceedances and whether actual daily VaRs contain information about the volatility of subsequent trading revenues. Unlike the level of VaR disclosure, the quality of VaR disclosure shows no sign of improvement over time. We find that VaR computed using Historical Simulation contains very little information about future volatility.

Disclosure, conservatism and the cost of equity capital : a review of the foundation literature

In this review piece, we survey the literature on the cost of equity capital implications of corporate disclosure and conservative accounting policy choice decisions with the principle objective of providing insights into the design and methodological issues, which underlie the empirical investigations. We begin with a review of the analytical studies most typically cited in the empirical research as providing a theoretical foundation. We then turn to consider literature that offers insights into the selection of proxies for each of our points of interest, cost of equity capital, disclosure quality and accounting conservatism. As a final step, we review selected empirical studies to illustrate the relevant evidence found within the literature. Based on our review, we interpret the literature as providing the researcher with only limited direct guidance on the appropriate choice of measure for each of the constructs of interest. Further, we view the literature as raising questions about both the interpretation of empirical findings in the face of measurement concerns and the suitability of certain theoretical arguments to the research setting. Overall, perhaps the message which is most clear is that one of the most controversial and fundamental issues underlying the literature is the issue of the diversifiability or nondiversifiability of information effects.

Endogenous mortality, human capital and economic growth

We consider growth and welfare effects of lifetime-uncertainty in an economy with human capital-led endogenous growth. We argue that lifetime uncertainty reduces private incentives to invest in both physical and human capital. Using an overlapping generations framework with finite-lived households we analyze the relevance of government expenditure on health and education to counter such growth-reducing forces. We focus on three different models that differ with respect to the mode of financing of education: (i) both private and public spending, (ii) only public spending, and (iii) only private spending. Results show that models (i) and (iii) outperform model (ii) with respect to long-term growth rates of per capita income, welfare levels and other important macroeconomic indicators. Theoretical predictions of model rankings for these macroeconomic indicators are also supported by observed stylized facts.

Retrofitting commercial office buildings for sustainability : tenants’ expectations and experiences

Introduction Buildings, which account for approximately half of all annual energy and greenhouse gas emissions, are an important target area for any strategy addressing climate change. Whilst new commercial buildings increasingly address sustainability considerations, incorporating green technology in the refurbishment process of older buildings is technically, financially and socially challenging. This research explores the expectations and experiences of commercial office building tenants, whose building was under-going green refurbishment. Methodology Semi-structured in-depth interviews with seven residents and neighbours of a large case-study building under-going green refurbishment in Melbourne, Australia. Built in 1979, the 7,008m² ‘B’ grade building consists of 11 upper levels of office accommodation, ground floor retail, and a basement area leased as a licensed restaurant. After refurbishment, which included the installation of chilled water pumps, solar water heating, waterless urinals, insulation, disabled toilets, and automatic dimming lights, it was expected that the environmental performance of the building would move from a non-existent zero ABGR (Australian Building Greenhouse Rating) star rating to 3.5 stars, with a 40% reduction in water consumption and 20% reduction in energy consumption. Interviews were transcribed, with responses analysed using a thematic approach, identifying categories, themes and patterns. Results Commercial property tenants are on a journey to sustainability - they are interested and willing to engage in discussions about sustainability initiatives, but the process, costs and benefits need to be clear. Critically, whilst sustainability was an essential and non-negotiable criterion in building selection for government and larger corporate tenants, sustainability was not yet a core business value for smaller organisations – whilst they could see it as an emerging issue, they wanted detailed cost-benefit analyses, pay-back calculations of proposed technologies and, ideally, wished they could trial the technology first-hand in some way. Although extremely interested in learning more, most participants reported relatively minimal knowledge of specific sustainability features, designs or products. In discussions about different sustainable technologies (e.g., waterless urinals, green-rated carpets), participants frequently commented that they knew little about the technology, had not heard of it or were not sure exactly how it worked. Whilst participants viewed sustainable commercial buildings as the future, they had varied expectations about the fate of existing older buildings – most felt that they would have to be retrofitted at some point to meet market expectations and predicted the emergence of a ‘non-sustainability discount’ for residing in a building without sustainable features. Discussion This research offers a beginning point for understanding the difficulty of integrating green technology in older commercial buildings. Tenants currently have limited understandings of technology and potential building performance outcomes, which ultimately could impede the implementation of sustainable initiatives in older buildings. Whilst the commercial property market is interested in learning about sustainability in the built environment, the findings highlight the importance of developing a strong business case, communication and transition plan for implementing sustainability retrofits in existing commercial buildings.

The analysis of social capital in online social communities

Social networks have proven to be an attractive avenue of investigation for researchers since humans are social creatures. Numerous literature have explored the term “social networks” from different perspectives and in diverse research fields. With the popularity of the Internet, social networking has taken on a new dimension. Online social communities therefore have become an emerging social avenue for people to communicate in today’s information age. People use online social communities to share their interests, maintain friendships, and extend their so-called circle of “friends”. Likewise, social capital, also known as human capital, is an important theory in sociology. Researchers usually utilise social capital theory when they investigate the topic relating to social networks. However, there is little literature that can provide an explicit and strong assertion in that research area due to the complexity of social capital. This thesis therefore focuses on the issue related to providing a better understanding about the relationship between social capital and online social communities. To enhance the value within the scope of this analysis, an online survey was conducted to examine the effects of the dimensions of social capital: relational capital, structural capital, and cognitive capital, determining the intensity of using online social communities. The data were derived from a total of 350 self-selected respondents completing an online survey during the research period. The main results indicate that social capital exists in online social communities under normal circumstances. Finally, this thesis also presents three contributions for both theory and practice in Chapter 5. The main results contribute to the understanding of connectivity in the interrelationships between individual social capital exchange within online social networks. Secondly, social trust was found to have a weak effect in influencing the intensity of individuals using online social communities. Third, the perpetual role of information sharing has an indirect influence on individual users participating in online social communities. This study also benefits online marketing consultants as marketers can not only gain consumer information easier from online social communities but also this understanding assists in designing effective communication within online social communities. The cross-sectional study, the reliability of Internet survey data, and sampling issues are the major three limitations in this research. The thesis provides a new research model and recommends that the mediating effects, privacy paradox, and social trust on online social communities should be further explored in future research.

A human capital framework : designed for convergence

The 21" century business environment is dominated by unprecedented change across a broad spectrum of social, economic, technological and cultural factors (Nowotny, Scott & Gibbons 2001). Among these, two broad trends -economic globalisation and rising knowledge intensity (Hart 2006)have come to distinguish organisational life. Under the weight of these transformational influences, the developed world, it seems, has arrived at a transformational moment. The far-reaching effects of the global financial crisis and its shadowy twin: the threat of a double dip recession, continue to exert an unsteadying influence on global and corporate finances. Growth in developed economies has slumped, share prices have declined, the market value of corporations has slipped and unemployment rates, in the vast majority of developed economies, have risen. Gross domestic product (GDP) growth has retreated from the strong growth experienced in the late 1990s to negative growth in 2009 and a sluggish and unsteady recovery in 2010. In response, the reach of Government in terms of its participation in markets has been extended, bringing with it the need to transition to new governance and regulatory arrangements. Ongoing concerns regarding the pace and sustainability of the recovery remains a front-of-mind concern with bailouts, buybacks, borrowings and BP dominating news services: 'We are witnessing the reweaving of the social, political and economic fabric that binds our planet, with long-term consequences that are as or more profound than those of the industrial era' (Tapscott & Williams 2006, p. 59).