Did the goodwill accounting standard impose material economic consequences on Australian acquirers?

This research explores the empirical association between takeover bid premium and acquired (purchased) goodwill, and tests whether the strength of the association changes after the passage of approved accounting standard AASB 1013 in Australia in 1988. AASB 1013 mandated capitalization and amortization of acquired goodwill to the income statement over a maximum period of 20 years. We use regressions to assess how the association between bid premium and acquired goodwill varies in the pre-AASB and post-AASB 1013 periods after controlling for confounding factors. Our results show that reducing the variety of accounting policy options available to bidder management after an acquisition results in a systematic reduction in the strength of the association between premium and goodwill.

Termination fees in a ‘bright line’ jurisdiction

We seek to statistically inform the debate regarding the Australian Takeovers Panel’s ‘bright line’ policy towards break fees. Based on 313 takeovers from 2002 to 2006, 85 involving break fees, we find post-bid competition to be unrelated to break fee usage and inversely related to bid success. We also find that break fee usage has a detrimental effect on shareholder wealth as measured by both the final bid premium and abnormal returns. Therefore, although break fees appear to be neither anticompetitive nor coercive within the Australian context, they do appear to have had a deleterious effect on shareholder wealth.

The impact of target board recommendations in Australian takeovers

This paper examines the impact of targe board recommendations on the probability of the bid being successful in the Australian takeovers context. Specifically, we model the success rate of the bid as a binary dependent variable and target board recommendations or the board hostility as our key independent variable by using logistic regression framework. Our model also includes bid structures and conditions variables (such as initial bid premium, bid conditions, toehold, and interlocking relationship) and bid events (such as panel and bid duration) as our control variables. Overall, we find board hostility has statistically significant negative effect on the success rate of the bid and almost all control variables (except for the initial bid premium) are statistically significant with the correct sign. That is, we find toehold, the percentage of share required to make the bid becomes successful, and the unconditional bid have positive impact on the success rate of the bid, at least as predictive determinants prior to the release of any hostile recommendation. Consistent with Craswell (2004), we also find the negative relation between interlocking relationship and the success rate of the bid. Our finding supports that from target investors’ point of view, interlock is consistent with the negative story of self interest by directors. Finally, like Walking (1985), we find that the initial bid premium does not have influence on the success rate of the bid. Hence our results reinstate Walking’s bid premium puzzle in Australian context.

Who is the South African retail giant behind the David Jones bid?

Yesterday morning came the news South African retailer Woolworths had offered $4 a share to acquire David Jones, a proposal that has the approval of the department store’s board. This offer, worth an estimated A$2.15 billion, represents a 25% premium over the current share price value. An earlier offer, from rival Myer, was rejected earlier this year. But who is Woolworths? Not to be confused with Australia’s largest supermarket, Woolworths SA is one of South Africa’s largest retailers.

A Multiplicative Homomorphic Sealed-Bid Auction-Based on Goldwasser-Micali Encryption

Instead of the costly encryption algorithms traditionally employed in auction schemes, efficient Goldwasser-Micali encryption is used to design a new sealed-bid auction. Multiplicative homomorphism instead of the traditional additive homomorphism is exploited to achieve security and high efficiency in the auction. The new scheme is the currently known most efficient non-interactive sealed-bid auction with bid privacy.

Examining the use of bid information in predicting the contractor’s performance

Purpose – The purpose of this paper is to examine the use of bid information, including both price and non-price factors in predicting the bidder’s performance. Design/methodology/approach – The practice of the industry was first reviewed. Data on bid evaluation and performance records of the successful bids were then obtained from the Hong Kong Housing Department, the largest housing provider in Hong Kong. This was followed by the development of a radial basis function (RBF) neural network based performance prediction model. Findings – It is found that public clients are more conscientious and include non-price factors in their bid evaluation equations. With the input variables used the information is available at the time of the bid and the output variable is the project performance score recorded during work in progress achieved by the successful bidder. It was found that past project performance score is the most sensitive input variable in predicting future performance. Research limitations/implications – The paper shows the inadequacy of using price alone for bid award criterion. The need for a systemic performance evaluation is also highlighted, as this information is highly instrumental for subsequent bid evaluations. The caveat for this study is that the prediction model was developed based on data obtained from one single source. Originality/value – The value of the paper is in the use of an RBF neural network as the prediction tool because it can model non-linear function. This capability avoids tedious ‘‘trial and error’’ in deciding the number of hidden layers to be used in the network model. Keywords Hong Kong, Construction industry, Neural nets, Modelling, Bid offer spreads Paper type Research paper

Service bid comparisons by fuzzy ranking in open railway market timetabling

In an open railway access market, the Infrastructure Provider (IP), upon the receipts of service bids from the Train Service Providers (TSPs), assigns track access rights according to its own business objectives and the merits of the bids; and produces the train service timetable through negotiations. In practice, IP chooses to negotiate with the TSPs one by one in such a sequence that IP optimizes its objectives. The TSP bids are usually very complicated, containing a large number of parameters in different natures. It is a difficult task even for an expert to give a priority sequence for negotiations from the contents of the bids. This study proposes the application of fuzzy ranking method to compare and prioritize the TSP bids in order to produce a negotiation sequence. The results of this study allow investigations on the behaviors of the stakeholders in bid preparation and negotiation, as well as evaluation of service quality in the open railway market.

The determinants of multinational contractors' willingness to bid for Australian public sector major infrastructure projects : towards deploying the eclectic paradigm of internationalisation

Against a background of already thin markets in some sectors of major public sector infrastructure in Australia and the desire of Australian federal government to leverage private finance, concerns about ensuring sufficient levels of competition are prompting federal government to seek new sources of in-bound Foreign Direct Income. The aim of this paper is to justify and develop a means to deploying the eclectic paradigm of internationalisation that forms part of an Australian federally funded research project designed to explain the determinants of multinational contractors' willingness to bid for Australian public sector major infrastructure projects. Despite the dominance of the eclectic paradigm as a theory of internationalisation for over two decades, it has seen limited application in terms of multinational construction. It is expected that the research project will be the first empirical study to deploy the eclectic paradigm to inbound FDI to Australia whilst using the dominant economic theories advocated for use within the eclectic paradigm. Furthermore, the research project is anticipated to yield a number of practical benefits. These include estimates of the potential scope to attract more multinational contractors to bid for Australian public sector infrastructure, including the nature and extent to which this scope can be influenced by Australian governments responsible for the delivery of infrastructure. On the other hand, the research is also expected to indicate the extent to which indigenous and other multinational contractors domiciled in Australia are investing in special purpose technology and achieving productivity gains relative to foreign multinational contractors.