Valuation and reporting of native fauna in monetary terms: compatibility between a market-Based system and natural resources?

A change in community values and priorities has introduced ethical,
environmental and social issues into the way in which business conducts
its activities. There are an increasing number of managed investment funds focusing on socially responsible investment (SRI) by concentrating on firms that operate according to predetermined criteria for environmental, social and ethical issues. For investors in these funds environmental stewardship issues are integrated with concern over financial resources and performance. In this paper the accounting and reporting by business activities concerned with conservation of wildlife are examined. The world of accounting has functioned for many years with relatively few accounting standards devoted to specialised industry needs. In 1998 the Australian Accounting Standards Board and in 2001 the International Accounting Standards Board issued standards devoted to agriculture. Both standards deal with the reporting of managed biological assets and require application of essentially the same approaches despite the Australian standard requiring net market value while the International standard requires fair value. In this paper we analyse how one conservation firm Earth Sanctuaries Ltd. (ESL) has applied AASB 1037 and then we explore the implications for conservation firms operating in geographical locations outside Australia. It is suggested that AASB 1037 and indeed lAS 41 may not provide value appropriate information for investor decisions relating to accounting profits for such firms. Our examination shows that it is appropriate to reconsider accounting guidelines provided by these standards in order to link the information relating to economic and environmental performance. Transparency may be improved by a move closer to Elkington 's (1997) triple bottom line reporting. We therefore contend that the issues arising from the use ofAASB 1037 and lAS 41 need to be widely considered by all standard setters, particularly given the increasing attention to SRI.

Comprehensive look at the re-examination of the re-valuation effect of auditor switch and its determinants in Malaysia : a post crises analysis from Bursa Malaysia

This study examines economic rational for auditor switch and its impact on share revaluation of 51 switched firms main board of Bursa Malaysia for the post crisis period (1997-2002). This study adopted both logistic regression model and event study methodology to examine the determinants of auditor switches and its impact to share price. Findings show that the auditor switch decision of Malaysian listed finns for post crisis period has been partly explained by audit report, turnover growth and firm's performance. While, findings suggest no significant evidence of wealth effect from auditor switch announcements once switches were divided along the line of auditor switch type, different findings emerged.

Monitoring and incentives of executives in risky firms : a test of the association with firm performance

This study investigates the relationship between a firm's risk and the effectiveness of the firm's corporate governance practices. Previous research investigating the relationship between corporate controls and firm performance has been mixed and often weak. Therefore, this study sets out to determine the efficiency of monitoring and incentive contracts given certain characteristics of the firm. That is, the study sets out to determine whether risk firms with higher monitoring and levels of incentives are associated with higher firm performance.
The results of this study of 282 firms demonstrate how the relationship between firm risk and performance is associated with the monitoring and incentive contracts used by these firms. In particular, the results of this study showed that the negative association between risk and firm performance is weakened when firms have stronger monitoring and incentive mechanisms. The particular contribution of this study is to show that the role of corporate governance variables infirm performance should be evaluated in the context of the firm's risk.

An analysis of the association between firms' investment opportunities, board composition and firm performance

The purpose of this paper is to identify the variables that influence the board structure adopted by firms and the subsequent relationship to the firm's performance. The results of this study of 229 Australian firms show that firms' investment opportunities are strongly associated with a higher proportion of executive directors ("EDs") on the board. The results also show that the negative relationship between a firm's investment opportunity set ("IDS") and firm performance is weakened at higher levels of non-executive director board domination. These results have implications for policy setters and managers of firms with investment opportunities

An Analysis of the Association Between Firm Risk, Executive Share Options and Accounting Performance: Some Australian Evidence

This paper examines whether the financial performance of the firm is associated with the risk-taking propensity of executives, which is inferred from the structure of their share option portfolio. The objective of this paper is to determine if executives have greater risk bearing preferences when they have more share options than shares in their firm. In turn, executives' risk-taking preferences suggest that these decision-makers adopt value-increasing strategies. The results of this study support this notion. The results of the study of 182 Australian firms demonstrate that the negative relationship between firm risk and firm performance is weaker when executives hold a higher proportion of share options than shares in their investment in the firm. These results hold implications for executives' compensation contracts. That is, executives who share in their firms' risk via share options are more likely to undertake risky activities with high-expected performance outcome.

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.

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.

Intangible assets and the underpricing of industrial company initial public offerings

This study analyses 262 industrial company initial public offerings (IPOs) in Australia from 1994 to 1999. It finds that the identification and valuation of brand name, trademark, patent and capitalized research and development cost intangible assets in the prospectus significantly reduces underpricing. The identification of goodwill and license cost intangibles does not appear to be significant to underpricing. This paper supports the Beatty and Ritter (1986) argument that IPOs may display financial and nonfinancial characteristics that lower the uncertainty about the value of the lPO and hence lower the underpricing of that IPO. Our findings suggest implications for the issuer who wants to maximize the value of the firm at the time of the lPO, the underwriter who is required to guarantee the success of the capital raising and for the initial investors who are looking to reduce their uncertainty about the valuation of the lPO.

Estimating the economic value of Mount Buffalo National Park with the travel cost and contingent valuation models

The Mount Buffalo National Park is the oldest national park in Victoria, Australia. There has been a rapid increase in the number of visitors to the park during the last decade and park management has been a concern, especially in the light of declining budgetary allocations and potential damage due to the increased visitor numbers. Policy options to increase park revenue remain unclear because of a lack of information on demand parameters and user costs. This study estimates the economic value of the park using the travel cost method (TCM) and the contingent valuation method (CVM). The TCM gives higher consumer surplus (CS) than the CVM. The CS shows that the economic value of the park is high and that there are opportunities to introduce innovative fee schemes to enhance its revenue. Present entry fee systems do not capture the economic value of the park.

Do outsider-dominated boards and large board sizes curtail firm enterprise activities?

Recent literature recognizes the need for corporate governance to encompass mechanisms for motivating managerial behaviour towards enhancing enterprise activities or increasing wealth of the firm. Agency theory and current regulatory activity advocate increasingly greater roles for outsiders on the board of directors of publicly-traded firms. The literature also put forward that board size affect firm activities independent of other board attributes. Lipton and Lorsch (1992) also propose limiting board sizes to enhance communication and coordination on the board of directors as well as increase the ability of the board of directors to control top management of firms. This suggests that there are biases as board size grows. This paper, therefore, studies the implications of outsider-dominated board of directors and board size on firm enterprise activities. The paper finds that outsider dominated board of directors have a negative impact on firm enterprise activities. Board size was found to have a positive effect on firm enterprise activities.