Impact of board size and board diversity on firm value: Australian evidence

The aim of this paper is to provide a preliminary analysis of the relationship between firm market value and the size and gender diversity of a board of directors for a sample of publicly listed Australian firms. Our results show that smaller boards appear to be more effective in representing the shareholders as smaller boards are associated with higher firm value. As board size increases firm value declines, however at a decreasing rate suggesting that the relationship between board size and firm value is not strictly linear. Our findings further indicate that gender diversity promotes shareholders' value as the presence of women directors is associated with higher firm value.

Pandemic containment and management

In a pandemic, nurses will be the first health care contact for the general public in most cases. This clinical update provides information about the influenza virtus and its modes of transmission. The update will describe the principles of containment and management that will be important to understand in the event of a pandemic occurring.

External monitoring, managerial ownership and form performance in Malaysian capital market: a GMM based panel data approach

This study re-examines whether the structure of share ownership by both directors and institutional ownership provides explanation for firm performances. These relationships are modelled and estimated using GMM based dynamic panel data over a period from 1997 to 2001 with a sample of 100 CI components companies listed on Main Board of Malaysia. The findings provide strong evidence of simultaneity between firm performance and managerial ownership. Although an insignificant relationship between firm performance and institutional ownership is~ observed, the institutional holdings provide strong substitute for managerial ownership with a strong negative relationship between managerial ownership and institutional ownership. This is in line with the managerial incentive hypothesis, which suggests that manager's share in the firm's ownership leads to better performance and the monitoring substitute hypothesis, which suggests that managerial ownership could be effectively replaced by institutional ownership.

Organisation change and its impact on Australian Building Societies' performance

The paper examines the relation between changing ownership structure and performance of Australian building societies. An analysis and discussion of the theories of organizational development and change is undertaken to explore the mutual building societies' motivation for change. The financial performance measures, provided by financial ratios of the major mutual building societies in Australia, are examined to assess the behaviour of building societies under different governance structures in the 1980s and 1990s. The theoretical and empirical literature has suggested that mutual deposit-taking institutions should have lov^^er profitability and higher operating expenses than their publicly listed counterparts. Accounting ratios are observed over time to investigate if governance change in mutual deposit-taking organizations accounted for any discernable differences in profitability and cost efficiency pre- and post- demutualization. The study finds support for the contention that demutualized building societies will have higher profitability and lower costs than their mutual counterparts. The study is confined to investigation of the six largest building societies that undertook the demutualization process. It could he extended to the entire building society sector. The results have implications for investors, managers and 'ovraers' of firms that retain their mutual structure, suggesting the demutualization vnû benefit these groups. There is no study that compares mutual deposit-taking institutions pre- and post-conversion in Australia.

Ownership structure and corporate performance : Australian evidence

This paper seeks to analyse the relationship between ownership structure and corporate performance for fifty firms listed on the Australian Stock Exchange during 2002-2003. The study initially tests a two equation model similar to that in the existing literature, but is distinguished from prior literature by subsequently reclassifying leverage. By categorising leverage as an endogenous variable, an examination of the relationship between ownership and performance is undertaken through ordinary least squares and two stage least squares analysis of a three equation econometric model. Interestingly, empirical results illustrate the fact that managerial ownership impacts negatively on firm performance which is consistent with the management entrenchment hypothesis.

Information leakage and informed trading around unscheduled earnings announcements

While there has been much judicial discussion regarding the competency of Australia's continuous disclosure regime with reference to contemporaneous international standards, there has to date been limited empirical analysis of the Australian system's effectiveness in preventing selective disclosure and information leakage. This paper presents an empirical study of information content and trading behaviour around unscheduled earnings announcements - comprising of profit upgrades, profit warnings and neutral trading statements - made by ASX-listed companies during 2004. The contention is that informed trading impacts on the stock returns and trading volumes of listed entities, and hence abnormal returns or trading volumes observed prior to an announcement provide evidence of information leakage. The paper models a range of factors that potentially influence firm disclosure practices and contribute to the level information asymmetry in the market during the pre- announcement period. Previous research has investigated the influence of firm size and information content in contributing to information leakage. This study further considers the variables of firm growth, capital structure and industry group.

Corporate governance, board responsibilities and financial performance : the National Bank of Australia

This paper examines board responsibilities and accountability by management and Board of Directors in relation to the National Australia Bank's (NABs) performance. The NAB, an international financial service provider within the top thirty most profitable banks in the world, is compared with the Australian major banks. The evidence suggests that NABs poor performance was consistent with a lack of accountability, poor corporate governance and board dysfunction associated with fraudulent currency trading and the subsequent AUD360 million foreign currency losses. The NAB's performance is investigated by utilising accounting-based measures of profitability and cost efficiency as proxies for performance. Following the foreign currency trading losses in 2004 the NAB under-performed the other major Australian banks in terms of profits, cost to income ratio and growth in assets. In terms of profitability and cost efficiency NAB had the lowest ROE and ROA with a 19.7% fall in net profit and the highest cost to income ratio of 5 7.4% of any of the five largest banks. This case study provides an Australian example of poor corporate governance and suggests that financial institutions and regulators can learn from the NAB's experience. Failure to have top-down accountability can have significant impact on over-all performance, profitability and reputation. In particular, it suggests that management and Boards need to review their risk management procedures and regulators need to be more pro-active in their prudential oversight of financial institutions.

A principles-based Anglo governance system is not a science but an art

Anglo governance systems rely of a number of controls to align shareholder and boards of director’s interests. In general they are referred to as market control, regulatory control, and political and cultural control. Agency theory proposes that these control mechanisms are necessary as human nature is such that directors and managers act in a self-interested and boundedly rational manner in decision-making that can result in sub optimality. Notwithstanding that each country within the Anglo system accepts such controls are necessary they have their own foci and priorities, being a product of their own system’s characteristics. This paper through interviewing a number of Australian business executives adds to the academic literature by providing evidence from the field of the important characteristics of the Australian governance system, the drivers of change and the effectiveness of the principles-based approach. It argues that debate needs to move beyond the principles versus rules approach to look at how firms can be provided with more guidance in operationalising some of the principles that appear to be key to governance effectiveness. It concludes that there is a need for a holistic model of governance that is broader than that focusing on the control/legalistic approach; that top management is important in setting and driving the in-firm governance agenda; that the public needs to be informed and educated about governance and its importance; and that disclosure still requires an improvement in quality.

Sources of liquidity commonality, asymmetric information and ownership structure in emerging markets : evidence from the Chinese stock market

Xinwei Zheng examines if common factors of liquidity can be determined by ownership structure measured by asymmetric information in an emerging market that has adopted an order-driven trading system. Using China as a case for the study, I select a broad sample of stocks from two separate Chinese stock exchanges to measure and
analyse the relationship. My empirical evidence seems significant and pervasive. These findings about the Chinese stock market provide useful pointers for understanding commonality in emerging economies and shed critical light
on a new dimension of the working of emerging markets.