Short-term debt maturity, monitoring and accruals-based earnings management

Most prior studies assume a positive relation between debt and earnings management, consistent with the financial distress theory. However, the empirical evidence for financial distress theory is mixed. Another stream of studies argues that lenders of short-term debt play a monitoring role over management, especially when the firm's creditworthiness is not in doubt. To explore the implications of these arguments on managers' earnings management incentives, we examine a sample of US firms over the period 2003-2006 and find that short-term debt is positively associated with accruals-based earnings management (measured by discretionary accruals), consistent with the financial distress theory. We also find that this relation is significantly weaker for firms that are of higher creditworthiness (i.e. investment grade firms), consistent with monitoring benefits outweighing financial distress reasons for managing earnings.

Recycled effluent irrigation in vineyards : an Australian case study. I. issues and monitoring

The viticultural industry is becoming an increasingly significant part of the Australian agricultural sector, with gross earnings of over $4 billion in 2002. Expansion of the industry in the last decade has been rapid, however its heavy reliance on irrigation has resulted in further expansion in many wine growing regions being limited by the availability of water. This problem is not confined to the viticultural industry, with ever increasing pressures on water resources worldwide. As demands for water continue to rise, new strategies to meet demands must be adopted. One of the strategies being increasingly employed is the recycling of waste waters for a number of applications such as irrigation and industrial uses. The use of recycled water for vineyard irrigation provides a number of benefits. Among them are the reduced demands on potable supplies, reduced waste discharges to surface waters, and the opportunity for expansion of production. Recycled waters however, contain constituents which have the potential to cause deleterious effects to both production and the environment. Therefore, the use of recycled water for irrigation requires targetted monitoring and management to ensure the long-term sustainability of both the vineyard and the surrounding environment. Traditional monitoring techniques including water quality monitoring and soil testing can be complimented by new technologies and techniques which provide large quantities of information with relatively less labour and time. Such techniques can be used to monitor the vineyard environment to identify impacts arising from management practices, allowing vineyard managers to adjust management for sustainable production

Workplace "bargaining" and the wages/working time nexus: counting the cost of decentralisation

The impact of deregulation on dispersion of earnings in Victoria has been
acknowledged in the findings of the recent task force enquiry into industrial relations in Victoria. This paper argues that the link between hours worked and rates of pay has played a significant role in this increased dispersion. Drawing upon detailed analysis of hours and wages in Victorian agreements, data is presented on declining take-home pay flowing from the loss of penalty rates. This, we argue, is attributable to
the lack of substantive and procedural protections available to Victorian workers under schedule 1A of the Workplace Relations Act, and formerly under the Victorian Employee Relations Act, 1992. We contrast these findings with collective agreements trading off penalty rates certified by the Australian Industrial Relations Commission, and Australian Workplace Agreements approved by the Office of the Employment
Advocate. We conclude by suggesting there is a scale of fair outcomes attached to the wages/hours trade-off, directly attributable to the various institutional mechanisms now influencing Australian wage determination.

Do you really want to ask an underwriter how much money you should leave on the table?

This paper analyses whether the owners of companies seeking to list will leave less money on the table if underwriters are employed to price and market the issue. Our findings indicate that limited liability and Industrial company initial public offerings (IPOs) that have used underwriters have left
more money on the table than those not employing underwriters. Not only is there a direct cost in employing an underwriter but this study suggests there might also be an indirect cost. We also find that a positive forecast earnings per share yield may be useful in reducing the amount of money left on the table.

Promise more, leave less

Following Kim and Ritter (1999) who find that earnings forecasts provide more accurate valuations of IPOs, this paper analyses whether the owners of companies seeking to list will leave less money on the table if positive dividend per share (DPS) yield forecasts are made in the prospectus. Our findings indicate that DPS yield forecasts by directors of Industrial company IPOs have been an important ingredient in the amount of money left on the table. A similar result is found for Limited Liability IPOs and those that do not offer options to subscribers to buy more shares. The offer of an operational dividend reinvestment plan in the prospectus does not appear significant in reducing the amount of money left on the table.

Empirical evidence from the corporate collapse literature suggesting re-examination of accounting standards in relation to valuation of assets

This paper examines the recent spectacular corporate collapses of Parmalat in Europe, Enron and WorldCom in the USA and HIH in Australia and argues for a re-examination of corporate governance regulations, particularly in relation to accounting standards regarding the valuation of assets. The recommendation that is put forward in this regard is based upon empirical evidence arising from further examination of the empirical results in (Hossari and Rahman, 2004). Specifically, the recommendation is based upon the realization that, among the 48 financial ratios across the 50-plus refereed studies, five financial ratios, all of which contained assets as one of the variables, were a relatively robust indicator of corporate collapse. The five ratios are: Net Income/Total Assets, Current Assets/Current Liabilities, Total Liabilities/Total Assets, Working Capital/Total Assets, and Earnings Before Interest and Taxes/Total Assets. This paper suggests that it's not the failure of the corporate collapse prediction models, rather it's the erosion of the reliability of some key input data, namely assets and the valuation thereof, that is largely responsible for the apparent failure of these models in capturing impending collapses, such as those that we witnessed in the recent past. Such empirical findings support the argument that assets are soft targets for misrepresentation, because of the leeway granted in accounting standards with regards to their valuation.

Can the use of foreign currency derivatives explain variations in foreign exchange exposure? Evidence from Australian companies

We investigate the role of foreign currency derivatives (FCD) in alleviating foreign exchange rate exposure of Australian firms. While there is some evidence that the use of FCD reduces the level of ex-post short-term exposure, such an effect is absent with regard to the degree of foreign operations. Our results support the view that FCDs are used to hedge existing exchange rate exposures and that Australian firms, generally, are extensively exposed to currency fluctuations in the long run. While monthly exposure appears to be a function of a firm's size and financial hedging, exchange rate exposure of shorter horizons (1 and 3 months) appears to be negatively related to a firm's price earnings ratio (proxying growth opportunities)—thereby supporting the ‘underinvestment’ hypothesis. Further, the exposure of longer horizons (12 and 24 months) is positively related to a firm's liquidity, supporting the view that liquidity is a substitute for hedging.

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.

Community-based study on knowledge, attitude and practice on the mode of transmission, prevention and treatment of the Buruli ulcer in Ga West District, Ghana

Buruli ulcer disease (BUD), a devastating tropical disease caused by Mycobacterium ulcerans, occurs in more than 80% of the administrative districts of Ghana. To elucidate community perceptions and
understanding of the aetiology of BUD, attitudes towards Buruli patients and treatment-seeking behaviours, we conducted a survey with 504 heads of households and seven focus group discussions in Ga West District, Ghana. Although 67% of participants regarded BUD as a health problem, 53% did not know its cause. Sixteen per cent attributed the cause to drinking non-potable water, 8.1% mentioned poor personal hygiene or dirty surroundings, and 5.5% identified swimming or wading in ponds as a risk factor. About 5.2% thought that witchcraft and curses cause BUD, and 71.8% indicated that BU sufferers first seek treatment from herbalists and only refer to the hospital as a last resort. The main
reasons were prospects of prolonged hospital stay, cost of transport, loss of earnings and opportunity associated with parents attending their children’s hospitalization over extended period, delays in being
attended by medical staff, and not knowing the cause of the disease or required treatment. The level of acceptance of BUD sufferers was high in adults but less so in children. The challenge facing health workers is to break the vicious cycle of poor medical outcomes leading to poor attitudes to hospital treatment in the community. Because herbalists are often the first people consulted by those who contract the disease, they need to be trained in early recognition of the pre-ulcerative stage of Buruli lesions.

Directors' remuneration and performance in Australian banking

This paper explores the relationship between directors' pay and performance within Australian banking, using panel data for the 1992-2005 period. The relationship between CEO pay and performance is investigated also. Several earnings models are estimated, using different dependent variables, alternate measures of performance and different estimation techniques. The results indicate an absence of a contemporaneous relationship between directors' pay and bank performance, and no association with prior year performance. However, there is a more distant pay-performance relationship, with total directors' pay having a robust positive association with earnings per share lagged two years, as well as with ROE lagged two years. The other key determinants of directors' pay in Australian banking are bank specific managerial policies, lags in the administration of pay, bank size, directors' age and directors' stock ownership. In contrast to total directors' pay, the evidence confirms a strong positive and direct association between CEO remuneration and prior year bank performance. The pay-performance association is stronger and more direct for CEO remuneration than it is for total directors' remuneration. The responsiveness of CEO pay with respect to bank performance appears to have increased over time.

Optimal educational choice and redistribution when parental education matters

Higher education plays an important role in determining lifetime earnings. In turn, the decision to become educated depends to a large extent on family characteristics, such as wealth and education. In this paper, we focus on the interaction between fiscal policies and educational choices when parental education matters. We derive optimality conditions for a linear income tax and a lump‐sum subsidy for education in a dynamic framework in which generations are linked by educational background. The factors that determine their sign and magnitude include concerns for redistribution, efficiency, and the educational externality on future generations.

The development impact of remittances to Nicaragua

Workers' remittances represent a resource flow from rich to poor countries. The global value of remittances has risen sharply to over US$100 billion a year. This represents the second largest external income source for developing countries behind foreign direct investment (FDI), and far outstrips official development assistance (ODA) (Orozco 2003a). Remittances to developing countries are becoming increasingly important as other sources of external income decline. The impact of remittances on development, however, is inadequately reflected in the literature. Latin America and the Caribbean (LAC) is the world's largest remittance-receiving region. With 9 per cent of the world's population, the region receives approximately 32 per cent of the world's remittances. It is appreciably greater than tourist revenues in many countries, and in five countries in this region, remittances account for over 10 per cent of GNP (World Bank 2003). Within LAC, Nicaragua stands out from other countries. While the US dollar value of remittances to Nicaragua, estimated at US$610 million in 2001, is quite modest compared with the US$10 billion flowing into Mexico, for example, the relative volume of this resource compared with other income flows, and the potential for the country's development, makes Nicaragua's case exceptional. Representing almost 24 per cent of its GNP, remittances to Nicaragua have a significant social and economic impact. The value of known remittances is greater than total export earnings, on a par with the country's ODA, and almost five times that of FDI. As such, remittances currently represent the second largest single resource flow into the country. This is a recent phenomenon.

Directors' remuneration and performance in the Australian banking sector

This paper explores the links between directors' pay and performance within the Australian banking sector using panel data for the 1993-2004 period. The links between CEOs' pay and performance is investigated also. Several earnings models are estimated and different estimation techniques are used. The results indicate that there is no link between directors' pay and firm performance with a one year lag. However, there is a more distant payperformance link, with directors' pay influenced by shareholders' returns with a three year lag. The other key determinants of directors' pay in the Australian banking sector are bank specific managerial policies, lags in the administration of pay, bank size and board composition. A clear and strong positive and direct association between CEO remuneration and performance is established.

e-marketing positioning your law practice

Legal practices should measure aspects of their corporate reputation including image, reputation attributes and outcomes to be able to implement a successful marketing communication campaign - audience measurement allows information to be gathered about reach and frequency - building corporate websites which reach your target audience will increase revenue and earnings.

Changing journalism for the likely present

Media convergence and newsroom integration have become industry buzzwords as the ideas spread through newsrooms around the world. In November 2007 Fairfax Media in Australia introduced the newsroom of the future model, as its flagship newspapers moved into a purpose-built newsroom in Sydney. News Ltd, the country’s next biggest media group, is also embracing multi-media forms of reporting. What are the implications of this development for journalism? This paper examines changes in the practice of journalism in Australia and around the world. It attempts to answer the question: How does the practice of journalism need to change to prepare not for the future, but for the likely present.

Early in November 2007 The Sydney Morning Herald, the Australian Financial Review and the Sun-Herald moved into a new building dubbed the ‘newsroom of the future’ at One Darling Island Road in Sydney’s Darling Harbour precinct. Phil McLean, at the time Fairfax Media’s group executive editor and the man in charge of the move, said three quarters of the entire process involved getting people to ‘think differently’ – that is, to modify their mindset so they could work with multi-media.

The new newsroom symbolised the culmination of a series of major changes at Fairfax. In August 2006 the traditional newspaper company, John Fairfax Ltd, changed its name to Fairfax Media to reflect its multi-platform future. In March 2007 Fairfax launched Australia’s first online-only daily publication in Queensland, brisbanetimes.com.au. In May 2007 Fairfax completed its merger with Rural Press to become the biggest media company in Australasia, with annual revenues of about $2.5 billion and market capitalisation of about $7 billion. Two months later Fairfax got even bigger when it acquired at least one radio station in all Australian capital cities plus television studios when it bought Southern Cross Broadcasting. Fairfax is expected to bid for one of the two digital television licences made available by the changes to media ownership laws promulgated in May 2007.

The aim in moving Fairfax from a print to a multi-platform company was to reach as large an audience as possible. ‘We have a total readership in print of over 4 million per day and online of over 5 million per month’, CEO David Kirk said at the time of the Rural Press merger. ‘Our brand of quality, independent, balanced journalism will serve and support more communities than ever’ (Kirk 2007). A few months earlier chairman Ron Walker had written in the company’s annual report: ‘Fairfax is evolving into a truly digital media company’ (2006: 2). Within five years Fairfax would be a significantly bigger Internet company that distributed its content ‘over more media’, Kirk wrote in the same report (2006: 5).

Kirk developed a three-pronged strategy. The first part of the strategy involved the need to ‘defend and grow our newspaper publishing businesses’ – that is, to consolidate and develop the existing newspapers, whose circulations were holding steady during the week and improving on Saturdays. The second part involved plans to ‘accelerate the revenue and earnings of our digital business’. The third part was ‘to build a digital media company for the twenty-first century’ (Fairfax annual report 2006: 3). In June 2007 Kirk appointed Tim Mannes project leader for the Fairfax Media-Rural Press integration. ‘The purpose of the integration work is to bring the two companies together and build what is truly Australasia’s leading media company’, Mannes wrote in a memo to all staff on 7 June 2007. ‘It’s vital throughout this process that we maintain continuity and momentum and protect the interests and needs of our customers’ (2007: 1).

The business model appears attractive. Kirk said Fairfax’s increased scale and diversity would mean it relied less on classified lineage advertising in major metropolitan newspapers, so it could ‘rapidly develop the best online response to changing media advertising patterns’. In the two years to 2006, online’s contribution to Fairfax’s profits had grown from 1 per cent to 14 per cent with ‘much more to come’. Online’s share of the national advertising pie had grown from 2 per cent in 2002 to 10 per cent in 2006 (Beverley 2007: 6) and had jumped to 14 per cent in 2007. Analysts said they were happy with Fairfax’s move ‘from a newspaper company to a media company’ and banks such as Credit Suisse upgraded their profits forecast (AFR 19 September 2007: 37).

Planning for the move to One Darling Island Road in Sydney’s Darling Harbour started early in 2006. Fairfax CEO David Kirk took personal responsibility. He and chairman Ron Walker visited integrated sites around the world, along with a group of editorial bosses. The favoured site was The Daily Telegraph in London, which embraced convergence from June 2006. CEO Murdoch McLennan hired a consultant from Ifra, Dr Dietmar Schantin, director of the Newsplex, to facilitate the move from mono-media to multi-media at The Telegraph. Schantin said change was less about new technologies and more about altering the established mindset. The focus must be on the audience: ‘The whole idea of audience orientation seems to be quite new for some newspapers. In the past it was more “we know what is good for our readers and so we distribute the content”.’ Newspapers were a service industry whose service was information and news, he said. Newspapers had to learn to ‘serve’ its audience with the things the audience wanted to know, on any appropriate platform. ‘We start from the audience. What they want is a very important point. That does not mean that a newspaper should just do what the audience wants. The newspaper [also] needs to stick
to its core values’ (Luft 2006, Coleman 2007: 5).

Tom Curley, CEO of the world’s biggest newsgathering organisation, Associated Press, gave an important speech to the annual Knight-Bagehot dinner in New York in November 2007. The news industry had come to a fork in the road and needed to take bold steps to secure the audiences and funding to support journalism’s essential role for both the economy and democracy, he said. Otherwise the media industry would find itself ‘on an ugly path to obscurity’. He similarly emphasised the need to serve the audience: ‘Our focus must be on becoming the very best at filling people’s 24-hour news needs. That’s a huge shift from the we-know-best, gatekeeper thinking. Sourcing, fact gathering, researching, storytelling, editing [and] packaging aren’t going away’
(Curley 2007).

Kirk appointed a ‘newsroom of the future’ committee from editorial (reporters and photographers), IT and HR. The committee initiated a study tour by editorial executives of leading integrated and converged newsrooms in the UK and the US in April 2007. This became known as the ‘Tier 1’ course and involved the editor and deputy editor of The Age, and the news editor of The Sydney Morning Herald. The Herald’s editor went to the annual conference of the World Association of Newspapers in Cape Town, South Africa in June 2007 because that event featured convergence as one of its main themes (PANPA Bulletin June 2007: 6). The committee designed a two-day awareness course for senior editorial managers, known as ‘Tier 2’, that was run in Sydney in July 2007. The ‘Tier 3’ program for all editorial staff started in August 2007 and this ‘multi-media awareness program’ continued until the end of the year. A ‘Tier 4’ course for about 10 per cent of editorial staff (about 40 journalists), where they learned a range of multi-media skills, was scheduled to start after the Beijing Olympics in 2008. The author facilitated most of the Tier 2 and 3 courses.

The Tier 3 and 4 courses have profound implications for journalism education in Australia because they represent the start of major changes to how journalists work in Australia. The process reflects evolution in newsroom practices around the world. In November 2006 Ifra, the international media research company, asked newspaper executives worldwide about their priorities for 2007. The survey attracted 240 responses from 43 countries and results appeared in January 2007. Integration, editorial convergence and cross-media strategies attracted the most attention. Four in five executives rated it one of their top priorities, and half made it their main priority in terms of allocating ‘significant’ funds (Ifra 2007: 34). Ifra repeated the survey in November 2007 and published the results in January 2008. Expanding web strategies was first on the list for 2008, just ahead of editorial convergence strategies, which topped the list in 2007. Improving video and audio content jumped 14 places, and mobile phone strategies leapt 9 places between 2007 and 2008 to be near the top of the list (Ifra 2008: 8).