Re-examining the BMW-Rover affair:a case study of corporate, strategic and government failure?

This paper analyses corporate and government strategies during the purchase, period of control and divestment by BMW of the car manufacturer Rover over the period 1994 to 2000. This paper examines three types of ‘failure’. It views BMW’s purchase of Rover as a ‘corporate failure’, with British Aerospace keen to sell Rover to raise cash and with BMW not realising the real condition of Rover. It then moves on to examine BMW’s ‘divide and rule’ strategies with regard to working conditions and subsidy-seeking and its decision to sell Rover as an example of ‘strategic failure’. Finally, it considers the ‘hands-off’ nature of British policy towards such transnational firms, and BMW in particular, as an example of ‘government failure’. This paper concludes by raising the possibility of an EU-wide policy towards transnationals, especially in terms of monitoring the activities of such firms.

Methodological shifts in ratio-based modelling of corporate collapse

The year 1968 saw a major shift from univariate to multivariate methodological approaches to ratio-based modelling of corporate collapse. This was facilitated by the introduction of a new statistical tool called Multiple Discriminant Analysis (MDA). However, it did not take long before other statistical tools were developed. The primary objective for developing these tools was to enable deriving models that would at least do as good a job asMDA, but rely on fewer assumptions. With the introduction of new statistical tools, researchers became pre-occupied with testing them in signalling collapse. lLTUong the ratio-based approaches were Logit analysis, Neural Network analysis, Probit analysis, ID3, Recursive Partitioning Algorithm, Rough Sets analysis, Decomposition analysis, Going Concern Advisor, Koundinya and Purl judgmental approach, Tabu Search and Mixed Logit analysis. Regardless of which methodological approach was chosen, most were compared to MDA. This paper reviews these various approaches. Emphasis is placed on how they fared against MDA in signalling corporate collapse.

The accounting profession: a religious and community platform for change

Following the failure of large corporations in both Australia and the United States, considerable dialogue has been generated on the integrity and role of accountants. This focus of this study was to examine the role of the professional accounting community, which shapes, and is shaped by the value, religion and culture of accounting members. In view of the impetus towards internationalization of accounting standards it is suggested the accounting profession re-examine its position as part of the international human community
and re-examine its core values.

An Australian response to recent developments in the market for audit services

Where the quality - both competence and independence - of an audit is tested, often in the circumstance of a corporate failure, auditors frequently have good defenses as to their competency but rarely do they have equally convincing defenses for the objectivity of their decision-making or the independence of their audit. It is recommended that large audit firms establish an independence board with the authority to define, review and decide upon all threats and potential threats to independence. It would also have responsibility for quality-control and educational programs in respect of audit firm's independence decision-making. Firms would make transparent the processes of the boards, their membership and quality-control procedures. Firms would compete on their independence control processes and not just competence and price. Additionally, firms need to encourage a culture that rewards personnel for seeking counsel on issues pertinent to independence.

The market for financial report audits : regulation of and competition for auditor independence

The independence of auditors and the quality of financial report audits generally are rarely tested except in circumstances of corporate failure when alleged sub-optimality is present. Often auditors have good defences as to their expertise or competency, but rarely do they have equally convincing defences for the independence of their audit. A major issue for the regulation of auditor independence is that the threats to independence are often subtle and difficult to measure. This paper argues that firms undertaking financial report audits need to be transparent and competitive in respect of auditor independence. Two models that adopt this premise are proposed.

Default probability for the Jordanian companies: A test of cash flow theory

Abstract
This paper aims to investigate the effect of cash flow and free cash flow on corporate failure in the emerging market in particular Jordan using two samples; matched sample and a cross sectional time-series (panel data) sample representative of 167 Jordanian companies in 1989-2003. LOGIT models are used to outline the relationship between firms’ financial health and the probability of default. Our results show that there is firm’s free cash flow increases corporate failure. The result also shows that the firm’s cash flow decreases corporate failure. Firms’ capital structures are fund a mental in predicting default. Capital structure is seen as the main factor affecting the probability of default as it affects a firm’s ability to access external sources of funds. Jordanian firms depend on short-term debt for both short and long term financing.

History repeats itself: The failure of rational choice models in corporate governance

Marnet, Oliver, 'History repeats itself: The failure of rational choice models in corporate governance', Critical Perspectives on Accounting (2005) 18(2) pp.191-210 RAE2008

Managerial failure in mid-Victorian Britain?: Corporate expansion during a promotion boom

This article examines the mid-1840s expansion of the British railway network, which was associated with a large deterioration in shareholder value. Using a counterfactual approach and new data on railway competition, we argue that the expansion of the railway companies, and their subsequent decline in financial performance, was not due to managerial failure. Rather, the promotion of new routes by established railways and mergers with other companies was part of a managerial strategy to maintain incumbent positions, and may have been preferable to not expanding whilst their competitors did.

Corporate governance failure at PT

The following case study depicts the bitter transfiguration of Portugal Telecom, SGPS (PT), a multinational telecommunications company that was once an honourable flag of innovation, corporate governance standards in Portugal and overseas. It scrutinises the controversial episodes that paved the way for the pitiful condition in which PT is nowadays: a company that carries the weight of a ruinous €897 million investment in a defaulted company and no more than a 25.6% stake in a heavily indebted Brazilian carrier. The free-fall is made, ironically, of a complete disregard for best corporate governance practices, allowing for PT’s major shareholders to take over the helm of the company, using it selfishly as a cash cow.

Corporate governance failure and its impact on National Australia Bank's performance

The National Australia Bank (NAB) is the largest financial services institution listed on the Australian stock exchange and is within the 30 most profitable financial services organisation in the world. In January 2004, the bank disclosed to the public that it had identified losses relating to unauthorised trading in foreign currency options amounting to AUD360 million. This foreign exchange debacle was classified as operational risk, the risk of loss resulting from inadequate or failed processes, people, or systems and reiterated the importance of corporate governance for banks. Concurrent issues of National Australia Bank’s AUD4.1 billion loss on US HomeSide loans in 2001, the degree of strength of their risk management practices and lack of auditor independence, were raised by the US Securities and Exchange Commission in 2004, reinforcing the view that corporate governance had not been given the priority it deserved over a number of years. This paper will assess and critically analyse the impact of corporate governance failure by management and Board of Directors on NAB’s performance over the years 2001-2005.

Corporate governance failure and its impact on National Australia Bank's performance

The National Australia Bank (NAB) is the largest financial services institution listed on the Australian stock exchange and is within the 30 most profitable financial services organisation in the world. In January 2004, the bank disclosed to the public that it had identified losses relating to unauthorised trading in foreign currency options amounting to AUD360 million. Thisforeign exchange debacle was classified as operational risk, the risk of loss resulting from inadequate or failed processes, people, or systems and reiterated the importance of corporate governance for banks. Concurrent issues of National Australia Bank's AUD4.1 billion loss on US HomeSide loans in 2001, the degree of strength of their risk management practices and lack of auditor independence, were raised by the US Securities and Exchange Commission in 2004, reinforcing the view that corporate governance had not been given the priority it deserved over a number of years. This paper will assess and critically analyse the impact of corporate governance failure by management and Board of Directors on NAB's performance over the years 2001-2005.