Privatization and performance : the case of four Australian financial institutions

This paper investigates the performance after privatization of institutions in Australian banking and insurance. Privatization was anticipated to improve firm performance in Australia and elsewhere, yet findings are mixed. A comparative institutional approach is taken to analyzing firm performance in the longer term which allows for further structural change. A CAMEL analysis of performance before and after privatization events is undertaken for four privatized institutions, two each from banking and insurance sectors. These are matched with private peer institutions. Privatized institutions are found to perform quite similarly to private peer institutions both before and after privatization.

Aligning anti-money laundering, combating of financing of terror and financial inclusion : Questions to consider when FATF standards are clarified

Purpose – The purpose of this paper is to identify key questions that should be addressed to enable the Financial Action Task Force (FATF) to provide guidance regarding the alignment of anti-money laundering, combating of financing of terror and financial inclusion objectives.
Design/methodology/approach – The paper draws on relevant research and documents of the FATF to identify questions that are relevant to consider when it formulates guidance regarding the alignment between financial integrity and financial inclusion objectives.
Findings – The FATF advises that its risk-based approach enables countries and institutions to further financial inclusion. It is, however, not clear what the FATF means when its uses the terms “risk” and “low risk”. It is also unclear whether current proposals for financial inclusion regulatory models will necessarily limit money laundering (ML) aswell as terror financing risks to levels that can be described as “low”. The FATF will need to clarify its own thinking regarding low money laundering and low terror financing risk before it will be able to provide clear guidance to national regulators and financial institutions.
Originality/value – This paper was drafted to inform current FATF discussions regarding guidance on financial inclusion. The questions are relevant to all stakeholders in financial regulation.

Financial inclusion and financial integrity : aligned incentives?

A large percentage of the population in developing countries saves, remits money or accesses credit using informal financial services. Financial inclusion initiatives aim to expand the reach and attractiveness of formal financial services. Recently, the Financial Action Task Force embraced financial inclusion as complementary to anti-money laundering and counter-terrorist financing as it enhances financial transparency. Analyzing preliminary data from FinScope surveys on eight African countries we argue that an increase in access to formal services does not automatically imply an immediate and corresponding reduction of usage of informal services, especially as many individuals use informal and formal services in parallel. We consider customer trade-offs regarding the use of formal and informal services especially considering transparency as a potential disincentive to use formal services. The alignment of financial inclusion and integrity will fail where customers are apprehensive about increased transparency.

Environmental sustainability orientation and financial resources of small manufacturing firms in the Philippines

Purpose - This study challenges the conventional view that resources determine the extent of environmental sustainability orientation (ESO) of small firms in a developing Southeast Asian country context. First, this study attempts to develop a measurement model of ESO of small firms in the manufacturing sector in the Philippines. Second, the study explores the impact of the financial resources on the ESO of firms.

Design/methodology/approach - The study uses survey data from 166 small manufacturing firms in three Philippine cities. Multiple regression modelling is used to estimate the relationships between firm resources and ESO.

Findings - The results indicate that ESO is a multi-dimensional construct with three facets: awareness of, actions for, and appreciation of environmental sustainability. The empirical evidence does not support the conventional firm resources – ESO proposition.

Research limitations/implications - A proactive ESO is not necessarily beyond the reach of resource-constrained small firms. The generalisability of the findings however is limited to small manufacturing firms in the Philippines.

Practical implications - This study informs owner-managers of small firms that a proactive ESO does not largely depend on financial resources. Government policies and programs to encourage small firms to become sustainable should not only focus on financial forms of assistance.

Originality/value -  To date, this is the only Philippine-based study and one of the scarce small firm-focused studies that examine the proposition that small firms are unable to pursue a proactive ESO due to resource-constraints.

How the financial crisis sundered the dream of the autonomous subject

The article discusses the effect of the 2008 economic meltdown on self-reliance. Banks are noted to have honored credit default swaps and purchase mortgages as collateralized debt obligations (CDO) with the option of buy back at face value. Also discussed are the Wall Street Bailout, the Australian banking system and the overseas debt of Australia.

Volatility spillover between New Zealand stock market returns and exchange rate changes before and after the 1997 Asian financial crisis

Researchers in the last decade have been investigating the interdependence of stock returns and exchange rate changes within the same economy. Kanas (2000) and Yang and Doong (2004) find that for the G-7 countries, in general, the volatility of the stock market spills over to the exchange rate market but that volatility spillovers from the exchange rate market to the stock market are insignificant. Chen, Naylor, and Lu (2004) find that NZ individual firm returns are significantly exposed to exchange rate changes. This study complements their work by investigating the volatility spillover between the stock market and the foreign exchange market within the NZ economy.

Human rights performance reporting : a study of corporations within Australian financial sector

This paper investigates the human rights performance reporting practices of the top 50 Australian financial service companies listed in the Australian Stock Exchange. All corporate reporting media, including annual reports, Social Responsibility Reports (CSR) and company websites, were reviewed to document their disclosure practices for the current period (2009/2010). In considering a number of international voluntary guidelines on human rights, a content analysis instrument containing 80 specific human rights themes, under 10 general categories, was developed to examine corporate reporting media. The results remain intensely unimpressive. The number of companies that disclosed human rights items is extremely low; the majority of the items were not disclosed by any of the companies under investigation. However, compared to CSR reports and company websites, annual reports were the preferable media used to disclose human rights issues. The result indicates how ineffective the voluntary global guidelines are in ensuring that Australian financial corporations report on their human rights performances.

Determinants of capital structure of A-REITS and the global financial crisis

This paper contributes to the capital structure literature by investigating the determinants of capital structure of Australian Real Estate Investment Trusts (A-REITs) over the period 2006-2009. By using a panel approach and a Global Financial Crisis (GFC) dummy variable, our analysis incorporates the Global Financial Crisis (GFC) shock which appears to have affected the market after December 2007. We find that A-REIT size, profitability, tangibility, operating risk and number of growth opportunities impact similarly to many previous studies of international entities upon the degree of leverage. We also find mixed support for prevailing capital structure theories of Pecking Order, Trade-off and Agency Theory, but find that Market Timing Theory can be rejected over our sample period. With specific focus after onset of the GFC, we find that the relationship between capital structure and our independent variables is somewhat distorted. Consequently, the postulations of theory also become distorted whereby changes to capital structure come about because of the primary goal to survive, rather than managerial opportunism.

Implied volatility smiles, option mispricing and net buying pressure : evidence around the global financial crisis

Using the recent global financial crisis as an exogenous setting, we examine the presence and source of implied volatility smile phenomena in Australian S&P ASX 200 index options. We find a pronounced implied volatility smile for index puts in both bull and bear markets and a smile for index calls in the bear but not bull market. Implied volatilities of out-of-the money puts tend to be upwards biased whilst those of calls tend to be downwards biased. We also find that the bias in implied volatilities yields excess returns based on unhedged and delta-neutral trading strategies, suggesting that implied volatilities are related to option mispricing. Net buying pressure from market participants appears to be a source of mispricing in the case of out-of-the-money index puts with excess demand particularly pronounced during the bull period before the global financial crisis unfolded.