An exploratory survey of Australia's informal venture capitalists : a predicate to theory building in the context of international angel research

In Australia, as it is all over the world, finding and acquiring equity capital is one of the major problems facing entrepreneurs who are starting or growing entrepreneurial ventures. The informal venture capital market, made up of high net worth non-institutional private equity investors (or ‘business Angels’) provides risk capital directly to new and growing businesses and has been shown to be considerably more significant than institutional providers as a source of finance for entrepreneurial businesses. Building upon and comporting with Angel research undertaken overseas, this study generated and evaluated data resulting from an investigation of Australian business Angels which focused upon three primary research questions: (i) Who are Australia's Informal Venture Capitalists (Business Angels)? (ii) How do they behave? (iii) What are their investment criteria? Analysis of answers resulting from a survey of 36 carefully screened respondents produced a descriptive profile, depicted in twelve key graphs, of Australian Angels' identifying characteristics, patterns of investment behaviour and investment criteria. The study initiates Australian Angel research into the developing international continuum of formal Angel research and can serve as the generator of empirically sensible hypotheses for future research and theory development.

The pricing of infrastructure initial public offerings : evidence from Australia

This paper explores first-day returns on infrastructure entity initial public offerings (IPOs) in Australia from 1996 to 2007. While a good deal has been written on the first-day returns of industrial and mining company IPOs and Real Estate Investment Trust IPOs, first-day returns of infrastructure entity IPOs have yet to be reported in the literature. The study uses ordinary least squares regression analysis to identify factors that might influence the percentage first-day returns theoretically available to investing subscribers and factors that might influence the aggregate amount of money left to subscribers by issuers. The study finds that first-day returns, on average, are not significantly different from zero. There is evidence, however, that suggests higher dividend yields and higher percentage direct costs of capital raising influence these first-day returns. The study also finds that infrastructure entity IPOs that seek to raise more equity capital leave less money on the table for subscribing investors.

A duration analysis of the time from prospectus to listing for A-REIT IPOs

Dimovski (2010) finds that the time from prospectus registration to listing is significantly positively related to the amount of underpricing amongst 45 Australian Real Estate Investment Trust (A-REIT) initial public offerings (IPOs) from 2002 to 2008. This makes the understanding of the time from prospectus registration to listing for A-REITs an important matter. This study analyses 82 A-REIT IPOs from 1994 to 2008 using a Cox proportional hazard model to analyse the duration from prospectus date to listing date. The study finds that A-REIT IPOs issued after 2000 listed more quickly, as did those A-REITs that were underwritten and also those that sought to raise larger amounts of equity capital. Those that proposed higher debt to assets ratios in their prospectuses listed more slowly. When the data is partitioned into 1994 to 1999 and 2002 to 2008 groupings, earlier A-REIT IPOs listed more quickly if they were larger while in the more recent group, those that had higher debt to asset ratios took longer to fill their subscriptions.

The level of representative underwriting and the underwriting costs of REIT SEOs

Purpose – The purpose of this paper is to investigate factors influencing the underwriting discount for US Real Estate Investment Trust (REIT) Seasoned Equity Offerings (SEOs).

Design/methodology/approach – The study provides new evidence on determinants of underwriting discounts with a comprehensive dataset of 783 US REIT SEOs from 1996 until June 2010. Ordinary least squares regressions are performed to estimate the effect of the level of representative underwriting along with other potential factors on underwriting discounts.

Findings – The study complements the well-documented notion of the economies of scale in SEO underwriting discounts. The equally (value) weighted underwriting discounts averaged 4.21 per cent (4.10 per cent) with a declining trend over time. The findings of this study show the statistically and economically significant negative effect of the level of representative underwriting on the underwriting discounts, as well as the significance of the structure of underwriting syndicate in determining the underwriting discounts. The findings suggest that issuers can minimize the costs of raising secondary equity capital by optimally allocating the underwriting business among the underwriters.

Originality/value – This paper adds to the international REIT SEO literature by exploring new evidence behind underwriting discounts. The study includes data before and after the REIT Modernization Act 1999 and during the recent global financial crisis period.

Initial public offerings of energy companies

This study analyses 158 energy company initial public offerings (IPOs) in Australia from January 1994 to December 2010, including the period of the global financial crisis (GFC). The study finds that energy company IPOs had an average 22.0 % underpricing and that those IPOs that sought to raise more equity capital and engaged underwriters had lower underpricing. There is also evidence that suggests energy company IPOs that offered options to their underwriters had higher underpricing returns, effectively cancelling the lower underpricing effect of the underwriting itself. The energy IPOs that raised equity capital after the 2007/8 global financial crisis do not appear to have offered on average, significantly different underpricing returns to their investors compared to those energy IPOs that raised capital prior to this GFC period. The findings of this study offer insights for issuers who seek to lower underpricing, for underwriters involved in the capital raising and for investors who are looking to invest in Australian energy company IPOs.

A-REIT rights issues

Purpose – This is the first REIT paper to seek to empirically examine potential influencing factors on the discounts and underwriting fees of Australian REIT rights issues.

Design/methodology/approach – Using a methodology similar to Owen and Suchard, and Armitage, a sample of 62 A-REIT rights issues during 2001-2009 is analyzed. A variety of potential factors influencing discounts and underwriting fees are explored.

Findings – Over A$20 billion was raised by A-REIT rights issues during 2001-2009 (this around three times that raised through A-REIT initial public offerings during the same period). The mean offer price was discounted around 9.5 percent from the current market price and underwriting fees averaged 2.9 percent of gross proceeds raised – both substantially less than for industrial rights issues. The standard deviation of daily returns for the past year appears to influence the percentage discount offered to subscribers. This volatility was particularly noticeable in 2008 and 2009, during the global financial crisis, where new issues were discounted substantially so as to raise equity to repay debt. This historical risk variable appears paramount in determining the discounts to subscribers and fees to underwriters.

Practical implications – A-REITs seeking to minimize the discounts offered to subscribers and to minimize their underwriting costs with rights issue equity capital raisings must first minimize their share price volatility.

Originality/value – This paper adds to the international costs of capital raising literature of REITs by examining such costs with A-REIT rights issues and is the first paper to examine factors influencing these costs.

Career progression, human capital and pay equity in Australian public sector labour markets

This study uses data from the Victorian Public Sector Census 2004 to identify the extent of equity in pay and career progression (promotion). A system of three equations is developed to capture the endogeneity between human capital and promotion and the interdependence between promotion, pay and human capital. The results indicate that there are substantial differences in the average wages earned by public sector employees in different Equal Employment Opportunity (EEO) groups. While some of these differences arise from factors beyond the control of the public sector employers, others arise from bias in the public sector employment system and procedures. The earnings of individual employees in the public sector are determined in a systematic way by the wage structures in the different sub-sectors, the skill base of the employee on recruitment, sub-sector specific promotion rates, acquisition of formal and informal training and the apparent bias within recruitment and promotion systems in dealing with particular groups. The apparent bias of recruitment and promotion systems is complex in makeup and varies within EEO groups as well as between EEO groups. Most of the difference in pay across employees can be explained as an outcome of individual choice and labour market conditions external to the public sector. After adjusting for sectoral wage differences, skill base when recruited, sectoral promotion rate differences, experience in the public sector, whether individuals are employed on a full-time or part-time basis and individual training decisions, the statistical evidence is consistent with the finding that public sector recruitment and promotion systems tends to be biased, on average, against females and those from culturally diverse backgrounds. Achievements in formal education are important for salary progression. This is particularly the case for women. The main drivers of participation in formal education were employer support in both financial and non-financial terms. Promotion rates were important factors in explaining wage differences. Women tended to receive slightly fewer promotions than men, but women received, on average, greater rewards for each promotion.

Towards a southern theory of student equity in Australian higher education : enlarging the rationale for expansion

Student equity in Australian higher education is a numbers game. While university student recruitment departments focus on ‘bums on seats’, equity advocates draw attention to which bums, in what proportions and, more to the point, which seats, where. But if the counting of ‘bums’ is crude, so is the differentiation of seats. Just distinguishing between courses and universities and scrutinizing the distribution of groups is a limited view of equity. This paper proposes an expanded conception for student equity and an enlarged regard for what is being accessed by students who gain entry to university. Drawing on Connell’s notion of ‘southern theory’, the paper highlights power/knowledge relations in higher education and particularly for ‘southerners’: those under-represented in universities, often located south of cut-off scores, and whose cultural capital is similarly marginalised and discounted. The paper concludes that taking account of marginalized forms of knowledge requires thinking differently about what higher education is and how it gets done.

Basel risk weights, asset correlations, and book-to-market equity: evidence from Asian countries

We examine the effect of firm book-to-market equity values (BE/ME) on asset correlations which play an important role in determining risk weights under the current Basel capital requirements. Using firms in China, Hong Kong, Japan, Korea, Singapore and Taiwan over a sample period from 1988 to 2013, we find that BE/ME has a negative effect on asset correlations. This suggests a role for BE/ME as an additional factor in determining asset correlations, and thus risk weights, also potentially reducing incentives for regulatory capital arbitrage.