How prepared was Australia for international financial reporting standards? The case of listed firms

We measure the preparedness of listed firms for international financial reporting standards (IFRS) by changes in explanations from Australian GAAP to IFRS between the half-year and annual accounts. About one-third of sample firms changed their explanations for earnings, cashflows or equity by averages of about −7%, 67% and 3% respectively. Most changes are less than 5% for earnings and equity, and tax is the item most commonly revised. More profitable firms and firms with more reconciling items are most likely to change an explanation. In a telephone survey of chief financial officers, 70% revealed that the change followed an incorrect application of an accounting rule in the half-year accounts.

Toward high growth enterprise

The disproportional impact of high growth firms on economies around the world has made them a natural focus of policy attention in New Zealand. That is what is behind New Zealand's ICT taskforce recommendations in 2003 to grow 100 ICT companies each doing over US$ 100 million sales per year by 2012 (a huge accomplishment for a small economy). Those companies could help New Zealand's foreign exchange earnings and jobs, not to mention improved health care, better resourced schools and tertiary institutions, debt reduction and increased savings, and improved standard of living (ICT Taskforce, 2003).

Accounting convergence of intangibles : value relevance of R & D accounting treatment

The rapid globalization of markets has resulted in further acceleration of the worldwide convergence of accounting standards, including the development of high-quality and globally consistent accounting standards for both domestic and cross-border financial reporting. Prior studies report that earnings value relevance of U.S. companies is decreasing, and the decline is partially attributable to the immediate expensing of intangibles, like research and development (R&D). Being one of the areas of divergence, accounting for R&D was highlighted as one of the seven short-term convergence projects by the FASB and IASB. Australia's adoption of IFRS in 2005 presents an empirical setting to evaluate the value relevance of different accounting treatments for R&D, and ultimately assist financial accounting standard setters in the U.S. and abroad in finding an appropriate accounting treatment for R&D.

Asymmetric recognition of good and bad news at Malaysian capital market : a pre and crisis analysis

The aim of this paper is to analyze the asymmetric recognition of good and bad news on reported earnings of Malaysian-listed firms. The study uses both descriptive and regression analyses to ascertain whether there is a contemporaneous relationship between news (good and bad) and reported earnings. The analysis is based on a sample of 150 firms listed on the Bursa Malaysia Index over a period of 10 years, from 1990 to 2000. Two regression models were adopted based on Basu (1997) and Giner and Rees (2001). The first model aims to capture asymmetric recognition of good and bad news into reported earnings while the latter model is developed to capture both asymmetric recognition of information shock and permanent earnings effect on contemporaneous earnings. The evidence from this study reported the steady increase in earnings per share till 1997. However, a drastic decline was observed for the period 1997 to 1999 because of Asian financial crisis. The findings from the regression model one suggested that the asymmetric recognition of good news was more prominent during the good time compare to bad time and vice versa. The findings from model two also suggested that autoregressive effect of permanent effect was very prominent both for crisis and non crisis periods.

Determinants of tourist expenditure in Fiji : a cointegration approach

Tourism is Fiji's largest industry in terms of foreign exchange earnings and employment creation. The industry earns around F$600 million per annum in foreign exchange, employs around 40,000 people, and tourist expenditure per capita is valued at around F$671. On the basis of this contribution, the industry is seen as a catalyst for economic development in Fiji; hence, it is imperative to understand the behavior of the industry. This article focuses on examining the determinants of tourist expenditure in Fiji. Using cointegration analysis and error correction models, the article finds that in the long run, real GDP in the country of origin impacts tourist spending in Fiji positively while prices and transport costs (airfares) have a negative effect. In the short run, coups d'êtat impact tourist expenditure negatively. It is envisaged that these results will help Fiji's policy makers and tourism industry stakeholders to understand the industry better.

Does tourism Granger causes economic growth in Fiji?

Tourism is Fiji's largest industry in terms of export earnings and employment. In this paper we investigate the nexus between tourism receipts and real gross domestic product (GDP) in Fiji. Specifically, we test whether the two variables are cointegrated and using Granger causality tests we establish the direction of causation between the two. We find that there is a cointegration relationship when real GDP is the dependent variable. On the direction of causation we find that in the short-run real GDP Granger causes tourism receipts while in the long-run tourism receipts Granger cause real GDP.

Crime rates, male youth unemployment and real income in Australia: evidence from Granger causality tests

This article applies Granger causality tests to examine the relationship between seven different categories of property crime and violent crime against the person, male youth unemployment and real male average weekly earnings in Australia from 1964 to 2001 within a cointegration and vector error correction framework. It is found that fraud, homicide and motor vehicle theft are cointegrated with male youth unemployment and real male average weekly earnings. However, there is no evidence of a long-run relationship between either break and enter, robbery, serious assault or stealing with male youth unemployment and real male average weekly earnings.

Optimal redistribution when educational background matters

Higher education plays an important role in determining individuals lifetime
earnings. In turn, the decision to become educated depends to a large extent on innate ability and on family characteristics, including both family
wealth and educational background. In this paper, we abstract from family
income differences to concentrate on the effects of fiscal policies on the
decision to undertake higher education when the educational background
matters. In a dynamic framework, where successive generations are linked by educational background, we consider a government that uses both linear income taxation and a lump-sum subsidy to education. Conditions for
optimality of each policy are derived. The factors that determine the sign
and magnitude of the tax rate and the subsidy are identified and include
concerns for redistribution, efficiency and the educational externality on
future generations

Achieving growth in the Pacific islands : an introduction

The Small Island Developing States (SIDS)1 in the Pacific, spread out over an area of 30 million square kilometres of ocean, and home to over 9 million people, face a complex and unique set of development challenges. As small, highly open economies they are particularly susceptible to external shocks, including fluctuations in import prices and export earnings in particular. Remoteness from major ports and export markets, low levels of connectivity with the outside world and susceptibility to natural hazards further complicate matters and have resulted in the Pacific islands being amongst the most vulnerable economies in the world. In spite of their increasing integration into global markets, most face further challenges owing to very limited absorptive capacities, limited resources, inadequate technology, lack of infrastructure and poor economic management and institutional capabilities. As a consequence, economic growth and related outcomes in most remain heavily reliant on external resources, typically including at least one of aid, migrant remittances, and foreign direct investment (FDI) (AusAID 2008 and McGillivray et al. 2008). The particular constraints and growth challenges of Pacific SIDS are too often overlooked in the development research literature. Moreover, the policy debate on how to promote and achieve growth in the Pacific islands can benefit from a deeper understanding of the nature and consequences of these often unique, combination of constraints. This Focus is devoted to development challenges facing these islands, specifically relating to the achievement of economic growth, and draws on five papers that were presented or tabled at the World Institute for Development Economics Research (WIDER) ‘Fragility and Development’ research project meeting held in Fiji in December 2006.

Executive compensation and corporate governance with special reference to Bangladesh; some emerging issues

This discussion paper considers corporate governance issues associated with executive compensation arrangements. An historical perspective is used to demonstrate the absence of a sound empirically-based understanding of good corporate governance practices in relation to share-based payment arrangements. The paper provides an overview of issues including the potential earnings dilution and volatility effects of the introduction of regulations affecting executive remuneration. Potential future research questions have been framed addressing each of the major issues identified in this paper. We conclude that corporate regulators should ensure they are familiar with and consider best practice models for corporate governance when developing new, or revising existing business regulation. It is proposed that further research to remedy this deficiency would enable a more accurate assessment of the impact of management on accounting regulation and the better design and implementation of regulation.

Corporate governance of executive remuneration with special reference to Bangladesh

This discussion paper focuses on corporate governance issues associated with executive compensation arrangements. An historical perspective is used to demonstrate the absence of a sound empirically-based understanding of good corporate governance practices in relation to share-based payment arrangements. The paper provides an overview of issues including the potential earnings dilution and volatility effects of the introduction of regulations affecting executive remuneration. Potential research questions have been framed addressing each of the major issues identified in this paper. It is concluded that corporate regulators should ensure they are familiar with and that they consider best practice models for corporate governance when developing new or revising existing business regulation. It is proposed that further research to remedy this deficiency would enable a more accurate assessment of the impact of management on accounting regulation and the better design and implementation of regulation.

Value relevance of accounting information in China pre- and post-2001 accounting reforms

Purpose – This paper aims to investigate whether the accounting reform in China has improved the relevance of China's accounting information. It seeks to investigate the association between earnings and book value of equity to share returns before and after the introduction of the Accounting System for Business Enterprises (ASBE) in 2001 for A- and A&B-share firms.

Design/methodology/approach – The paper employs the return regression model. The pre-ASBE period is designated as 1997 through to 2000, and the post-ASBE period is designated as 2002 through to 2004. All firms listed on the Chinese stock market during the investigation period constitute the sample.

Findings – It is found that accounting information better explains share returns for both A-share firms and A&B-share firms in the post-ASBE period. The paper also finds that the book value of equity for A&B-share firms is incrementally value relevant to that of A-share firms in the post-ASBE period.

Research limitations/implications – Further studies will contribute to understanding how governance mechanisms and liquidity influence the association between accounting information and share returns in the Chinese A-share market.

Practical implications – The findings provide empirical evidence regarding the relevance of accounting information in emerging markets.

Originality/value – The paper contributes to the extant value relevance literature by investigating time periods surrounding the issue of ASBE in 2001 in the Chinese stock market.

The role of board independence in mitigating agency problem II in Australian family firms

We investigate the impact of board independence on earnings management on a sample of family controlled firms listed on the Australian Securities Exchange (ASX). Using panel data over the period 2000–2004, we find evidence of earnings management among family controlled firms in Australia, an environment of high investor protection and private benefits of control. Findings show that a higher proportion of independent directors on boards is effective in reducing earnings management, thereby mitigating agency problems associated with entrenchment and expropriation in family firms. We also find that managers of family firms are less aggressive in managing earnings via discretionary long-term accruals compared to non-family firms.

Managerial share ownership and operating performance : do independent and executive directors have different incentives?

We investigate the relationship between managerial share ownership (MSO) and earnings as a measure of operating performance in Australia. To mitigate potential earnings management, we also use discretionary accrual adjusted earnings as an alternative measure of performance. We document a negative relation between MSO and performance followed by a positive relation. We suggest that these unique results are an artefact of certain Australian institutional features and imply that the ownership–performance relation is context-specific, with the wider corporate governance systems influencing the theorised incentive effects. We also posit that executive directors and independent directors have different ownership–performance incentives. Our results are consistent with this proposition and suggest that independent directors may be immune to the theorised incentive alignment or entrenchment effects associated with share ownership.