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

The origins of formal collusion in Australian fire insurance 1870-1920

The market for insurance has become increasingly competitive in recent years. However, it has not always been so. At the end of the nineteenth century, it was characterized by a highly concentrated and tightly controlled oligopolistic market structure. As such, the history of the fire insurance industry provides an interesting case study in the development of collusive behaviour amongst firms. Up to 1897, pricing agreements among firms were generally short-lived, and were followed by periods of intense competition. After this point, an agreement was forged, which proved very resilient to market pressures and formed the basis of premium rate setting until the 1970s. This paper investigates the difference between this agreement and previous efforts to set premium rates, and points to some of the common features of the later compact, which explain its longevity.

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.

The role of human resource management (HRM) in Australian-Malaysian joint ventures

This article examines human resource management (HRM) for successful Australian-Malaysian joint ventures (JVs), on the basis of survey data and case studies. The findings suggest that each phase of JV development had its own pattern of HR practices. Three phases of development were distinguished - initiation, transitional, and maturational. The first phase involved selecting, recruiting and training a skilled workforce and formulating rudimentary human resource policies. Cultural differences were most marked in this phase. The second phase, after three years of operation, involved evolution of human resource policies better suited to local conditions, and more polycentric management staffing. The final phase, after six years of operation, saw the development of a distinctive human resources system, and the minimisation of cultural differences as an operational issue. In this phase there was also a move to more geocentric management staffing.

New community governance in small rural towns: the Australian experience

State and federal governments in Australia have developed a range of policy instruments for rural areas in Australia that are infused with a new sense of ‘community’, employing leading concepts like social capital, social enterprise, community development, partnerships and community building. This has encouraged local people and organisations to play a greater role in the provision of their local services and has led to the development of a variety of ‘community’ organisations aimed at stemming social and economic decline. In Victoria, local decision-making, before municipal amalgamations, gave small towns some sense of autonomy and some discretion over their affairs. However, following municipal amalgamations these small towns lost many of the resources—legal, financial, political, informational and organisational—associated with their former municipal status. This left a vacuum in these communities and the outcome was the emergence of local development groups. Some of these groups are new but many of them are organisations that have been reconstituted as groups with a broader community focus. The outcomes have varied from place to place but overall there has been a significant shift in governance processes at community level. This paper looks at the processes of ‘community governance’ and how it applies in a number of case studies in Victoria.

The Sustainability and Evolution of Quality Improvement Programmes-an Australian Case Study

This paper presents a case study on the implementation of quality management programmes and initiatives in one manufacturing company in Australia, which has lasted for more than two decades. Using data collected through in-depth interviews, the case study describes how the company progressed from an earlier initiative based on quality control to the present initiatives that emphasize customer focus, product development, and innovation. Several important insights are drawn from the case study, including the importance of aligning the quality programmes or initiatives with a clear strategic focus. In addition, the commitment and leadership of senior management of the company has been demonstrated, particularly in the provision of resources and facilities to support the TQM programme, and also shown is how the company has been successful in maintaining its long-term commitment to quality management, which has led to an accumulation of various knowledge and competencies, which function as a valuable resource to sustain its business performance.

The Relationship between TQM Practices and Quality Performance and the Role of Formal TQM Programs: An Australian Empirical Study

This article presents the findings from an empirical study examining the relationship between total quality management (TQM) practices and quality performance in Australian organizations. A comparison is made between organizations that have adopted formal TQM programs and organizations without a formal program in place. It was recognized that the lack of a formal program did not necessarily mean TQM principles were not being practiced. The findings show that the firms adopting formal TQM programs implement several TQM practices at a higher level than those that do not have TQM programs. This difference, however, is not apparent in the case of quality performance. Furthermore, the findings show the strong links between TQM practices and quality performance, and there is no significant difference between organizations implementing formal TQM programs and those organizations simply adopting TQM practices. This suggests that it is the adoption of quality practices that matters rather than formal programs per se.

Coastal state fisheries management : a review of Australian enforcement action in the Heard and McDonald Islands Australian Fishing Zone

In 1953 the Heard and McDonald Islands Act, which formalised the transfer of sovereignty over the two named sub-Antarctic islands from the United Kingdom, was passed by the Australian Government. For the ensuing 40 years, Australian management of the Islands was uneventful. The first subAntarctic scientific station was established at Atlas Cove, on Heard Island, in December 1947 following the initial indication by Britain of a willingness to transfer rights to the Islands. In 1987 the Islands, together with their 12 mile territorial sea, were proclaimed a wilderness reserve with a number of activities including fishing and mining prohibited. The same area was included on the WorId Heritage List in 1997. In 1979 a 200 nautical mile Australian Fishing Zone (AFZ) was proclaimed around all Australian territories. In 1994 new terminology was embraced and the Exclusive Economic Zone was declared.

Integrated management system:the experiences of three Australian organisations

Purpose – Management systems and standards have become a key part of the organisation's lifeline and a prerequisite for survival in the twenty-first century. Systems for quality environmental and occupational health and safety (OHS) now form the three main pillars of the organisation, the fourth one being financial accounting. In light of the increasing pressure and demands from different stakeholders, it is becoming necessary for organisations to adopt the different systems/standards. However, to achieve the benefits from the implementation and subsequently maintenance of these systems it is only a practical and logical step that the existing management systems/standards be integrated into a single system.

Design/methodology/approach – This paper presents the experiences of three Australian-based organisations that have successfully undertaken the integration of their management systems/standards. Data for this paper were collected through in-depth interviews conducted with the managers responsible for quality, environment and OHS systems.

Findings – The interviews revealed a number of quantifiable and unquantifiable benefits experienced by the companies from operating one integrated system, such as saving of dollars, better utilisation of resources and improved communication across the organisation, to name a few. However, for the benefits to be realized it is essential that organisations are aware of the challenges and obstacles accompanying integration of systems/standards. If these challenges are not addressed early in the process they can delay the completion of the integration process.

Originality/value – Recommendations for other organisations contemplating integrating their management system include: obtaining commitment from the top management; having adequate resources to integrate the systems; having communication and training across the organisation in aspects of integration; and, last but not the least, having integrated audits. Implementation of these recommendations may vary from one organisation to another; however, it would result in lesser resistance for the organisations following them.

E-Commerce, human resource strategies, and competitive advantage: two Australian banking case studies

Service organizations need to consider in depth the human resource management (HRM) strategies that will enable them to achieve sustained competitive advantage in the e-commerce era. This paper analyzes the HRM strategies developed to accommodate the changing customer service practices associated with B2C e-commerce in the retail banking sector. Based on case study data, it describes how two banks in Australia, one large, the other small, have linked their e-commerce strategies with their overall business strategy, and the extent to which their HRM strategies have helped them to utilize their e-commerce capability to achieve sustained competitive advantage.

The costs of raising equity capital by Australian property trust initial public offerings

This paper reports some of the direct costs of raising equity capital by property trust initial public offerings (IPOs) in Australia from 1994 to 2004. It also documents the amount of underpricing by these IPOs. The results indicate the average fees paid to underwriters and/or stockbrokers in managing and marketing the issue was around 3.3% of the public equity capital raised. The average fees paid to legal firms, accounting firms and valuers for their professional involvement and expert reports were 0.4%, 0.2% and 0.1% respectively, totaling 0.7% of the equity raised. Other fees such as printing, listing fees, postage, distribution and advertising cost around 2.1%. The total average direct costs amounted to around 6.1% of the proceeds raised. The average underpricing by these property trust IPOs was 2.6%. This paper also investigates the hypotheses that the percentage direct capital raising costs are influenced by the size of the IPO and whether the IPO is underwritten. This study confirms that larger property trust equity capital raisings have lower percentage total direct cost;, however, it does not find that underwriting significantly influences the percentage of total direct costs for these property trust IPOs.

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.

Can the use of foreign currency derivatives explain variations in foreign exchange exposure? Evidence from Australian companies

We investigate the role of foreign currency derivatives (FCD) in alleviating foreign exchange rate exposure of Australian firms. While there is some evidence that the use of FCD reduces the level of ex-post short-term exposure, such an effect is absent with regard to the degree of foreign operations. Our results support the view that FCDs are used to hedge existing exchange rate exposures and that Australian firms, generally, are extensively exposed to currency fluctuations in the long run. While monthly exposure appears to be a function of a firm's size and financial hedging, exchange rate exposure of shorter horizons (1 and 3 months) appears to be negatively related to a firm's price earnings ratio (proxying growth opportunities)—thereby supporting the ‘underinvestment’ hypothesis. Further, the exposure of longer horizons (12 and 24 months) is positively related to a firm's liquidity, supporting the view that liquidity is a substitute for hedging.

On the determinants of derivative usage by Australian companies

This paper provides an examination of the determinants of derivative use by Australian corporations. We analysed the characteristics of a sample of 469 firm/year observations drawn from the largest Australian publicly listed companies in 1999 and 2000 to address two issues: the decision to use financial derivatives and the extent to which they are used. Logit analysis suggests that a firm's leverage (distress proxy), size (financial distress and setup costs) and liquidity (financial constraints proxy) are important factors associated with the decision to use derivatives. These findings support the financial distress hypothesis while the evidence on the underinvestment hypothesis is mixed. Additionally, setup costs appear to be important, as larger firms are more likely to use derivatives. Tobit results, on the other hand, show that once the decision to use derivatives has been made, a firm uses more derivatives as its leverage increases and as it pays out more dividends (hedging substitute proxy). The overall results indicate that Australian companies use derivatives with a view to enhancing the firms' value rather than to maximizing managerial wealth. In particular, corporations' derivative policies are mostly concerned with reducing the expected cost of financial distress and managing cash flows. Our inability to identify managerial influences behind the derivative decision suggests a competitive Australian managerial labor market.