Stock market efficiency before and after a financial liberalisation reform:do breaks in volatility dynamics matter?

This article focuses on the deviations from normality of stock returns before and after a financial liberalisation reform, and shows the extent to which inference based on statistical measures of stock market efficiency can be affected by not controlling for breaks. Drawing from recent advances in the econometrics of structural change, it compares the distribution of the returns of five East Asian emerging markets when breaks in the mean and variance are either (i) imposed using certain official liberalisation dates or (ii) detected non-parametrically using a data-driven procedure. The results suggest that measuring deviations from normality of stock returns with no provision for potentially existing breaks incorporates substantial bias. This is likely to severely affect any inference based on the corresponding descriptive or test statistics.

Has the Financial Services Reform Act fixed the problems with the regulation of securities and derivatives?

The Financial Services Reform Act 2001 (Cth) introduced new definitions of“derivative” and “financial product” into the Corporations Act 2001 (Cth), andreplaced the separate regulatory regimes governing futures contracts andsecurities with a single financial markets authorisation regime and a singleintermediary licensing regime. This article examines the reforms to evaluatewhether they have been successful. It is argued that there are definiteimprovements resulting from the reforms, and the scope for regulatoryarbitrage has been greatly reduced. However, numerous problems remain.There are significant differences in the regulation of securities and deriva-tives. The distinction between securities and derivatives is still based on legalcharacteristics, not economic function. There is uncertainty as to the exactscope and interaction of the definitions, particularly with respect to equityderivatives, warrants and options. The current law has thus not fullyaddressed many of the problems that existed prior to the reforms.

National consumer credit laws, financial exclusion and interest rate caps : The case for diversity within a centralised framework

Australia is going through a major reform of consumer credit regulation, with the implementation of a proposal to transfer regulatory responsibility from the State and Territory Governments to the Commonwealth Government. While the broad policy approach is supported, the reform process has missed a significant opportunity to engage directly with issues of financial exclusion and with the potential role of regulation to reduce financial exclusion. The imposition of an interest rate cap can limit the impact of financial exclusion. However, the future of the existing interest rate caps is uncertain, given the diversity of approaches, and the heated debate that surrounds this issue. In the absence of support for regulatory initiatives to increase the availability of low cost, small loans, permitting regulatory diversity on this issue of interest rate caps, within an otherwise centralised regulatory framework., can minimise the impact of financial exclusion on consumers.

Preliminary review of over-regulation in Australian financial services

This article examines a preliminary review and the limited evidence of over-regulation in Australian financial services. The 1997 Wallis Report and the CLERP 6 paper resulted in the amendments to Ch 7 of the Corporations Act 2001 (Cth) by the Financial Services Reform Act. Nearly a decade later the system based upon 'one-size fits all' dual track regime and a consistent licensing regime has greatly increased the costs of compliance. In the area of enforcement there has not been a dramatic change to the effective techniques applied by ASIC over other agencies such as APRA. In particular there are clear economic arguments, as well as international experiences which state that a single financial services regulator is more effective than the multi-layered approach adopted in Australia. Finally, in the superannuation area of financial services, which is worth A$800 billion there is unnecessary dual licensing and duplicated regulation with little evidence of any consumer-member benefit but at a much greater cost

The regulation of insurance intermediaries in the Australian financial services market

The insurance industry discharges a critical role in the Australian economy and is a significant part of the Australian financial services market. The industry relies upon intermediaries, the principal types being brokers and agents, to promote, arrange and distribute their products and services in the market. The pivotal role that they play in this context and sensitivities associated with the consumer oriented products, such as house and contents insurance, has ensured close regulatory attention. Of particular importance was the passage of the Insurance (Agents and Brokers) Act 1984 (Cth), a comprehensive attempt to address the responsibilities of intermediaries as well as particular problem areas associated with the handling of money. However, with the introduction of financial services and market reform early in the new millennium this insurance intermediary specific regulatory approach was abandoned in favour of a market-wide strategy; that is, market reform was based upon across-the-board licensing, disclosure, conduct and fairness standards, and all financial products and services are now regulated at a generic level under Ch 7 of the Corporations Act 2001 (Cth). This article briefly explores the categories of insurance intermediaries and the relevant distinctions between them but focuses mainly upon the regulatory context in which they operate. This context transcends a strictly legal framework as the regulatory body, the Australian Securities and Investments Commission (ASIC), has sought to inform and guide the market through Policy Statements and Regulatory Guides. The usefulness of these guides as an adjunct to the legislation in explaining the scope and operation of regulatory framework is examined. In addition, the article looks at the self-regulatory and dispute resolution practices in this area and their impact. In conclusion an assessment of this across-the-board regulatory regime is advanced.

Thrown in the deep end : newcomers and public sector reform

Triggered by the continuing global financial crisis, most public administration systems internationally are reviewing their ability to meet public expectations in more challenging strategic environments, while satisfying the pressure from their political masters to drive down the costs of public administration. Consequently public sector organizations are under constant pressure to reform to meet not only the global economic challenges, but the need for more responsive government (Brown et al 2003). Doyle et al (2000) propose that organizational change is seldom well managed, but that the public sector faces greater difficulty in implementing corporate change than the private sector because of its unique environment, e.g. the need to deliver bureaucratically impartial outcomes. The scale of the changes required, and the constraints imposed by the context within which these changes need to occur, have intensified the need for capable public sector leadership and management. The types of capability required now extend beyond those typically required in public organizations through the efficiency drive of new public management. Acquiring these capabilities remains a key issue for public organizations. One challenge for public management, then, is leadership and management quality, including the need to recruit externally to refresh, re-energize and change the sector and its individual organizations as well as develop advanced skills among existing senior executives.

Evaluation of financial incentives as a quality improvement strategy in the public hospital context : clinician attitudes, design variables, and economic costs

In 2008, a three-year pilot ‘pay for performance’ (P4P) program, known as ‘Clinical Practice Improvement Payment’ (CPIP) was introduced into Queensland Health (QHealth). QHealth is a large public health sector provider of acute, community, and public health services in Queensland, Australia. The organisation has recently embarked on a significant reform agenda including a review of existing funding arrangements (Duckett et al., 2008). Partly in response to this reform agenda, a casemix funding model has been implemented to reconnect health care funding with outcomes. CPIP was conceptualised as a performance-based scheme that rewarded quality with financial incentives. This is the first time such a scheme has been implemented into the public health sector in Australia with a focus on rewarding quality, and it is unique in that it has a large state-wide focus and includes 15 Districts. CPIP initially targeted five acute and community clinical areas including Mental Health, Discharge Medication, Emergency Department, Chronic Obstructive Pulmonary Disease, and Stroke. The CPIP scheme was designed around key concepts including the identification of clinical indicators that met the set criteria of: high disease burden, a well defined single diagnostic group or intervention, significant variations in clinical outcomes and/or practices, a good evidence, and clinician control and support (Ward, Daniels, Walker & Duckett, 2007). This evaluative research targeted Phase One of implementation of the CPIP scheme from January 2008 to March 2009. A formative evaluation utilising a mixed methodology and complementarity analysis was undertaken. The research involved three research questions and aimed to determine the knowledge, understanding, and attitudes of clinicians; identify improvements to the design, administration, and monitoring of CPIP; and determine the financial and economic costs of the scheme. Three key studies were undertaken to ascertain responses to the key research questions. Firstly, a survey of clinicians was undertaken to examine levels of knowledge and understanding and their attitudes to the scheme. Secondly, the study sought to apply Statistical Process Control (SPC) to the process indicators to assess if this enhanced the scheme and a third study examined a simple economic cost analysis. The CPIP Survey of clinicians elicited 192 clinician respondents. Over 70% of these respondents were supportive of the continuation of the CPIP scheme. This finding was also supported by the results of a quantitative altitude survey that identified positive attitudes in 6 of the 7 domains-including impact, awareness and understanding and clinical relevance, all being scored positive across the combined respondent group. SPC as a trending tool may play an important role in the early identification of indicator weakness for the CPIP scheme. This evaluative research study supports a previously identified need in the literature for a phased introduction of Pay for Performance (P4P) type programs. It further highlights the value of undertaking a formal risk assessment of clinician, management, and systemic levels of literacy and competency with measurement and monitoring of quality prior to a phased implementation. This phasing can then be guided by a P4P Design Variable Matrix which provides a selection of program design options such as indicator target and payment mechanisms. It became evident that a clear process is required to standardise how clinical indicators evolve over time and direct movement towards more rigorous ‘pay for performance’ targets and the development of an optimal funding model. Use of this matrix will enable the scheme to mature and build the literacy and competency of clinicians and the organisation as implementation progresses. Furthermore, the research identified that CPIP created a spotlight on clinical indicators and incentive payments of over five million from a potential ten million was secured across the five clinical areas in the first 15 months of the scheme. This indicates that quality was rewarded in the new QHealth funding model, and despite issues being identified with the payment mechanism, funding was distributed. The economic model used identified a relative low cost of reporting (under $8,000) as opposed to funds secured of over $300,000 for mental health as an example. Movement to a full cost effectiveness study of CPIP is supported. Overall the introduction of the CPIP scheme into QHealth has been a positive and effective strategy for engaging clinicians in quality and has been the catalyst for the identification and monitoring of valuable clinical process indicators. This research has highlighted that clinicians are supportive of the scheme in general; however, there are some significant risks that include the functioning of the CPIP payment mechanism. Given clinician support for the use of a pay–for-performance methodology in QHealth, the CPIP scheme has the potential to be a powerful addition to a multi-faceted suite of quality improvement initiatives within QHealth.

Will Queensland tort reform change valuation practice and valuers liability

It has been common practice over past property boom and bust cycles in Australia for financial institutions and property owners who have suffered a loss in the property downturn to sue valuers for negligence. Damages claimed are based on the price differential between the valuation at or nearing the peak of the market and the subsequent sale in the market downturn. However, the context of valuers liability has become increasingly complex as a result of statutory reforms introduced in response to the Review of the Law of Negligence Final Report 2002), in particular the introduction of Civil Liability Acts introducing proportionate liability provisions. Legislative reforms have had some positive outcomes for Valuers, however valuers need to continue to maintain high ethical standards, independence and professionalism in valuation practice.

Is biggest best? A comparative analysis of the financial viability of the Brisbane City Council

Structural reform through forced mergers has been a dominant feature of Australian local government for decades. Advocates of compulsory consolidation contend that larger municipalities perform better across a wide range of attributes, including financial sustainability. While empirical scholars of local government have invested considerable effort into investigating these claims, no-one has yet examined the performance of Brisbane City Council against other local authorities, despite the fact that it is by far the largest council in Australia. This paper seeks to remedy this neglect by comparing Brisbane with Sydney City Council, an average of six south east Queensland councils and an average of ten metropolitan New South Wales councils against four measures of financial performance over the period 2008 to 2011.

Integrated reporting and directors’ concerns about personal liability exposure: Law reform options

Integrated reporting () holds significant promise as a new reporting paradigm that is holistic, strategic, responsive, material, and relevant across multiple time frames. However, its uptake in Australia is being hampered by directors’ concerns about personal liability exposure, particularly for forward-looking statements that subsequently prove to be unfounded. This article seeks to illuminate the bases for these liability concerns by outlining the similarities between and the operating and financial review requirements under the Corporations Act 2001 (Cth), and the relevant grounds for liability for misleading and deceptive disclosures, and breach of directors’ duties. In light of this discussion, this article proposes four possible reform options, ranging from minor adaptations to the Framework to far-reaching reforms of the Corporations Act. As assurance is desirable to ensure that reliance can be placed on integrated reports, the development of a legal safe harbour for auditors of forward-looking information is also canvassed.

Unpacking director financial literacy

The social and economic effects of high profile governance scandals such as the National Safety Council, HIH and Centro have triggered much debate, reform and research into predicting and preventing future failures. While this has meant director financial literacy is now recognised as a core capability required of each individual director, there has been little guidance on what this capability involves other than the very general statement of being able to 'read and understand financial statements'. This thesis presents the results of a Delphi study aimed at identifying the core concepts a director needs to master to be financially literate. Thirty-five experts drawn from accounting, education and practice agreed that to be financially literate a director must have a conceptual understanding of 24 basic accounting concepts and be able to independently apply this understanding to a strategic evaluation of the finances of the organisation they serve.

An austerity-driven energy reform

In July 2013, the government approved a major overhaul of the Spanish electricity sector to correct existing imbalances that have led to an exponential increase of regulated electricity costs and a huge tariff deficit. The reform addresses the problem of financial sustainability of the sector, severely affected by weak demand and overcapacity. Previous regulation introduced in 2012 and early 2013, also aimed at restoring financial stability of the sector, failed to correct the tariff shortfall and new regulatory measures were needed to reduce the 4.5 billion euros forecasted deficit for 2013. The frequent change of the rules of the game in the sector has created regulatory uncertainty, more so as it is not clear that the present reform will be sufficient to eliminate the deficit. Moreover, the government has left the door open to new regulation that would deal with the price formation system. In general, short run financial criteria have prevailed, while efficiency principles and a long run perspective have little weight in the reform.

Reform of Spain's profesional services market: Implementation of the EU Services Directive

The implementation of the European Commission Services Directive initiated the modernization process of services markets within the European Union. The objective was to guarantee the creation of a single market by ensuring the freedom of establishment and circulation. The transposition of the Directive in Spain triggered an initial wave of reforms in the Spanish legal system. A second package of reforms is currently underway, following recommendations by the EC, IMF and OECD, which highlight the relative lack of competition in Spain’s services as one of the major imbalances in its economy, alongside the public deficit and unemployment. Both the implemented and planned reforms represent a major step forward. Nevertheless, the government has recently announced modifications to the draft bill of the Professional Services and Associations Law, which is expected to soon be submitted for parliamentary debate and approval. Taking into consideration modifications already introduced, together with anticipated further changes, it will be important to maintain the main points of the draft bill and to introduce a deeper review of the legal framework for professional services, of the professional associations themselves, and for the activities that are subject to compulsory membership within a professional association. Spain’s territorial map of professional associations must too be redrawn.