This study considers the psychological influences on academic performance using a goal-efficacy framework. Data were gathered using a survey questionnaire (N = 375). The paper is motivated by a repeated high failure rate for a second-year core accounting unit and anecdotal evidence that international students perform poorly in comparison with domestic students. The results demonstrate the role of self-regulated learning strategy as a mediating variable for goal orientation and academic performance. While the analyses suggest no significant differences between domestic and international students with respect to the main psychological variables and academic performance, further analyses reveal that four specific factors of the main psychological variables are significantly different between domestic and international students.

This article provides a critique of the Rose, Rose, and Norman (2013) article. It focuses on four issues: (i) whether institutional details have been appropriately captured; (ii) whether experiments are an appropriate method to answer the authors' research question; (iii) whether the authors' hypotheses should predict an interaction; and (iv) whether the authors have relied on the appropriate theory.

Using firms from 20 non-US countries, we investigate whether and how ownership structure, analyst following and country-level institutions influence stock price informativeness (SPI). We find that stock price informativeness decreases with control-ownership wedge (the detachment of voting rights from cash flows rights), and this SPI-reducing effect of the wedge is attenuated for firms with high analyst following and in countries with strong country-level institutions. We also find that stock price informativeness decreases with analyst following, but this SPI-reducing effect of analyst following is attenuated in countries with strong country-level institutions.

Closed-end fund investors may view assets valued using level 2 and 3 inputs more sceptically because of the subjectivity of these inputs (valuation scepticism), or these assets could be viewed favourably because they allow small investors to access illiquid securities (liquidity benefit). We find that funds holding level 3 assets have higher value when funds trade at a premium, but lower value when funds trade at a discount. Both of these effects are magnified for funds with higher levels of unrealized appreciation. Our results suggest that liquidity benefit (valuation scepticism) is more important when funds trade at a premium (discount).

This paper analyzes the role of default risk in the momentum effect focusing on data from four developed European stock markets (France, Germany, Spain and the United Kingdom). Using a market-based measure of default risk, we show that it is not the hidden factor behind this effect. While the loser portfolio is characterized by high default risk, small size, high book-to-market and illiquidity, characterization of the winner portfolio is somewhat more complex. Given that the momentum strategy is the return differential between the winners and the losers, factors such as the stock market cycle or the evolution of momentum portfolios against their reference point make momentum profits difficult to forecast.

We examine whether systematic higher moments capture beta asymmetry in an asset pricing model whereby the conditional beta of a risky asset increases (decreases) during a bear (bull) market state. We first provide a simple conceptual outline from the microeconomic literature to show that beta asymmetry is driven by time-varying higher-order risk preferences (prudence and temperance) across different market states. We then empirically relate these higher-order risk preferences to systematic skewness and systematic kurtosis. We find that beta asymmetry in Australian stock returns cannot be explained by Carhart (1997) 4-factor model but is subsumed by systematic higher moments.

This paper investigates whether cost stickiness occurs in small and medium sized companies using a sample of Italian nonlisted and listed firms during the period 1999–2008. Our findings show that cost stickiness emerges only for the total cost of labour and not for selling, general and administrative (SG&A) costs, cost of goods sold and operating costs. Stickiness of operating costs is only detected in a sample of listed companies. We further contribute to the literature on sticky cost behaviour by discussing critical issues associated with the extant approach of empirical analysis and interpretation of sticky cost behaviour.

Investors widely use contracts for difference (CFDs) to leverage and short sell underlying financial assets. We investigate the after cost performance of investors in Australian Securities Exchange listed share CFDs, and find that market order CFD trades earn small positive returns at the daily horizon, with negative returns reported for one month to one year horizons due to financing costs. Market orders also net sell positions, which suggests that investors use CFDs for shorting opportunities. Overall, we find that liquidity demanders in CFDs obtain favourable execution, which is inconsistent with the view that CFDs are used by naive individuals.

This study contributes evidence on the valuation relevance of the ‘use of proceeds’ disclosure in the initial public offering (IPO) prospectus. This article develops a classification of ‘use of proceeds’ disclosures that aims to capture information embedded in the disclosures relating to the purpose (growth, production, financing) and amount committed to specific assets. These measures are then related to IPO underpricing, survival prediction and expected and realised prospects of the IPOs. The results suggest the ‘use of proceeds’ disclosure categories have incremental information over other sources of information for underpricing, for predicting firm survival and in the case of some disclosure categories, for investors’ evaluation of the firms’ prospects and risks in the early years after listing.

Cross-region and cross-sector asset allocation decisions are one of the most fundamental issues in international equity portfolio management. Equity returns exhibit higher volatilities and correlations, and lower expected returns, in bear markets compared to bull markets. However, static mean–variance analysis fails to capture this salient feature of equity returns. We accommodate the nonlinearity of returns using a regime switching model across both regions and sectors. The regime-dependent asset allocation potentially adds value to the traditional static mean–variance allocation. In addition, optimal allocation across sectors provide greater benefits compared to international diversification, which is characterized by higher returns, lower risks, lower correlations with the world market and a higher Sharpe ratio.

We investigate the claims of superiority of fundamental indexation strategy over capitalisation-weighted indexation using data for Australian Securities Exchange listed stocks. While our results are in line with the outperformance observed in other geographical markets, we find that the excess returns from fundamental indexation in Australian market are much higher. On a rolling 5-year basis, the fundamental index always outperforms the capitalisation-weighted index. Our results suggest that superior performance of fundamental indexation could not be entirely attributed to value, size or momentum effects. The outperformance persists even after adjusting for slightly higher transaction costs related to turnover.

By IPO market regime, I decompose the effect of revealed private information on the initial return of IPOs (initial public offerings) into adjusted and unadjusted private information and find (i) investment banks partially adjust the offer price in return for revealed private information in all but the non-hot IPO market; (ii) the economic importance of private information associated with IPOs (and hence agency costs) is procyclical; and (iii) industry information spillovers between IPOs occur only in the hot and very-hot IPO markets.

Liu and Strong (2008) note that researchers often employ a simple (but incorrect) averaging approach that induces significant error into estimated buy-and-hold portfolio returns. This study explores the additional challenges that arise when stocks are subject to nontrading. We develop a decomposition of the total bias in estimated return into the components attributable to the stock weighting approach and the treatment of nontrading. While the latter is shown to be negligible, the former can approach 150 basis points per month. Our empirical analysis of Australian equities shows that the simple averaging approach tends to overstate the size and book-to-market effects, and understate the momentum effect.

Audit committees (ACs) are expected to play a key role in improving financial statement integrity and as a consequence reduce audit risk. Companies reporting conformity with regulations can have an AC that appears effective but is not actually effective in substance. We surveyed audit partners and managers to identify their indicators of actual AC effectiveness (auditor-chosen list). We hypothesize a negative association between AC effectiveness and audit risk, only when an auditor-chosen list, rather than extent of conformity with regulations, is used to measure effectiveness. Results support our expectations.

We investigate how the market's subjective estimates of autocorrelation in quarterly earnings vary with objective time-series estimates. Our results suggest that investors increasingly underestimate the correlation as the autocorrelation level increases, and as a result, the post-earnings-announcement drift (PEAD) increases with the level of autocorrelation. We further show that the ability of autocorrelation to explain variation in the PEAD is robust to alternative explanations based on risk and institutional factors. Additional analysis indicates that the market's inefficiency in assessing the existence and magnitude of autocorrelation (and the related impact on PEAD) is inversely related to the richness of the information environment.

This paper examines the sources of momentum profits of countries exhibiting and not exhibiting momentum and compares the differences in the underlying factors determining momentum profits between these two groups of countries. We find remarkable differences in the decomposed components between these two groups of countries. Countries exhibiting momentum show that the cross-sectional dispersion in unconditional mean returns dominates the negative contribution from the component reflecting the intertemporal behaviour of asset returns. However, this is not the case in countries exhibiting no momentum. Furthermore, countries with greater relative contribution from the cross-sectional variance in unconditional mean returns tend to have greater momentum profits. Our results may support risk-based explanations for the momentum phenomenon rather than behavioural finance-based explanations.

Prior studies document a negative association between Big 4 auditor choice and the implied cost of equity capital, suggesting that Big 4 auditors mitigate information asymmetry (IA) between shareholders and managers. This study extends this line of research and reports that the negative association is more pronounced in multiple-segment firms, where IA is more severe than in single-segment firms. We also find that the association between Big 4 auditor choice and the cost of equity capital becomes more negative as the number of segments increases. Taken together, our findings suggest that the role of Big 4 auditors in reducing the cost of equity capital becomes more significant when greater IA exists.

We posit that the benefits and costs of multiple directorships are conditional on firm characteristics. We find firm valuation is positively associated with multiple directorships in (i) firms with high advising needs and (ii) firms with high external financing needs. These beneficial effects of multiple directorships are generally stronger in countries with weak shareholder rights and in firms that are widely held. However, when controlling shareholder hold high voting-rights to cash-flow rights, multiple directorships reduce firm valuation, especially in countries with weak shareholder rights and in closely held firms. As multiple directorships increases, cash holdings (capital expenditures) contribute less to shareholder value. The negative association between value of cash (capital expenditure) and busy boards is mitigated in firms with (i) high advising needs, (ii) high external financing needs and (iii) less entrenched ownership structures.

This study empirically examines the impact of changes in substantial shareholdings ahead of 450 Australian takeover offers between the years 2000 and 2009. Previous studies have attributed a significant proportion of the price run-up effect in takeover targets to insider-trading behaviour. This study examines the contribution of a broad range of public information sources that are known to typically generate market anticipation, including the acquisition of toeholds ahead of takeover announcements. Our findings show no significant pre-bid run-up for takeover targets after considering these sources. We conclude from these results that previous findings attributing pre-bid share price run-up to illegal insider trading may overstate the existence of such conduct.

This study is motivated by the increasing diversity among first-year accounting students and the increasing number of first-year accounting students whose majors are not in accounting related areas in UK universities. The main contribution of this study is that it uses student data over four consecutive academic years from a first-year accounting course at a UK university to provide empirical evidence in support of the theoretical framework proposed by Rankin, Silvester, Vallely and Wyatt (2003). Our results show the effects of metacognitive knowledge and content knowledge on academic performance as well as highlighting the inclusiveness of the first-year accounting course. For instance, regardless of the choices of secondary subjects, students who have good prior academic achievement are the best performers on the first-year accounting course. The influence of content knowledge on academic performance is strongly felt when the assessments of the course changed from a 100 per cent final exam to a combination of mid-term coursework and a final exam. The results suggest that well-designed mid-term coursework is academically beneficial to accounting students, especially non-native English-speaking students.

This article examines the importance of adjustments to corporate financial statements for credit risk assessment. Prior research has tended to examine individual adjustments one at a time. As correlations among adjustments and control variables may bias inferences when researchers examine a single adjustment and ignore other adjustments, our results provide important new information about previous research by documenting whether or not such bias exists. We find that financial statement recasting adjustments – which aim to better reflect firms' indebtedness, financing costs and recurring earnings than reported financial numbers – are reflected in bond yield spreads and have an economically significant impact on credit pricing and loss forecasting. Among individual adjustment categories, we find that those for off-balance-sheet leases, defined benefit pensions and securitized debt have an economically significant impact on credit pricing and loss forecasting.

This article examines the impact of FASB Interpretation No. 46 (Revised), FIN 46(R), on perceived earnings informativeness of companies with special purpose entities (SPEs). We find that the impact depends on the pre-FIN 46(R) incentives for using SPEs. The implementation of FIN 46(R) improves perceived earnings informativeness of companies that previously used SPEs less for the manipulation of financial reporting, but does not generate the same improvement for those otherwise. Furthermore, these differential effects are more pronounced when companies reacted to FIN 46(R) by restructuring their SPEs to keep them off financial statements.

Discretionary current accruals of Chinese initial public offering (IPO) firms decreased after the abolition of fixed-price offering systems that directly linked offering price to reported earnings. Results suggest IPO firms that decrease managerial ownership manage earnings upward during the fixed-price offering period, but this relationship disappeared after the introduction of a book-building system. We also find that bank debt is negatively related to discretionary current accruals during the fixed-price offering period, but no relation exists for the book-building period. Leverage has a significant positive relationship with earnings management. However, this finding is potentially attributable to nonoffering price objectives or endogeneity biases.

Older, more experienced and smaller U.S. venture capital firms are most probable to sacrifice proximate distance for new opportunities in foreign, and mostly mature, portfolio companies. These companies are treated differently than the domestic ones, as U.S. venture capital firms collaborate with and delegate monitoring to foreign partners, rather than stage or syndicate. Successful outcomes mostly occur in more mature, non-hi-tech, portfolio companies that receive more financing per round. Our results are robust to the investee country's openness and industry classification, stage of the investment and possible sample selection problems.

While economic theory suggests that identifying alternate customers is costlier than identifying alternate specialized employees for customization providers, substantial field research evidence indicates the opposite, where providers are reportedly more dependent on employees than customers. We inquire into this contrasting picture between theory and practice through an in-depth case study that suggests that what begins as customer dependence transforms into vulnerability to employees. While perceived vulnerability to customers is efficiently removed through ex ante controls, the physical asset specificity in each customer order generates task uncertainty, specialization and teamwork, which become the new sources of opportunism threat for the customization providers. Compounded layers of ex ante and ex post controls with frequent iterations suggest a need for continuous management (as against removal) of vulnerability to employees.

We apply the stochastic dominance (SD) tests proposed by Linton et al. (2005) and Davidson and Duclos (2000) for risk averters and risk seekers to examine investors’ preferences with respect to the Taiwan stock index and its corresponding index futures. We find that there is no first-order SD relationship between Taiwan spot and futures. However, for second- and third-order SD, we find that spot dominates futures for risk averters whereas futures dominates spot for risk seekers. The implication is that to maximize their expected utilities, risk averters prefer to buy stocks, whereas risk seekers prefer long index futures.

We examine whether analyst forecasts influence investors’ perceptions of the credibility of a good news management earnings forecast. We hypothesize that the effect of analyst forecasts will depend on whether the analyst forecast confirms management’s forecast and the extent to which management’s forecast is consistent with the prior earnings trend. Findings indicate that the positive effect of a confirming analyst forecast is greater when the management forecast is trend inconsistent than when it is trend consistent. The negative effect of a disconfirming analyst forecast does not differ based on management forecast trend consistency.

This study documents a positive relationship between audit committee stock ownership and firm performance in large US firms from 1998 to 2008. This study also finds a positive relationship between changes in ownership and performance. These results persist throughout the sample period, do not weaken after Sarbanes–Oxley and are robust to controlling for endogeneity between ownership and performance. After testing shows that there is no relationship between audit committee independence and firm performance, these findings suggest that audit committee stock ownership is an important corporate governance mechanism and potentially a more relevant variable than audit committee independence from a policy perspective.

We investigate the impact of business strategy on the use of performance-linked compensation (PLC) and long-term incentive plans. We also examine the relation between strategy and compensation structure fit and performance. Using cluster and content analyses to classify a firm’s business strategy, we predict and find that product differentiation firms use a higher proportion of PLCs than cost-leadership firms. Furthermore, we find that the misfit between business strategy and compensation structure has a negative impact on performance. This study contributes to the executive compensation literature by recognizing that business strategy influences the compensation structure and that a strategy and compensation structure misfit negatively affects performance.

This study uses survival analysis to determine how early the indications of bank failure can be observed. We find that banks with high loan to asset and high personal loan to assets ratios are more likely to survive. Older banks and banks with high real estate and agricultural loans, loan loss allowance, loan charges off and non-performing loans to assets ratio are more likely to fail. It is possible to predict survival functions of <50% for failed banks, 3 years or less before failure. Moreover, we find that most of the variables present a behaviour that departs from Benford’s Law.

We find that listed parents’ carve-outs have investment-cash-flow sensitivities 70 per cent lower than unlisted parents’ carve-outs, on average. Such a finding is stronger when we consider only equity carve-outs in technological industries. The finding suggests that listed parents are more capable of alleviating the financial constraint of their carved-out units than private parents. Our further analysis shows that listed parents’ carve-outs also have a lower cost of equity than their counterparts, but such difference cannot be explained by corporate transparency, as implied by analyst coverage and analysts’ forecast dispersion. Therefore, we argue that the benefits from affiliation with a listed parent to the carve-out come mainly from the parent’s financial support rather than an increase in corporate transparency.

This study examines the weekend effect in gold returns during bull and bear markets over the period 1975 through 2011. It shows that gold returns from close on Friday to close on Monday are significantly lower than returns during the rest of the week. This result is due largely to gold returns during bear markets. During gold bull markets, gold weekend returns are not significantly different from weekday returns. The study shows that the effect has substantial economic implications for gold investors. The effect is shown to be related to a significantly negative skewness in the weekend returns.

We document a high-profile instance of mispricing that is puzzling given the gradual information diffusion hypothesis and the lack of obvious limits to arbitrage. An internet search in 2008 led to a story about United Airlines’ 2002 bankruptcy being re-released as ‘news’. This resulted in United Airlines losing 73 per cent of its value and caused a $4.2 billion decline in the value of airline stocks and United Airlines suppliers. The incorrect bankruptcy ‘news’ was quickly retracted, which led to a rebound in other airline and supplier firms, but the stock price of United Airlines was adversely affected for 4 days.

This paper examines the economic consequences of goodwill write-offs under Statement of Financial Accounting Standards No. 142 (SFAS 142). Although write-off firms have performed poorly, it is evident that deteriorating economic performance explains only a small proportion of write-offs. After controlling for endogeneity of write-off choice, I fail to find evidence that investors and analysts fixate on SFAS 142 goodwill write-offs. I also provide evidence that write-off firms pay higher audit fees, suggesting that auditors charge higher fees in response to extra audit effort. These results are consistent with the principles of market efficiency, analyst-forecast rationality and efficient audit pricing.

This study provides a new approach to determine the fair value of ESOs by extending the performance-vested option pricing model. The model developed in this study takes both vesting period and forfeiture rate into consideration to capture characteristics of ESOs. Empirical and sensitivity analyses give evidence for the importance of these two elements. Empirical results also support that the derived model can be employed to increase the accuracy of ESOs’ fair value.

This study investigates China’s evolving banking systems from 1996 to 2009 by testing the market response to bank loan announcements in the China. The results show a significant negative market response to bank loan announcements in the Chinese financial market for the sample period 1996–2004. However, after a series of reforms in the Chinese banking system, the significantly negative market response to bank loan announcements disappears for the sample period 2005–2009.

An independent audit committee is an audit committee on which all members are independent directors. This study examines whether independent audit committee members’ board tenure affects audit fees. On the basis of the prior literature, we formulate an unsigned hypothesis. This is because on the one hand, long board tenure audit committee members (defined as members with board tenure of 10 or more years) have greater incentives to protect their reputational capitals by purchasing increased audit effort, which positively affects audit fees. On the other hand, audit pricing reflects audit committee quality. Long board tenure audit committee members may have less need for increased audit effort because they can effectively oversee the financial reporting process themselves, which negatively affects audit fees. We find that audit fees are negatively associated with the proportion of long board tenure directors on the independent audit committee, consistent with the notion that audit committee members’ long board tenure results in lower audit effort.

This paper investigates the effect of foreign currency hedging with derivatives on the probability of financial distress. I use Merton’s (1974) structural default model to compute firms’ distance to default as a proxy for their probability of financial distress. Using an instrumental variables approach to control for endogenous hedging and leverage, I find that the extent of foreign currency hedging is associated with a lower probability of financial distress. Whereas previous research finds that the probability of financial distress is a determinant of a firm’s hedging policy, this paper provides direct evidence supporting the hypothesis that the extent of hedging reduces a firm’s probability of financial distress.

This manuscript studies the shape of the relation between firm value and trade credit for a sample of Spanish listed firms in the period 2001 to 2007. Considering the trade-off between benefits and costs of investing in trade credit, we estimate a non-linear relationship between accounts receivable and firm value. As expected, the results obtained show a positive relation between firm value and trade credit at low levels of receivables and a negative one at high levels. To give robustness to the results, we analyse whether deviation from target accounts receivable level reduces firm value. Consistent with the previous analysis, we find that deviations from this level of receivables decrease firm value.

We use a binomial model to investigate the cost to shareholders of backdating employee stock option (ESO) grants to award in-the-money rather than at-the-money options to a manager. When the expected return of the stock underlying an ESO is sufficiently close to the risk-free rate, a backdating arrangement can always be structured to simultaneously improve shareholders’ wealth and the manager's utility. The smaller the manager's non-option wealth, personal income tax rate or risk tolerance, the more likely a backdating arrangement can be welfare improving.

We examine whether the components of accruals and operating cash flows improve the predictive ability of earnings for forecasting future cash flows. Unlike most previous studies, we avoid data estimation errors and sample self-selection bias because we exploit data from Australia where reporting of actual cash flow components had been mandatory since 1992. We show that accrual components and operating cash flow components together are more useful than (i) earnings, (ii) operating cash flows and total accruals and (iii) the combination of operating cash flows with accrual components in forecasting future cash flows. These results are robust to several contextual factors, including the length of the operating cash cycle, industry membership, firm profitability and firm size.

In this study, we investigate the performance of firms selected to Barron’s Most Respected Companies against the S&P 500 and a matched sample over a short-term, long-term and operational basis. The most respected companies exhibit a statistically significant announcement effect associated with their selection and outperform the S&P 500 over longer-holding periods. The overall sample and those firms identified as top picks outperform a matched sample of firms. In addition, as measured by changes in the return on assets, the post-selection operational performance of the most respected firms was better than that of the matched firms.

This study explores press releases in the pharmaceutical industry to expand our understanding of how investments in R&D outlays influence uncertainty of future earnings. The findings make two contributions to the literature. First, they provide evidence that equal investments in different R&D ventures are associated with differential variability of future earnings. This result suggests that non-financial information contained in press releases captures attributes of firm-specific R&D investments that are not revealed through R&D expenditures reported in financial statements. Second, prior studies have indicated that investments in pharmaceutical R&D are associated with the highest variability of future earnings among all industries. The results, however, suggest that for a large class of low-risk pharmaceutical R&D investments, the relative variability of future earnings is low and similar to that generated by capital expenditures. The findings hold when we control for endogeneity in voluntary disclosure of press releases.

We propose the corporate governance hypothesis which suggests that the outside blockholders arising from the private placement of equity are more likely to have a significantly positive effect on firms with poor corporate governance. Using a sample of Taiwan-listed firms with initial private placements of equity, our study’s results indicate that an improvement in operating performance is more likely to be seen after a private placement for those firms that are without independent directors, are controlled by a family, have lower insider shareholdings or are characterized by a pyramidal ownership structure. These findings are consistent with our hypothesis.

This study examines whether Australian financial reporting became more conservative over the period of 1993–2009. Unlike the United States and European evidence in Givoly and Hayn (2000) and Grambovas et al. (2006), the Australian evidence is not consistent with the notion that conservatism has increased over time. The degree of conservatism fluctuates without any obvious trend over the 17-year period, especially for the constant sample of firms appearing throughout the period. We also examine the impact of mandatory International Financial Reporting Standards (IFRS) adoption on accounting conservatism in Australia. Our evidence suggests the adoption of IFRS has led to a decrease in conditional conservatism (i.e. asymmetric timeliness).

The oil and gas industry is subject to different types of risks, many of which have the potential to generate extreme results. Classifying extreme events as global, industry specific and firm specific, we use a Bayesian probability model and the Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model to evaluate the impact of disclosure of extreme events on returns and return volatilities. The results suggest political events have more of a pronounced effect compared to those classified as economic events. The overall effects are more pronounced at the global and firm-level classifications. At the firm level, extreme economic events have a more significant impact than political extreme events.

Previous studies have investigated the effectiveness of directors in performing their monitoring and advising functions by examining characteristics such as independence, qualifications and professional expertise. In this study, we propose a more direct measure of director effectiveness – prior experience as a director. Using hand-collected data from Australia, we find that both the depth (number of prior years) and breadth (number of current directorships) of a new appointee’s director experience is valued by shareholders at appointment. In particular, the market reaction is highest for appointees with the most prior director experience (two or more other current directorships in listed companies and four or more years of director experience) and when experienced appointees join less-experienced boards.

We uncover a new source for the conflict of interest in analyst coverage existed before the Regulation FD period by examining whether recommendations within the parent–subsidiary (PS) relationship are more optimistic and whether they have better investment value than non-PS recommendations. We find evidence consistent with the conflict of interest: PS analysts on average issue more optimistic recommendations, but their recommendations have worse or no better investment value in the calendar-time portfolio analysis. Analyst firm PS relationship is another source for the conflict of interest in analyst coverage that has not been identified before.

This article examines the growth in accounting and finance PhD graduates across all Australian universities from 1965 to 2006. It investigates the impact of the major changes that were initiated in 1988 in higher education in Australia with the introduction of the Unified National Scheme (UNS) and, in 2002, with the Research Training Scheme (RTS). A data set of PhD thesis records provides data of actual PhD completions, as distinct from enrolments. Analyses show that both the number of accounting and finance PhD completions and the dispersion of these PhD completions across Australian universities increased from 1988 with the introduction of the UNS. There is also evidence that the proportion of accounting and finance–related PhD completions relative to total Australian PhD completions increased from 1988. While there is strong statistical support for the effect of the UNS on PhD completions, this is not the case for the more recent changes associated with the Research Training Scheme (RTS).

This study empirically investigates the value shareholders place on excess cash holdings and how shareholders’ valuation of cash holdings is associated with financial constraints, firm growth, cash-flow uncertainty and product market competition for Australian firms from 1990 to 2007. Our results indicate that the marginal value of cash holdings to shareholders declines with larger cash holdings and higher leverage. However, firms that are more financially constrained, that have higher growth rates and that face greater uncertainty exhibit a higher marginal value of cash holdings. These findings are consistent with the explanation that excess cash holdings are not necessarily detrimental to firm value. Firms with costly external financing and that also save more cash for current operating and future investing needs find that the market values these cash hoarding policies favourably. Finally, there is limited evidence of an association between various corporate governance measures and the value of cash holdings for a shorter sample period.

This study investigates whether passive investment managers can exploit the size and value premia without incurring prohibitive transaction costs or being exposed to substantial tracking error risk. Returns on the value premium are shown to be pervasive across size groups, while the size premium is nonlinear and driven by microcaps. The value premium cannot be explained by the capital asset pricing model; however, returns on value portfolios do covary across monetary regimes. The substantial turnover required to achieve annual rebalancing and the relative illiquidity of Australian small-cap firms means that investing in a portfolio of large-cap value firms appears to be the best way for passive fund managers to exploit the Fama and French (1993) premia.

The value-growth effect is one of the most pervasive patterns in stock prices. In this study, the ability of four proxies for value-growth, book-to-market, sales-to-price, earnings-to-price and cash-flow-to-price to explain equity returns is analysed. The findings show that in aggregate, book-to-market best explains cross-sectional variation in Australian equity returns, which in isolation suggests that it is the superior proxy for value-growth. The analysis is taken further and the value-growth effect is examined separately in positive and negative earnings firms. After segregating firms, it is found that in the negative earnings sample, book-to-market is the best value-growth proxy and in the positive earnings sample, cash-flow-to-price has the highest level of significance and is thus the superior value-growth proxy. The economic significance of this result is telling, as the firms that report positive earnings are much larger than those that report negative earnings.

This study investigates the effect of differential capital gains tax rates on investor trading and share prices in a unique market setting that facilitates the resolution of conflicting prior evidence of holding period tax incentives. In particular, we examine whether the concessionary tax treatment of long-term capital gains increases the supply of shares that qualify for long-term status, thereby causing downward price pressure. We find evidence of abnormal seller-initiated trading following the 12-month anniversary of listing for IPO firms that appreciate in price (‘winners’) and report no such evidence for firms that decline in price (‘losers’). Consistent with the tax concessions being greater for individual than institutional investors, we report that abnormal seller-initiated trading is mitigated by higher levels of ownership by institutional investors. We also report limited evidence, for winners, of declining share prices upon qualifying for long-term tax status.

This study empirically examines the investment value of security analyst recommendations on constituent stocks of the S&P/ASX 50 index. We find that stocks with favourable (unfavourable) recommendations on average outperformed (underperformed) the benchmark index. An investment strategy using the Black–Litterman asset allocation model that incorporates consensus analyst recommendations, in conjunction with daily rebalancing, outperforms the market in terms of return and risk-adjusted performance measures. The investment strategy involves high levels of trading, and no significant abnormal returns are achieved after transaction costs. Less frequent rebalancing, under most situations, causes a decrease in both performance and turnover. Filtering of dated recommendations causes an increase in turnover, while having mixed effects on investment returns.

Efforts by Australian standard-setters to harmonise public sector financial reporting resulted in AASB 1049, which sought to bridge the divide between generally accepted accounting principles (GAAP)-based and government finance statistics (GFS)-based financial statements. However, whether AASB 1049 has resulted in information that is considered appropriate for the public sector has not been examined. We explore this issue by comparing the requirements of AASB 1049 with the responses from a survey of public sector stakeholders on the appropriate accounting treatment and presentation of selected financial items. The analysis suggests consensus with AASB 1049 on presentation issues but less consensus on accounting treatments.

We present a new method for consistent cross-sectional pricing of all traded bonds in the fixed income market. By applying thin plate regression splines (Wood, 2003) to bootstrapped zero coupon bond yields (Hagan and West, 2006), the method decomposes traded yields into a risk-free component plus premia for credit and liquidity risks, where the decomposition is consistent with the market valuations and underlying cash flows of the bonds. We apply the framework to end of quarter yield data from 2008 to 2011 on Australian dollar denominated semi-government, supranational and agency (SSA) bonds, and find that the surface provides an excellent fit to the underlying zero coupon yield curves. Further, the decomposition of selected yield time series and cross-sections demonstrates how credit premia increased for Australian SSA bonds through the Global Financial Crisis (GFC), but were counterbalanced by liquidity discounts as investors sought safe haven securities.

We test alternative hypotheses on a sample of Chinese stock dividends. The inverse Mills ratio, a signal about future performance, is positively related to announcement returns but does not predict higher future performance. Analysts do not revise their earnings forecasts after the announcement date. Our results are more consistent with liquidity-based theories. We find that managers choose higher stock dividend ratios if share prices deviate more from the industry-wide average. Increases in proportional spreads, depth, and the number of trades and decreases in average trade size, and price impact suggest greater participation of liquidity and small investors following stock dividends.

We present empirical evidence on traditional and family firm–specific determinants of cash holdings in the under-researched context of private family firms. We examine, from an agency theoretic perspective, how and to what extent the relation between family firm management and cash holdings is moderated by the ownership structure. Results reveal that descendant CEOs appear to maintain higher cash holdings than founder CEOs. This effect seems to be stronger if there is a low ownership dispersion. Moreover, outside CEOs maintain higher cash holdings than family CEOs if the family firm is owned by a single owner.

This paper empirically analyses the factors that determine the profitability of Spanish banks for the period of 1999–2009. We conclude that the high bank profitability during these years is associated with a large percentage of loans in total assets, a high proportion of customer deposits, good efficiency and a low doubtful assets ratio. In addition, higher capital ratios also increase the bank’s return, but only when return on assets (ROA) is used as the profitability measure. We find no evidence of either economies or diseconomies of scale or scope in the Spanish banking sector. Finally, our study reveals differences in the performance of commercial and savings banks.

This study employs an innovative market-based approach, where return on equity (ROE) is employed as a proxy for cash-flow news and a state-space model is used for market news decomposition. We document that the bad beta good beta (BBGB) model of Campbell and Vuolteenaho (2004) explains about 30 per cent of the cross-sectional variations in US stock returns. We also find that the BBGB model adequately explains the size effect leading to its superior performance in this area. Our method controls for the news decomposition method and market news proxies’ bias. We contribute to the literature by providing an alternative easy-to-implement and consistent market-based method for news decomposition.