Board structure and survival of new economy IPO firms

Research Question/Issue: This study examines the relevance of currently accepted best practice recommendations regarding board structure on the survival likelihood of new economy initial public offering companies. We argue that industry context determines governance outcomes. Research Findings/Insights: We study 125 Australian new economy firms listed between 1994 and 2002. Each firm is tracked until the end of 2007 for monitoring their survival. We find that board independence is associated with an increase in the likelihood of corporate survival. We also find that the benefits of board independence increase at a decreasing rate. Theoretical/Academic Implications: The standard best practice recommendation of board independence stems from the monitoring role of directors and is based on agency theory. The results from our study suggest that the recommendation regarding board independence does not work well for new economy firms. While the agency theory based model implies a monotonic relation between board independence and performance, our research suggests that the relationship is nonlinear. This variation occurs because of increased monitoring costs faced by outsiders due to higher information asymmetry and complexity of new economy firms. Our empirical results suggest that inside directors play a complementary role to outsiders in mitigating firm failure. Practitioner/Policy Implications: Our research offers insights to policy makers who are interested in setting best practice standards regarding board structure. Our research suggests that firm/industry characteristics play a crucial role in determining the optimal board structure. In firms/industries where outsiders face significantly higher information processing costs, insiders can play a valuable complementary role to outsiders in enhancing the effectiveness of the board. Thus future hard or soft regulations related to board structure should consider industry context.

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.

Do venture capitalists play a monitoring role in an emerging market? Evidence from the pay–performance relationship of Chinese entrepreneurial firms

This paper investigates venture capitalists' monitoring of managerial behavior by examining their impact on CEO pay–performance sensitivity across various controlling structures in Chinese firms. We find that the effectiveness of venture capitalists' monitoring depends on different types of agency conflict. In particular, we find that venture capital (VC) monitoring is hampered in firms that experience severe controlling-minority agency problems caused by disproportionate ownership structures. We provide further evidence that VC is more likely to exert close monitoring in firms that have greater managerial agency conflict, and thus require more direct monitoring. However, controlling-minority agency problems have a greater impact on VC monitoring than managerial agency problems. Overall, our study suggests that venture capitalists' monitoring role is hampered in an emerging market where firms have complex ownership structures that contribute to severe agency conflict between controlling and minority shareholders.

Bailouts, monitoring, and penalties: an integrated framework of government policies to manage the too-big-to-fail problem

This paper discusses optimal government bailout policy where the costs of systemic failures and moral hazard problems are considered. We find that a three-tiered bailout policy that includes an ex post monitoring and bailout scheme for financial institutions with large systemic impacts ('too big to fail') is optimal. The optimal policy also requires a randomized bailout for medium-impact institutions ('Constructive Ambiguity'), and no bailout for institutions that have only minimal systemic consequences ('too small to save'). However, in a volatile, innovative market environment where individual institutions may know more than the government regulator, monitoring error could contribute to risk taking, leaving the government regulator to always play a 'catch-up' role in revising policy. Moreover, the optimal bailout policy may not be time-consistent: institutions not deemed 'too big to fail' may still have an incentive to take excessive risks and expect to be bailed out in case of insolvency, primarily due to the short-term orientation of the government. Finally, because an institution's systemic cost affects the probability of a bailout, we show that the boundary of an institution may be extended by the government subsidy.

A comparative analysis of opinions of Americans, Australians and Malaysians on the use of biometric devices in workplaces for security and monitoring of worker productivity

Since the September 11, 2001 terrorist attacks in New York, the use of biometric devices such as fingerprint scans, retina and iris scans and facial recognition in everyday situations for national security and border control, have become commonplace. This has resulted in the biometric industry moving from being a niche technology to one that is ubiquitous. As a result. more and more employers are using biometrics to secure staff access to their facilities as well as for tracking staff work hours, maintaining 'discipline' and carry out surveillance against thefts. detecting work hour abuses and fraud. However, the data thus collected and the technologies themselves are feared of having the potential for and actually being misused - both in terms of the violating staff privacy and discrimination and oppression of targeted workers. This paper examines the issue of using biometric devices in organisational settings their advantages, disadvantages and actual and potential abuses from the point of view of critical theory. From the perspectives of Panoptic surveillance and hegemonic organisational control, the paper examines the issues related to privacy and identification, biometrics and privacy, biometrics and the 'body', and surveillance and modernity. The paper also examines the findings ofa survey carried out in Australia. Malaysia and the USA on respondents' opinions on the use of biometric devices in everyday life including at workplaces. The paper concludes that along with their applications in border control and national security, the use of biometric devices should be covered by relevant laws and regulations. guidelines and codes of practice. in order to balance the rights to privacy and civil liberties of workers with employers' need for improved productivity, reduced costs, safeguards related to occupational health and safety, equal opportunity, and workplace harassment of staff and other matters, that employers are legally responsible for.

Consumer choice, information product quality, and market implications

The paper concerns with the peculiarities of consumer choice in information product markets. This is a multidisciplinary study based on both information system research and microeconomic theory. An extension is introduced to the conventional general theory of consumer choice for explicitly taking into account the impact of information product quality on consumer behaviour. Multiple quality characteristics, considered against the price of product, are an essential reason for consumer choice of high tech product in general and information product in particular. We assume that consumers are able to aggregate their preferences of multiple product characteristics into a product preference order. On the supply side, the product quality characteristics incur costs. In the case of information product, those costs are the costs of the first copy, and marginal costs are near zero. All of the above constitute the distinctive characteristics of the competitive mechanism in the digital economy and in information product markets. A model, based on the game theory is used to consider two special cases. The first one deals with monopolistic competition for a share of the market with a limited number of customers. Conditions are derived for IT firm survival. The second one considers conditions at which a monopoly is able to successfully introduce a new version if its information product.

Dispersion statistics and a sampling plan for Helicoverpa (Lepidoptera : Noctuidae) on fresh-market tomatoes (Lycopersicon esculentum)

Helicoverpa spp. is the primary pest in the Australian fresh-market tomato industry. We describe the spatial distribution of Helicoverpa spp. eggs on fresh-market tomato crops in the Goulburn Valley region of Victoria, and present a sequential sampling plan for monitoring population densities. The distribution of Helicoverpa spp. eggs was highly contagious, as indicated by a Taylor's b-value of 1.59. This high level of contagion meant that relatively large sample sizes would need to be collected to obtain an estimate of population density. High-precision sampling plans generally necessitated impractical sample sizes, and thus the plan we present is a relatively low-precision level plan (SE/mean = 0.3). Nonetheless, this level of precision is considered adequate for most agronomic scenarios. The plan was validated using a statistical re-sampling approach. The level of precision achieved was generally close to the nominal level. Likewise, the number of samples collected generally showed little departure from the theoretically calculated minimum sample size.

An intelligent forex monitoring system

The need for intelligent monitoring systems has become a necessity to keep track of the complex forex market. The vast currency market is a foreign concept to the average individual. However, once it is broken down into simple terms, the average individual can begin to understand the foreign exchange market and use it as a financial instrument for future investing. We attempt to compare the performance of a Takagi-Sugeno, type neuro-fuzzy system and a feedforward neural network trained using the scaled conjugate gradient algorithm to predict the average monthly forex rates. We considered the exchange values of Australian dollar with respect to US dollar, Singapore dollar, New Zealand dollar, Japanese yen and United Kingdom pounds. The connectionist models were trained using 70% of the data and remaining was used for testing and validation purposes. It is observed that the proposed connectionist models were able to predict the average forex rates one month ahead accurately. Experiment results also reveal that the neuro-fuzzy technique performed better than the neural network

Consumer loyalty versus propensity to switch between providers in mature IT markets (the case of mobile phone market)

The example of the youth mobile phone market is used for pilot empirical testing of a model of consumers’ decision making, based on common features of consumer behaviour in mature markets of information and high technology products. Firstly, we discuss the key properties of mature high technology markets which affect market behaviour and strategies. These properties include: established customer and provider bases; the elements of both oligopolistic and monopolistic competition; very short product life cycle; considerable product differentiation; and using product quality, versioning and price discrimination as planning and marketing tools. Secondly, a model of consumers’ decision making in such markets is suggested on the assumption that a choice is to be made between the following options: to continue using the existing version of the product, to upgrade it with the current provider or to switch to another provider. Product price, quality characteristics, switching costs and network effects are demonstrated to be the variables affecting consumers’ decisions and therefore, these variables should be considered by competing providers when they choose production and marketing strategies. In conclusion, the results of the empirical study are discussed in the context of their possible application to other information and high technology markets.

Australian forex market anaylsis using connectionist models

The need for intelligent monitoring systems has become a necessity to keep track of the complex forex market. The forex market is difficult to understand by an average individual. However, once the market is broken down into simple terms, the average individual can begin to understand the foreign exchange market and use it as a financial instrument for future investing. This paper is an attempt to compare the performance of a Takagi-Sugeno type neuro-fuzzy system and a feed forward neural network trained using the scaled conjugate gradient algorithm to predict the average monthly forex rates. The exchange values of Australian dollar are considered with respect to US dollar, Singapore dollar, New Zealand dollar, Japanese yen and United Kingdom pound. The connectionist models were trained using 70% of the data and remaining was used for testing and validation purposes. It is observed that the proposed connectionist models were able to predict the average forex rates one month ahead accurately. Experiment results also reveal that neuro-fuzzy technique performed better than the neural network.

Environmentally sustainable food production and marketing : opportunity or hype?

Purpose: Identify and analyse the beliefs of value-chain intermediaries regarding the production and marketing of food products conforming to environmentally sustainable standards.

Methodology: In-depth, semi-structured, face-to-face interviews with senior managers of food companies across the value chain.

Findings: In Australia, the demand for foods that are produced under environmentally sustainable standards has been slow to take-off because (a) customers do not perceive these products as offering any special benefits (b) customers distrust the claims made by organisations (c) these products are much more expensive than traditional products, and (d) the implementation of environmental standards is expensive. Customers claim that the use of different terminologies such as organic, green and environmentally friendly in promoting
food products is confusing.

Research Limitations: Findings are not generalisable because the study is based on a small sample.

Practical Implications: Value-chain intermediaries are unlikely to voluntarily adopt environmental standards because of low demand for such foods and the high costs of adopting and monitoring environmentally sustainable production and marketing regimes.

Costs of inflation in Australia and New Zealand.

This paper evaluates the costs of inflation in Australia and New Zealand using a compensated measure calculated by calibrating a general equilibrium search model in the vein of Lagos and Wright (2005). We look at how inflation affects the intensive margin (the quantity traded in each match) by examining the impact of various pricing protocols. We also look at how inflation affects the extensive margin (the number of trades) by making the market composition between buyers and sellers endogenous. We obtain much larger costs of inflation than existing studies, but smaller costs than similar studies conducted on the US economy. Depending on the version of the model the costs of 10% inflation for a $50,000 worker ranges from $250 to $2200 per year in Australia, and from $200 to $1700 in New Zealand, that is between 0.5% and 4.4% of GDP and between 0.4% and 3.4% of GDP respectively. Finally it is calculated that Australia could gain up to 1.6% of GDP per annum--1.2% for New Zealand--by implementing the Friedman rule.

Costs of raising equity capital by renounceable rights issues in Australia

Rights issues remain a common method for raising equity capital in Australia for companies listed on me Australian Stock Exchange. This study investigates the capital raising costs of Anstralian renounceable equity rights issues from 2001 to 2006. Both direct and indirect costs are investigated and the explanatory power of potential influencing factors is analyzed. The total direct costs averaged nearly 4% of gross proceeds raised and the mean offer price was discounted around 17% from the current market price. Issue size, percentage underwritten, concentration of ownership and issuer risk significantly influence the percentage direct costs of the rights issue. The age of the issuer, the average historical volume of shares traded and the offer price appear to influence the percentage discount.

Healthcare in continuum for an ageing population: national self monitoring or remote offshore monitoring for Australia?

Australia is a country, similar to other developed nations, confronting an ageing population with complex demographics. Ensuring continued healthcare for the ageing, while providing sufficient support for the already aged population requiring assistance, is at the forefront of the national agenda. Varied initiatives are with foci to leverage the advantages of lCTs leading to e-Health provisioning and assisted technologies. While these initiatives increasingly put budgetary constraints on local and federal governments, there is also a case for offshore resourcing of non-critical health services, to support, streamline and enhance the continuum of care, as the nation faces acute shortages of medical practitioners and nurses. However, privacy and confidentiality concerns in this context are a significant issue in Australia. In this paper, we take the position that if the National and state electronic health records system initiatives, are fully implemented, offshore resourcing can be a feasible complementary option resulting in a win-win situation of cutting costs and enabling the continuum of healthcare.