Factor analysis of partners' commitment to risk management in public-private partnership projects

Purpose – The purpose of this paper is to investigate and uncover key determinants that could explain partners' commitment to risk management in public-private partnership projects so that partners' risk management commitment is taken into the consideration of optimal risk allocation strategies.

Design/methodology/approach – Based on an extensive literature review and an examination of the purchasing power parity (PPP) market, an industry-wide questionnaire survey was conducted to collect the data for a confirmatory factor analysis. Necessary statistical tests are conducted to ensure the validity of the analysis results.

Findings – The factor analysis results show that the procedure of confirmatory factor analysis is statistically appropriate and satisfactory. As a result, partners' organizational commitment to risk management in public-private partnerships can now be determined by a set of components, namely general attitude to a risk, perceived one's own ability to manage a risk, and the perceived reward for bearing a risk.

Practical implications – It is recommended, based on the empirical results shown in this paper, that, in addition to partners' risk management capability, decision-makers, both from public and private sectors, should also seriously consider partners' risk management commitment. Both factors influence the formation of optimal risk allocation strategies, either by their individual or interacting effects. Future research may therefore explore how to form optimal risk allocation strategies by integrating organizational capability and commitment, the determinants and measurement of which have been established in this study.

Originality/value – This paper makes an original contribution to the general body of knowledge on risk allocation in large-scale infrastructure projects in Australia adopting the procurement method of public-private partnership. In particular, this paper has innovatively established a measurement model of organisational commitment to risk management, which is crucial to determining optimal risk allocation strategies and in turn achieving project success. The score coefficients of all obtained components can be used to construct components by linear combination so that commitment to risk management can be measured. Previous research has barely focused on this topic.

The direct costs of raising external equity capital for US REIT IPOs

Purpose – The purpose of this paper is to investigate the total direct costs of raising external equity capital for US real estate investment trust (REIT) initial public offerings (IPOs).

Design/methodology/approach – The study provides recent evidence on total direct costs for a comprehensive dataset of 125 US REIT IPOs from 1996 until June 2010. A multivariate OLS regression is performed to determine significant factors influencing the level of total direct costs and also underwriting fees and non-underwriting direct expenses.

Findings – The study finds economies of scale in total direct costs, underwriting fees and non-underwriting expenses. The equally (value) weighted average total direct costs are 8.33 percent (7.52 percent), consisting of 6.49 percent (6.30 percent) underwriting fees and 1.87 percent (1.22 percent) non-underwriting direct expenses. The study finds a declining trend of total direct costs for post 2000 IPOs which is attributed to the declining trend in both underwriting fees and non-underwriting direct expenses. Offer size is a critical determinant for both total direct costs and their individual components and inversely affects these costs. The total direct costs are found significantly higher for equity REITs than for mortgage REITs and are also significantly higher for offers listed in New York Stock Exchange (NYSE). Underwriting fees appear to be negatively influenced by the offer price, the number of representative underwriters involved in the issue, industry return volatility and the number of potential specific risk factors but positively influenced by prior quarter industry dividend yield and ownership limit identified in the prospectus. After controlling for time trend, the paper finds REIT IPOs incur higher non-underwriting direct expenses in response to higher industry return volatility prior to the offer.

Originality/value – This paper adds to the international REIT IPO literature by exploring a number of new influencing factors behind total direct costs, underwriting fees and non-underwriting direct expenses. The study includes data during the recent GFC period.

A review of the cost estimation issues in the tender preparation process in construction industry

Cost estimation process is undertaken to predict the total cost of the project. Studies indicate that one of the construction company failures in contracting is because of the uncertain, incorrect, and unrealistic cost estimation. Cost estimation process are heavily influenced by the complexity of the project, scale and scope of construction, market conditions, method of construction, site constraints, client’s financial position, buildability and the location of the project. However, there are other combinations factors that have not been studied thus far. Hence, this paper focuses on the review of other researchers’ findings in relation to cost estimation issues in the construction industry. Among the findings, it has been revealed that the cost estimation issues are related to accuracy, human factors, practical knowledge and insufficient cost data/information. The aim of this paper is to investigate these factors and determining other potential factors that may influence cost estimation process in the construction industry.

Safeguarding Australia from cyber-terrorism : a SCADA risk framework

Terrorist groups are currently using information and communication technologies (ICTs) to orchestrate their conventional attacks. More recently, terrorists have been developing a new form of capability within the cyber-arena to coordinate cyber-based attacks. This chapter identifies that cyber-terrorism capabilities are an integral, imperative, yet under-researched component in establishing, and enhancing cyber-terrorism risk assessment models for SCADA systems. This chapter examines a cyber-terrorism SCADA risk framework that has been adopted and validated by SCADA industry practitioners. The chapter proposes a high level managerial framework, which is designed to measure and protect SCADA systems from the threat of cyber-terrorism within Australia. The findings and results of an industry focus group are presented in support of the developed framework for SCADA industry acceptance.

Firm characteristics and information risk

Following the work of Easley et al. (2002) in documenting the effect of private information on cross-sectional stock returns, we examine the relationship between a firm’s fundamental characteristics and its probability of information-based trading (PIN). We find that asset turnover and dividend yields are important firm characteristics that influence a firm’s PIN. The findings also offer an alternative explanation as to why firm characteristics are informative about asset prices.

Problem gambling among international and domestic university students in Australia : who is at risk?

Young people are a high risk group for gambling problems and university (college) students fall into that category. Given the high accessibility of gambling in Australia and its association with entertainment, students from overseas countries, particularly those where gambling is restricted or illegal, may be particularly vulnerable. This study examines problem gambling and its correlates among international and domestic university students using a sample of 836 domestic students (286 males; 546 females); and 764 international students (369 males; 396 females) at three Australian universities. Our findings indicate that although most students gamble infrequently, around 5 % of students are problem gamblers, a proportion higher than that in the general adult population. Popular gambling choices include games known to be associated with risk (cards, horse races, sports betting, casino games, and gaming machines) as well as lotto/scratch tickets. Males are more likely to be problem gamblers than females, and almost 10 % of male international students could be classified as problem gamblers. Hierarchical regression analysis showed that male gender, international student status, financial stress, negative affect and frequency of gambling on sports, horses/dogs, table games, casino gaming machines, internet casino games and bingo all significantly predicted problem gambling. Results from this study could inform gambling-education programs in universities as they indicate which groups are more vulnerable and specify which games pose more risk of problem gambling.

Out of the shadows: a discussion on law reform for the prevention of financial abuse of older people

Financial abuse of older people too often lives ‘in the shadows, hidden by fear and shame’. This and the protective love between family members can screen changes that are critical to an older person’s financial and living arrangements. Rather than a single event, it is usually a series of well-intentioned but ill-considered financial acts, which at some point tips over into abuse interwoven with an intricate web of family relationships. Was a transfer of title or a loan to an adult child really misappropriation? Has thoughtlessness become undue influence or even theft? 

Energy drinks and alcohol: research supported by industry may be downplaying harms

Mixing alcohol with so called energy drinks has become popular, but with what risk? Peter Miller worries that research does not consider real world levels of consumption and that researchers’ conflicts of interest need to be declared in full.

The effects of the late 2000s global financial crisis on Australia's construction demand

An accurate measurement of the impacts of external shocks on construction demand will enable construction industry policymakers and developers to make allowances for future occurrences and advance the construction industry in a sustainable manner. This paper aims to measurethe dynamic effects of the late 2000s global financial crisis on the level of demand in the Australian construction industry. The vector error correction (VEC) model with intervention indicators is employed to estimate the external impact from the crisis on a macro-level construction economic indicator, namely construction demand. The methodology comprises six main stages to produce appropriate VEC models that describe the characteristics of the underlying process. Research findings suggestthat overall residential and non-residential construction demand were affected significantly by the recent crisis and seasonality. Non-residentialconstruction demand was disrupted more than residential construction demand at the crisis onset. The residential constructionindustry is more reactive and is able to recover faster following the crisis in comparison with the non-residential industry. The VEC model with intervention indicators developed in this study can be used as an experiment for an advanced econometric method. This can be used to analyse the effects of special eventsand factors not only on construction but also on other industries.

Board committee meetings and firm financial performance : an investigation of Australian companies

This article examines how the frequency of board committee meetings impacts on Australian firms’ financial performance. Data were collected from 118 Australian listed companies – including 26 financial firms and 92 nonfinancial firms – for the period 1999–2007. Analysis of that data shows that the frequencies of audit committee meetings and remuneration committee meetings are positively and significantly associated with return on equity and return on assets. The frequencies of risk committee meetings do not show any significant effects on the financial performance of Australian firms. Estimated results are found to be robust after controlling for internal as well as external governance mechanisms that might affect Australian firm performance.

Attributable risk analysis reveals potential healthcare savings from increased consumption of dairy products.

With rising burdens of obesity and chronic disease, the role of diet as a modifiable risk factor is of increasing public health interest. There is a growing body of evidence that low consumption of dairy products is associated with elevated risk of chronic metabolic and cardiovascular disorders. Surveys also suggest that dairy product consumption falls well below recommended targets for much of the population in many countries, including the USA, UK, and Australia. We reviewed the scientific literature on the health effects of dairy product consumption (both positive and negative) and used the best available evidence to estimate the direct healthcare expenditure and burden of disease [disability-adjusted life years (DALY)] attributable to low consumption of dairy products in Australia. We implemented a novel technique for estimating population attributable risk developed for application in nutrition and other areas in which exposure to risk is a continuous variable. We found that in the 2010-2011 financial year, AUD$2.0 billion (USD$2.1 billion, €1.6 billion, or ∼1.7% of direct healthcare expenditure) and the loss of 75,012 DALY were attributable to low dairy product consumption. In sensitivity analyses, varying core assumptions yielded corresponding estimates of AUD$1.1-3.8 billion (0.9-3.3%) and 38,299-151,061 DALY lost. The estimated healthcare cost attributable to low dairy product consumption is comparable with total spending on public health in Australia (AUD$2.0 billion in 2009-2010). These findings justify the development and evaluation of cost-effective interventions that use dairy products as a vector for reducing the costs of diet-related disease.

Estimating the equity risk premium for economies in the Asian region

The Equity Risk Premium (ERP) is widely used in economic and financial analysis, yet it is difficult to find empirical estimates of the ERP that are generally accepted. The paucity of data in Asian economies exacerbates the problems of estimation. This study estimates the ERP for the larger market-orientated Asian economies and compares the estimates with those of the United States. Surprisingly, of the seven economies examined, the ERP of four cannot be statistically differentiated from that of the United States.

Modelling SME credit risk : a Thai empirical evidence

This paper develops and tests a model to predict small and medium enterprise (SME) financial distress based on empirical evidence from Thailand. A sample comprising 198 financial statements of non-financially distressed and 68 statements of financially distressed SMEs were used. A parametric t-test was conducted to establish differences between financial characteristics of the two groups of SMEs.

Results show statistically significant differences (t values significant at .001) between the two groups of SMEs in the financial ratios used for the study. Discriminant analysis was then conducted to develop a model for predicting the likelihood of an SME experiencing financial distress.

The model hits an accuracy level of 97%, which compares favourably with the probability of accurate classification by chance (i.e., 65% after adjusting for the unequal sample sizes of the two groups of SMEs). A test of the model with a new sample shows the validity of the model beyond the original sample, confirming that Thai SME financial distress is amenable to prediction to a statistically significant extent. The model is expected to serve SME managers and creditors in assessing financial health of SMEs before making important decisions. The results are also expected to inform policymakers in formulating economic policies concerning SMEs.

Did the late-2000s financial crisis influence construction labour productivity?

The late-2000s global financial crisis has wrought dramatic impacts on the construction industry. However, the issue of whether the crisis influenced the behaviours of the construction industry has not been addressed yet. This research presents an econometric approach to investigating the effects of the recent global financial crisis on construction labour productivity. By employing the error correction model and panel regression methods, the direct and indirect effects of the financial crisis on the changes in Australian construction labour productivity are explored at national and state levels. Neither the direct nor the indirect effects appear statistically significant. The results indicate that the direct effect of the financial crisis drives up construction labour productivity at the national level, while the indirect effect diminishes productivity. The effects of the financial crisis on the state construction labour productivity vary from state to state. The financial crisis influenced construction labour productivity directly and significantly in the northern and eastern regions, while the direct effects appear not significant in the other states and territories. The indirect effects of the financial crisis on productivity are statistically significant in three regions: the Australian Capital Territory, the Northern Territory and Western Australia. By comparison, the model with the financial effects fails to provide more accurate simulating results. As such, this research concludes that the influence of the late-2000s financial crisis on Australian national and state construction labour productivity is limited.

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.