Disproportional ownership structure and pay–performance relationship: evidence from China’s listed firms

This paper examines the impact of ownership structure on executive compensation in China's listed firms. We find that the cash flow rights of ultimate controlling shareholders have a positive effect on the pay–performance relationship, while a divergence between control rights and cash flow rights has a significantly negative effect on the pay–performance relationship. We divide our sample based on ultimate controlling shareholders' type into state owned enterprises (SOE), state assets management bureaus (SAMB), and privately controlled firms. We find that in SOE controlled firms cash flow rights have a significant impact on accounting based pay–performance relationship. In privately controlled firms, cash flow rights affect the market based pay–performance relationship. In SAMB controlled firms, CEO pay bears no relationship with either accounting or market based performance. The evidence suggests that CEO pay is inefficient in firms where the state is the controlling shareholder because it is insensitive to market based performance but consistent with the efforts of controlling shareholders to maximize their private benefit.

Predicting future earnings growth: a test of the dividend payout ratio in the Australian market

This paper examines the use of the payout ratio as a predictor of a firm’s future earnings growth. Recent evidence rejects the hypothesis that firm which retain a large portion of their earnings have strong future earnings growth. Higher dividend payout ratios instead correspond to higher future earnings growth. Examining both listed and delisted firms on the Australian stock exchange over the period 1989 to 2008, we provide further evidence that the dividend payout ratio is positively linked to future earnings growth. The results hold over both one, three and five year periods. Furthermore, our results rejected claims that such a relationship was caused by simple mean reversion in earnings. We find no evidence to support the cash flow signaling and free cash flow hypotheses as an explanation for this relationship.

A random coefficient approach to the predictability of stock returns in panels

© The Author, 2014. Most studies of the predictability of returns are based on time series data, and whenever panel data are used, the testing is almost always conducted in an unrestricted unit-by-unit fashion, which makes for a very heavy parametrization of the model. On the other hand, the few panel tests that exist are too restrictive in the sense that they are based on homogeneity assumptions that might not be true. As a response to this, the current study proposes new predictability tests in the context of a random coefficient panel data model, in which the null of no predictability corresponds to the joint restriction that the predictive slope has zero mean and variance. The tests are applied to a large panel of stocks listed at the New York Stock Exchange. The results suggest that while the predictive slopes tend to average to zero, in case of book-to-market and cash flow-to-price the variance of the slopes is positive, which we take as evidence of predictability.

Examining the approaches to diminish judicial intervention in statutory adjudication in Australia

In Australia, statutory construction adjudication is a fast payment dispute resolution process designed to keep the cash flowing down the hierarchical contractual chain in construction projects. Its rapid, highly regulatory and temporarily binding nature have led to it being often described as a ‘quick and dirty’ process that delivers ‘rough and ready’ justice. Adjudicators often have to grapple with complex legal issues related to jurisdictional facts and interpretation of contract provisions, though the majority of them are not legally trained. This has often led to a poor quality of adjudication outcome for large and complex payment claims which has, in turn, led to a mounting dissatisfaction due to the many judicial challenges to adjudicators’ determinations seen in recent years. The evolving tension between the object of the security of payment legislation and excessive involvement of the courts has often been the subject of comment by the judiciary. This paper aims to examine the legislative and judicial approaches to support the object of the security of payment legislation to ease cash flow. The paper adopts a desktop study approach whereby evidence is gathered from three primary sources – judicial decisions, academic publications and governmental reports. The paper concludes that there is a need to adopt other measures which can provide more convenient relief to aggrieved parties to an adjudication process, such that the adjudication process is kept away from the courts as far as is possible. Specifically, it is proposed that a well-designed expanded legislative review scheme of allegedly flawed adjudication, based on that provided in the Western Australian legislation, might stand as a promising remedy to eliminate the evolving tension.

Ultimate controlling shareholders and dividend payout policy in Chinese stock market

Departing from the traditional cash flow rights-dividend policy framework, this study investigates whether the level of control rights and the types of ultimate controlling shareholders (UCSs) of listed firms in China influence their cash dividend payout. We find that the level of control rights is positively associated with both the probability to pay and the level of cash dividend payout, which indicates that UCSs use cash dividends to reduce the agency cost of free cash flow and redirect listed firms' cash balance. Furthermore, different types of UCSs influence dissimilarly on the controlled firms' cash dividends, which can be attributed to the backgrounds of these UCSs originating from China's unique partial share issuance privatization process.

Towards diminishing judicial intervention in statutory adjudication: a pragmatic proposal

Statutory adjudication was introduced into the Security of Payment (SOP) legislation as a fast-track payment dispute resolution process aiming to achieve the object of the legislation to facilitate cash flow within the construction contractual chain. As such, adjudication determinations were usually released and enforced on a "pay now, argue later" 1 basis in order to protect a vulnerable class of smaller businesses within the building and construction industry. The SOP legislation was extremely successful in attaining the stated object in the context of small adjudicated payment claims where both parties used to comply with the adjudication determination.

Do shareholders really prefer risky projects?

It is often argued that managers representing shareholders' interests tend to undertake risky projects because equity resembles a call option on a firm's assets. However, this conclusion is not generally true when bankruptcy risk is explicitly modelled. This paper compares the relative strength of the agency cost and the bankruptcy risk in determining managerial choice of cash-flow volatility in a continuous-time framework. Assume the existing debt has covenants which preclude additional borrowing and that bankruptcy is triggered when the cash balance hits zero, I show that for low levels of debt, shareholders prefer to minimize cash-flow volatility I also work out the critical face value of the debt above which shareholders are risk-seeking rather than risk-avoiding In short, bankruptcy costs being borne by equity mitigates shareholders' desire for risk.

Corporate political connections, agency costs and audit quality

Purpose – The effect of political connections of agency costs has attracted considerable research attention due to the increasing recognition of the fact that political connection influences corporate decisions and outcomes. This paper aims to explore the association between corporate political connections and agency cost and examine whether audit quality moderates this association. Design/methodology/approach – A data set of Bangladeshi listed non-financial companies is used. A usable sample of 968 firm-year observations was drawn for the period from 2005 to 2013. Asset utilisation ratio, the interaction of Tobin’s Q and free cash flow and expense ratio are used as alternative proxies for agency costs; membership to Big 4 audit firms or local associates of Big 4 firms is used as a proxy for audit quality. Findings – Results show that politically connected firms exhibit higher agency costs than their unconnected counterparts, and audit quality moderates the relationship between political connection and agency costs. The results of this paper suggest the importance of audit quality to mitigate agency problem in an emerging economic setting. Research limitations/implications – The findings of this paper could be of interest to regulators wishing to focus regulatory effort on significant issues influencing stock market efficiency. The findings could also inform auditors in directing audit effort through a more complete assessment of risk and determining reasonable levels of audit fees. Finally, results could inform financial statement users to direct investments to firms with lower agency costs. Originality/value – To the knowledge of the authors, this study is one of the first to explore the relationship between political connection and agency costs, and the moderating effect of audit quality of this relationship.

Tourism and economic development in a cash-in-advance economy

This paper examines the impact of tourism on welfare in a cash-in-advance economy. As a result of the expansion in tourism, the price of the non-traded good increases. This gives rise to a terms-of-trade improvement. However, the cash-in-advance constraint causes a distortion in consumption. For tourism demand, where the gain from the terms-of-trade improvement dominates (does not dominate) the loss from the consumption distortion, tourism is welfare-improving (welfare-reducing). A similar condition for welfare improvement (deterioration) holds for a model of capital inflow and endogenised tourism.

Extending construction linkage measures by the consideration of the impact of capital

Construction linkage is a well-established research field. However, a significant limitation in previous linkage research is that the flow of capital goods is not addressed. Using the OECD input-output tables, this research first generates a new input-output model considering capital as an intermediate factor. Using the new model, the construction linkages are recalculated and investigated in order to evaluate further the role of construction in national economies. The findings verify that traditional construction linkages were extremely underestimated in previous research. Furthermore, the effect of capital on construction shows a declining trend over the examined period. After considering the effect of capital, most values and rankings of backward and forward linkages show a decreasing trend, which confirms the declining role of the construction sector with economic maturity.

Linkage measures of the real estate sector considering the effect of capital

A significant limitation in previous linkage relevant research is that the flow of capital goods is not addressed. Using the OECD input-output tables, this research first generates a new input-output model considering capital as an intermediate factor. Using the new model, the real estate linkages are re-calculated and investigated in order to evaluate appropriately the impact of the real estate sector on national economies. The findings verify that the linkages of the real estate sector were extremely underestimated in previous research. A correct linkage measure of the real estate sector can contribute to produce correct information corresponding to the sectors responsible for the economic growth during the period under study and provide substantial contributions towards guiding the appropriate strategies for future economic development.

Payoff, capital and teachers : education policies of the 90s

Although education remains in the flux of change, reviewing the trends in educational reforms in the last decade provides opportunity to learn from the past with a view to improving the educational strategies guiding reforms in the future. As globalisation has become more consolidated in education policy, investigating how particular ideas about globalisation inhabited policy and established over time, presents ways of addressing and challenging the assumptions about education and globalization in the 90s and the fall out from these ideas. Using evidence based policy research, this paper explores how educational policies from OECD, UNESCO and the World Bank coalesced with certain notions of globalisation that strategically guided educational reforms. An analysis of education-globalisation nexus in the policies of OECD, UNESCO and the World Bank evidences the distinct character and agenda of each agency. By focusing on textual evidence, in a range of education policy from the 90s, the paper discusses how policy consolidated particular ideas about globalization and presented ‘simple’ recipes for educational change. When reviewing the 90s, the relationship between education and global change shows that OECD policy emphasized education as a social and individual payoff, World Bank policy focused on education creating certainty enabling the free flow of capital, and UNESCO policy problematised globalization and focused on the importance of teachers as a way to create stability in education during the paradoxical times.

A-Reit price responses to cash rate changes

With the rapid increasing number and assets of A-REITs, there has been an urgent need to study the relationship between the changes of cash rates and the A-REITs returns. This study investigates whether there were relationships between Australian-Real Estate Investment Trusts stock returns and policy interest rate changes in the past decade by using event study with a multivariate regression model. The findings indicate that cash rate changes have no significantly positive or negative influence on the equity A-REIT stock prices. A series of successive cash rate changes do not take a continuous and dramatic effect on the equity A-REIT stock prices in each economic cycle. Moreover, the A-REITs with relatively smaller assets show more significant fluctuation to the changes of cash rates, and the A-REITs owning more than $ 10 billion in capital assets have relatively steady stock prices. Overall, the findings from this research lead to a call for comprehensive research into various areas in order to ascertain the determinants of A-REIT price changes.

A resource-based view of small export firms' social capital in a Southeast Asian country

This study empirically examines the social capital that facilitates the flow of export knowledge, thereby supporting the entrepreneurial stance of small export firms. By applying the VRIO (value, rarity, inimitability and organisation of firm resources) framework to the resource-based view (RBV) of the firm, this study suggests that superior performance is a function of resources that are valuable, rare, inimitable and sufficiently organised to develop and sustain the firm's competitive advantage. This study argues that small, resource-constrained export firms in a developing economy are able to adopt entrepreneurial tactics and reap positive rates of return by exploiting their relational capital to acquire export knowledge. A survey of 175 small export firms in the Philippines was conducted, and the data were analysed using structural equation modelling. The results suggest positive relationships between the firm's social capital and export knowledge. Export knowledge is associated with entrepreneurial orientation, which then correlates with export performance.

Erotic capital, popular pedagogy, and healthy adolescent female sexuality

The sexualization of the female body in contemporary media has created considerable anxiety about its impact on girls. Much of the resulting research focuses on the influence of visual media on body image and the flow-on effects for girls' health. Rather less attention is paid to the pedagogical role of popular romance fiction in teaching girls about their sexuality. Given the pronounced increase in eroticized fiction for girls over the past decade, this is a significant oversight. This article applies Hakim's (2010) concept of erotic capital to two chick lit novels for girls. The elements of erotic capital—assets additional to economic, cultural and social capital—are used to explore the lessons these novels teach about girl sexual subjectivities and sociality in a sexualized culture.