Print ISSN: 2204-1990

Online ISSN: 1323-6903

Volume 12, Issue 2

Volume 12, Issue 2, Summer and Autumn 2006

Institutional Investors: Do They Have a Role in the Monitoring of Corporate Performance?

Margaret Nowak Margaret McCabe

Journal of Contemporary Issues in Business and Government, 2006, Volume 12, Issue 2, Pages 1-14

In response to perceived anger of shareholders resulting from the combination of company failures, high termination payouts and CEO remuneration packages there has been growing media interest in assigning a role to institutional investors to participate as active monitors of corporate performance. This paper explores how institutional investors undertake the monitoring of corporate performance and governance processes and structures. Selected funds managers were interviewed about their approach to active institutional monitoring of invested companies. This article reports on the processes which funds managers indicated they adopted to monitor company performance and governance. It looks at managers' perceptions of the considerations which influenced the development of attitudes and policies about monitoring and the decision to undertake active monitoring and influencing activity. The processes and procedures through which exercise of real influence within invested companies is perceived to flow are discussed. The funds management industry is not homogeneous in its approach to active institutional monitoring and relations with invested companies. Thus, future research to measure the impact on corporate performance of the presence of institutional investors on the share register may need to differentiate between categories of institutional investor.

The 'State Tradition' in Australia: Reassessing an Earlier View

Roger Wettenhall

Journal of Contemporary Issues in Business and Government, 2006, Volume 12, Issue 2, Pages 15-46

This article seeks to revive interest in an Australian 'state tradition' that has been undergoing continuous development since the first European settlements in the late 1700s and early 1800s. Recent attempts to redefine such a tradition miss many of the foundational elements. There has been a tendency to locate the beginnings in the federal 'settlement' of 1901, and to see as outdated and irrelevant anything that happened before the current mood of marketising and privatising came to dominate our notions of political and economic correctness. Major changes have of course occurred in the nature of Australian statehood over the years, and they will continue to occur. However an understanding of the tradition restated in this article remains important for several reasons: because that tradition has furnished the foundations of so many of our national institutions; because it provides a standard against which the recent changes can be assessed; and because it will continue to influence and inform challenges to today's economic-rationalist/NPM (New Public Management) paradigm. Such challenges will seek to take us further forward, not backward, but in a style that is inclusive rather than divisive.

An Exploration of the Attributes of International Harmonisation Indices Using the T-Index

Emita W. Astami, Greg Tower, Rusmin Ross Taplin

Journal of Contemporary Issues in Business and Government, 2006, Volume 12, Issue 2, Pages 47-66

This study analyses the degree of harmony of four key accounting policy choices - depreciation policies, type of goodwill treatment, fixed asset valuation and inventory measurement - in 442 companies in five Asia-Pacific countries. The T-Index finds goodwill harmony percentages were only nine percent if non-disclosing companies were considered to be not comparable, 25 percent if excluded and 71 percent if considered comparable to all. Similarly, different assumptions about partial comparability of accounting policy choices resulted in varying scores from 36-61 percent for inventory. The analysis shows that in the Asia-Pacific region there remains a large level of different accounting policies chosen by countries. Concerns about comparability of data for financial statement users thus remain. Closer scrutiny of implicit assumptions contained within harmony indices and consideration of more detailed analysis are also advocated by this study.

The Smoothing Potential of Depreciation for Local Authorities

Robyn Pilcher

Journal of Contemporary Issues in Business and Government, 2006, Volume 12, Issue 2, Pages 67-80

The purpose of this paper is to consider the question: Does depreciation allocation provide a vehicle for local councils to smooth, maximise or minimise reported operating result? In 1968 Copeland claimed there were five properties an accounting practice must possess before it may be used as a manipulative device. These criteria have been considered with respect to depreciation expense reported by local government councils. Results confirmed the existence of unexplained 'anomalies' which significantly impacted on a council's operating result and subsequent performance measures used for decision-making. These, in turn, satisfied Copeland's five manipulative characteristics. This research provides the first (known), longitudinal empirical analysis related to the charging of depreciation to transport infrastructure by local authorities. It also adds to the 'manipulation' literature by considering its applicability in a public sector context. Future research will apply a statistical activity cost theory framework or similar instrument to ratify the findings reported here.

US Economic Announcements: Do They Convey Information to the Australian Share Market?

Ian Hyland, Sean Chinnery John Evans

Journal of Contemporary Issues in Business and Government, 2006, Volume 12, Issue 2, Pages 81-101

This study covers the period from January 2000 to June 2005 and examines the 'announcement effect' of economic news releases in the United States (US) on returns in the Australian share market. Using previously developed models and professional surveys as proxies for expected components of the announcements, the study analyses how the Australian market reacts to both expected and unexpected components. Three types of US economic announcements are analysed in this study, namely discount rate changes, inflation and real economic activity. Results show that significant relationships occur for each of the three types of economic announcements. These findings provide empirical proof that Australian investors regard US economic news as containing information relevant in the pricing of Australian equities. This has consequences for investors and fund managers throughout Australia who need to consider the impact of US and global economic conditions when developing investment strategies.

Valuing Athletes

Chris Gusenzow Greg Tower

Journal of Contemporary Issues in Business and Government, 2006, Volume 12, Issue 2, Pages 103-122

How does a sports team determine the value of its athletes? How should such information be communicated? Is silence misleading? In this study measurement models are explored to advance suggestions for improvement for reporting. Data from a large scale survey reveals that 62 percent of Australian Football League (AFL)- linked personnel disagreed with the idea of valuing players on their team's balance sheet. Statistical analysis identifies three clearly different categories; club/AFL management, player management (players, agents and players' union) and accountants/accounting academics. Each groups' views are significantly different with less, some and majority support for athlete valuation respectively. However, there may be a rising need to value such company assets. AFL clubs are being battered by increased transparency expectations of better and clearer communication. It is argued that the provision of providing player valuation information from a 'public interest' viewpoint would be beneficial for the hundreds of thousands of club members