Productivity differences, technology adoption and economic growth : the case of India

When the acronym of ëBRICí was coined in 2001 by Jim OíNeill of Goldman Sachs, it was expected that economic growth rates in India, Brazil and Russia would eventually catch up with that of China. However, China has continued to outperform the other economies in the group, even after it was renamed ëBRICSí to reflect the inclusion of South Africa in 2010. The focus of this chapter is on one of the BRICS economies, namely India. Its aim is to examine from an economic perspective, why Indiaís performance has not lived up to expectations, and comment on the key challenges it faces in meeting them. We begin with some descriptive statistics regarding the progress of the Indian economy since 1990. While it has been growing at a rapid rate since the reforms it introduced in the1990s, there has been a slowdown in its overall GDP growth rates since 2008. The rate of growth experienced in the period 2003ñ07 was an average of 10.5 per cent. However, since the recession following the Global Financial Crisis (GFC) of 2008, the growth rate has fallen. From the period 2008ñ12 it has only registered an average growth rate of 6.5 per cent (World Bank, 2013). This chapter suggests that one of the major factors underpinning this slowdown is the performance of Indiaís agricultural sector. The importance of the agricultural sector is highlighted by the following stylized facts.

ACE research briefing paper 007 : Ken Talbot - an entrepreneur's contribution to the growth of the Australian Mining Industry

Ken Talbot was one of Australian mining’s most successful entrepreneurs and rose to the top of his industry to become one of Australia’s wealthiest men. Although the nation’s resources industry is synonymous with global names such as Xstrata, BHP Billiton and Rio Tinto, Ken was an individual who made a big impact on the development and growth of the sector. This case study examines Ken’s achievements, his transition from employee to entrepreneur, and the qualities that enabled him to succeed at such a high level. In particular, it focuses on his Jellinbah and Coppabella mining developments that directly led to the creation of Macarthur Coal and the Talbot Group. By the time of his premature death in an African plane crash in 2010, Ken had amassed a fortune estimated at almost $1 billion and was aged just 59. The last publically available Talbot Group annual report for calendar year 2009 showed that the investment portfolio of the group returned 113 per cent that year. Even throughout the global financial crisis the portfolio made a positive return on investment of no less than 10 per cent. Ken’s sense of mateship and his tremendous people skills were keys to his success in the mining industry and the wider community. In addition to excelling in business, he is also remembered for his philanthropy and leaving 30 per cent of his estate to charity through the Talbot Family Foundation.

Embedded creatives in the Australian manufacturing industry

According to 2011 Australian Census figures, embedded creative employees (creative employees not working in the core Creative Industries) make up 2 per cent (or a total of 17 635) of manufacturing industry employees. The average for all industries is 1.6 per cent. In the 2011–2012 financial year the manufacturing industry formed 7.3 per cent of Australia’s gross domestic product (GDP), contributing approximately AU$106.5 billion to the economy (Department of Industry, Innovation, Science, Research and Tertiary Education 2013). Manufacturing is central to innovation, accounting for over one-quarter of all business expenditure in R&D in 2010–2011, representing around AU$4.8 billion invested in R&D (ibid.). Facing challenges such as sustainability concerns, ever-increasing offshore production and the global financial crisis, the Australian manufacturing industry needs to remain relevant and competitive to succeed. Innovation is one way to do this. Given the contribution of the manufacturing industry to the Australian economy, and the above-average portion of embedded creatives in manufacturing, it is important to consider what exactly embedded creatives add to the industry. This chapter, inspired by the Getting Creative in Healthcare report (Pagan, Higgs and Cunningham 2008), examines the contribution of embedded creatives to innovation in the manufacturing industry via case studies and supplemental data.

Characterising and predicting cyber attacks using the Cyber Attacker Model Profile (CAMP)

Purpose Ethnographic studies of cyber attacks typically aim to explain a particular profile of attackers in qualitative terms. The purpose of this paper is to formalise some of the approaches to build a Cyber Attacker Model Profile (CAMP) that can be used to characterise and predict cyber attacks. Design/methodology/approach The paper builds a model using social and economic independent or predictive variables from several eastern European countries and benchmarks indicators of cybercrime within the Australian financial services system. Findings The paper found a very strong link between perceived corruption and GDP in two distinct groups of countries – corruption in Russia was closely linked to the GDP of Belarus, Moldova and Russia, while corruption in Lithuania was linked to GDP in Estonia, Latvia, Lithuania and Ukraine. At the same time corruption in Russia and Ukraine were also closely linked. These results support previous research that indicates a strong link between been legitimate economy and the black economy in many countries of Eastern Europe and the Baltic states. The results of the regression analysis suggest that a highly skilled workforce which is mobile and working in an environment of high perceived corruption in the target countries is related to increases in cybercrime even within Australia. It is important to note that the data used for the dependent and independent variables were gathered over a seven year time period, which included large economic shocks such as the global financial crisis. Originality/value This is the first paper to use a modelling approach to directly show the relationship between various social, economic and demographic factors in the Baltic states and Eastern Europe, and the level of card skimming and card not present fraud in Australia.

Audit fees and asset securitization risks

The thesis investigates “where were the auditors in asset securitizations”, a criticism of the audit profession before and after the onset of the global financial crisis (GFC). Asset securitizations increase audit complexity and audit risks, which are expected to increase audit fees. Using US bank holding company data from 2003 to 2009, this study examines the association between asset securitization risks and audit fees, and its changes during the global financial crisis. The main test is based on an ordinary least squares (OLS) model, which is adapted from the Fields et al. (2004) bank audit fee model. I employ a principal components analysis to address high correlations among asset securitization risks. Individual securitization risks are also separately tested. A suite of sensitivity tests indicate the results are robust. These include model alterations, sample variations, further controls in the tests, and correcting for the securitizer self-selection problem. A partial least squares (PLS) path modelling methodology is introduced as a separate test, which allows for high intercorrelations, self-selection correction, and sequential order hypotheses in one simultaneous model. The PLS results are consistent with the main results. The study finds significant and positive associations between securitization risks and audit fees. After the commencement of the global financial crisis in 2007, there was an increased focus on the role of audits on asset securitization risks resulting from bank failures; therefore I expect that auditors would become more sensitive to bank asset securitization risks after the commencement of the crisis. I find that auditors appear to focus on different aspects of asset securitization risks during the crisis and that auditors appear to charge a GFC premium for banks. Overall, the results support the view that auditors consider asset securitization risks and market changes, and adjust their audit effort and risk considerations accordingly.

Aligning off-balance sheet risk, on-balance sheet risk and audit fees: a PLS path modelling analysis

This study focuses on using the partial least squares (PLS) path modelling technique in archival auditing research by replicating the data and research questions from prior bank audit fee studies. PLS path modelling allows for inter-correlations among audit fee determinants by establishing latent constructs and multiple relationship paths in one simultaneous PLS path model. Endogeneity concerns about auditor choice can also be addressed with PLS path modelling. With a sample of US bank holding companies for the period 2003-2009, we examine the associations among on-balance sheet financial risks, off-balance sheet risks and audit fees, and also address the pervasive client size effect, and the effect of the self-selection of auditors. The results endorse the dominating effect of size on audit fees, both directly and indirectly via its impacts on other audit fee determinants. By simultaneously considering the self-selection of auditors, we still find audit fee premiums on Big N auditors, which is the second important factor on audit fee determination. On-balance-sheet financial risk measures in terms of capital adequacy, loan composition, earnings and asset quality performance have positive impacts on audit fees. After allowing for the positive influence of on-balance sheet financial risks and entity size on off-balance sheet risk, the off-balance sheet risk measure, SECRISK, is still positively associated with bank audit fees, both before and after the onset of the financial crisis. The consistent results from this study compared with prior literature provide supporting evidence and enhance confidence on the application of this new research technique in archival accounting studies.

Aligning off-balance sheet risk, on-balance sheet risk and audit fees: a PLS path modelling analysis

This study focuses on using the partial least squares (PLS) path modelling methodology in archival auditing research by replicating the data and research questions from prior bank audit fee studies. PLS path modelling allows for inter-correlations among audit fee determinants by establishing latent constructs and multiple relationship paths in one simultaneous PLS path model. Endogeneity concerns about auditor choice can also be addressed with PLS path modelling. With a sample of US bank holding companies for the period 2003-2009, we examine the associations among on-balance sheet financial risks, off-balance sheet risks and audit fees, and also address the pervasive client size effect, and the effect of the self-selection of auditors. The results endorse the dominating effect of size on audit fees, both directly and indirectly via its impacts on other audit fee determinants. By simultaneously considering the self-selection of auditors, we still find audit fee premiums on Big N auditors, which is the second important factor on audit fee determination. On-balance-sheet financial risk measures in terms of capital adequacy, loan composition, earnings and asset quality performance have positive impacts on audit fees. After allowing for the positive influence of on-balance sheet financial risks and entity size on off-balance sheet risk, the off-balance sheet risk measure, SECRISK, is still positively associated with bank audit fees, both before and after the onset of the financial crisis. The consistent results from this study compared with prior literature provide supporting evidence and enhance confidence on the application of this new research technique in archival accounting studies.

Bank audit fees and asset securitization risks

Using the lens of audit pricing, we provide insights into auditors’ behaviors in relation to the risk of asset securitizations to bank holding companies in a period encompassing the Global Financial Crisis (GFC) and the introduction of the accounting standards FAS 166 and FAS 167. Using US bank holding company data from 2003 to 2011, we find significant and positive associations between asset securitization risks and audit fees. We find that auditors appear to focus on different aspects of asset securitization risks after the onset of the GFC, and increase their attention to the systemic risks facing bank holding companies in general. After the implementation of FAS 166 and FAS 167, which removed the discretion to treat asset securitizations as sales and required the consolidation of the accounts of special purpose entities, asset securitization risks no longer have a significant effect on audit fees.

The cultural economy in recession : Examining the US experience

Over the last two decades we have witnessed the global rise and spread of urban development policies aimed at stimulating the cultural economy. However, with the onset of the global financial crisis and recession, the cultural economy may experience a dramatic reorganization and even decline. Given the attention many cities place on the cultural sectors it is important to examine how they fare following this major economic event. To do so, this article examines the occupational distribution and geographic structure of the cultural economy in the 30 largest US metropolitan areas during recession and captures the changes that have occurred over the last decade. Based on this analysis, we identify a set of key trends, which highlight that while the boom period is generally characterized by widespread and, in some places, extreme growth in the cultural sectors, the recession is a period of selective growth and not a period of total decline. These findings have implications for determining the relevance of the arts and cultural sectors as targets of urban economic development policy in the post-recession era.

Determinants of plant performance dynamics : empirical analysis of the manufacturing sector in Indonesia, 1990-2000

We identify determinants of plant dynamics and find their differences before, during, and after the Asian financial crisis. The results show that the distinction of the crisis is important and the effects of the crisis do not seem to persist after 1998. Furthermore, we reject Gibrat's law as the right functional form to describe plant growth. We are not able to support empirically the theoretical results that smaller and efficient plants tend to grow faster than larger and inefficient plants with the exception of the crisis period. The results reflect that there was a trickle down effect of economic development.

In pursuit of an architecture realism

The noble idea of studying seminal works to ‘see what we can learn’ has turned in the 1990s into ‘let’s see what we can take’ and in the last decade a more toxic derivative ‘what else can’t we take’. That is my observation as a student of architecture in the 1990s, and as a practitioner in the 2000s. In 2010, the sense that something is ending is clear. The next generation is rising and their gaze has shifted. The idea of classification (as a means of separation) was previously rejected by a generation of Postmodernists; the usefulness of difference declined. It’s there in the presence of plurality in the resulting architecture, a decision to mine history and seize in a willful manner. This is a process of looking back but never forward. It has been a mono-culture of absorption. The mono-culture rejected the pursuit of the realistic. It is a blanket suffocating all practice of architecture in this country from the mercantile to the intellectual. Independent reviews of Australia’s recent contributions to the Venice Architecture Biennales confirm the malaise. The next generation is beginning to reconsider classification as a means of unification. By acknowledging the characteristics of competing forces it is possible to bring them into a state of tension. Seeking a beautiful contrast is a means to a new end. In the political setting, this is described by Noel Pearson as the radical centre[1]. The concept transcends the political and in its most essential form is a cultural phenomenon. It resists the compromised position and suggests that we can look back while looking forward. The radical centre is the only demonstrated opportunity where it is possible to pursue a realistic architecture. A realistic architecture in Australia may be partially resolved by addressing our anxiety of permanence. Farrelly’s built desires[2] and Markham’s ritual demonstrations[3] are two ways into understanding the broader spectrum of permanence. But I think they are downstream of our core problem. Our problem, as architects, is that we are yet to come to terms with this place. Some call it landscape others call it country. Australian cities were laid out on what was mistaken for a blank canvas. On some occasions there was the consideration of the landscape when it presented insurmountable physical obstacles. The architecture since has continued to work on its piece of a constantly blank canvas. Even more ironic is the commercial awards programs that represent a claim within this framework but at best can only establish a dialogue within itself. This is a closed system unable to look forward. It is said that Melbourne is the most European city in the southern hemisphere but what is really being described there is the limitation of a senseless grid. After all, if Dutch landscape informs Dutch architecture why can’t the Australian landscape inform Australian architecture? To do that, we would have to acknowledge our moribund grasp of the meaning of the Australian landscape. Or more precisely what Indigenes call Country[4]. This is a complex notion and there are different ways into it. Country is experienced and understood through the senses and seared into memory. If one begins design at that starting point it is not unreasonable to think we can arrive at an end point that is a counter trajectory to where we have taken ourselves. A recent studio with Masters students confirmed this. Start by finding Country and it would be impossible to end up with a building looking like an Aboriginal man’s face. To date architecture in Australia has overwhelmingly ignored Country on the back of terra nullius. It can’t seem to get past the picturesque. Why is it so hard? The art world came to terms with this challenge, so too did the legal establishment, even the political scene headed into new waters. It would be easy to blame the budgets of commerce or the constraints of program or even the pressure of success. But that is too easy. Those factors are in fact the kind of limitations that opportunities grow out of. The past decade of economic plenty has, for the most part, smothered the idea that our capitals might enable civic settings or an architecture that is able to looks past lot line boundaries in a dignified manner. The denied opportunities of these settings to be prompted by the Country they occupy is criminal. The public realm is arrested in its development because we refuse to accept Country as a spatial condition. What we seem to be able to embrace is literal and symbolic gestures usually taking the form of a trumped up art installations. All talk – no action. To continue to leave the public realm to the stewardship of mercantile interests is like embracing derivative lending after the global financial crisis.Herein rests an argument for why we need a resourced Government Architect’s office operating not as an isolated lobbyist for business but as a steward of the public realm for both the past and the future. New South Wales is the leading model with Queensland close behind. That is not to say both do not have flaws but current calls for their cessation on the grounds of design parity poorly mask commercial self interest. In Queensland, lobbyists are heavily regulated now with an aim to ensure integrity and accountability. In essence, what I am speaking of will not be found in Reconciliation Action Plans that double as business plans, or the mining of Aboriginal culture for the next marketing gimmick, or even discussions around how to make buildings more ‘Aboriginal’. It will come from the next generation who reject the noxious mono-culture of absorption and embrace a counter trajectory to pursue an architecture of realism.

Corporate credit risk prediction under stochastic volatility and jumps

This paper examines the impact of allowing for stochastic volatility and jumps (SVJ) in a structural model on corporate credit risk prediction. The results from a simulation study verify the better performance of the SVJ model compared with the commonly used Merton model, and three sources are provided to explain the superiority. The empirical analysis on two real samples further ascertains the importance of recognizing the stochastic volatility and jumps by showing that the SVJ model decreases bias in spread prediction from the Merton model, and better explains the time variation in actual CDS spreads. The improvements are found particularly apparent in small firms or when the market is turbulent such as the recent financial crisis.

Banking sector contingent liabilities and sovereign risk

The global financial crisis has underscored the need to pay attention to contingent government liabilities that could arise from bank failures for sovereign risk management. This paper proposes a simple method to construct a contingent liability index (CLI) for a banking sector that takes into account the size and concentration of the banking system, market expectations of bank defaults, and perceptions of government support to each bank. This method allows us to track potential government liabilities related to bank failures for 32 advanced and emerging economies on a monthly basis from 2006 to 2013. Furthermore, we find that the CLI is a significant determinant of sovereign CDS spreads. Our results suggest that a 1 percentage point increase in the CLI is associated with an increase in sovereign CDS spreads by 24 basis points for advanced economies and 75 basis points for emerging markets on average.

Analysis of risk management disclosures by Australian publicly listed companies

In the aftermath of the global financial crisis, effective risk management (RM) and its communication to stakeholders are now considered essential components in corporate governance. However, despite the importance of RM communication, it is still unclear how and to what extent disclosures in financial reports can achieve effective communication of RM activities. The situation is hampered by the paucity of international RM Research that captures institution differences in corporate governance standards. The Australian setting provides an ideal environment in which to examine RM communication because the Australian Securities Exchange (ASX) has since 2007 recommended RM disclosures under its principle-based governance rules. The recommendations are contained in Principle 7 of the Corporate Governance Principles and recommendations (ASX CGPR). Accordingly, to assess the effectiveness of the AXS's RM governance principle, this study examines the nature and extent of RM disclosures reported by major ASX-listed firms. Using a mixed method approach (thematic content analysis and a series of regression analysis) we find widespread divergence in disclosure practices and low conformance with the Principle 7 recommendations. Certain corporate governance mechanisms appear to influence some categories of RM dislcosure but equity risk has surprisingly little explanatory power. These results suggest that the RM disclosures practices observed in the Australian setting may not be meeting the objectives of regulators and the needs of stakeholders.

The value of tail risk hedging in defined contribution plans: What does history tell us

Hedging against tail events in equity markets has been forcefully advocated in the aftermath of recent global financial crisis. Whether this is beneficial to long horizon investors like employees enrolled in defined contribution (DC) plans, however, has been subject to criticism. We conduct historical simulation since 1928 to examine the effectiveness of active and passive tail risk hedging using out of money put options for hypothetical equity portfolios of DC plan participants with 20 years to retirement. Our findings show that the cost of tail hedging exceeds the benefits for a majority of the plan participants during the sample period. However, for a significant number of simulations, hedging result in superior outcomes relative to an unhedged position. Active tail hedging is more effective when employees confront several panic-driven periods characterized by short and sharp market swings in the equity markets over the investment horizon. Passive hedging, on the other hand, proves beneficial when they encounter an extremely rare event like the Great Depression as equity markets go into deep and prolonged decline.