Knowledge@Australian School of Business

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thumbnail The Rise of Class Actions: When Shareholders Strike Back
The recent legal challenge by QBE shareholders against the troubled insurance group is just the latest in the “explosive growth” of securities class actions in Australia. But these litigations don’t come out of the blue. New research from the Australian School of Business offers a way to predict which companies are most likely to be sued by their shareholders, with “weaker levels of corporate governance” a key factor. Australia is second only to the US in terms of the likelihood that a company will face a class action.
From: April 14, 2014 thumbnail PIN Drops With Fresh Findings on Equity Prices
New research disputes that uninformed investors experience equity-return disadvantages compared with market traders who have access to privileged information about assets. It finds that, in general, information risk proxied by probability of informed trading (PIN) has no pricing effect in world markets. “Ours is the first study using a comprehensive international database and we have uncovered evidence that investors should not be compensated for this information risk because these kinds of risks can be diversified away,” says co-author Bohui Zhang from the Australian School of Business.
From: March 10, 2014 thumbnail Companies Under Attack: Should Short-Sellers Be Encouraged or Reined In?
Short-selling is a vexing issue for investors and regulators, as well as for targeted companies. The process of deliberately pushing down share prices for profit is criticised as a cause of market volatility. But new research by Australian School of Business finance lecturer Bohui Zhang and colleagues suggests that short-selling is actually good for the market. By ferreting out and exposing negative information, short-sellers can assist in improving firm governance and performance, even though that's not their intention. “In the long run, short-selling should stabilise the financial market,” Zhang says.
From: November 11, 2013 thumbnail Why High Land Prices in China Are Not a Bubble
Land prices in China have been soaring, with a growth rate as high as 16% per annum over eight years. It will be difficult to maintain the pace, but don’t expect a slump, says Wharton real estate professor Joseph Gyourko.
From: November 11, 2013 thumbnail The Bharti-Walmart Breakup: Where Next for Foreign Direct Investment in India?
The break-up of a seven-year joint venture in India between Walmart and Bharti Enterprises has been orchestrated amid controversy. The split raises questions about the future of multi-brand foreign direct investment in India’s retail market.
From: November 11, 2013 thumbnail Skin in the Game: Is Board Independence Destroying Firm Value?
Australian School of Business professor Peter Swan and colleague Marc-Oliver Fischer have stirred up the business community by refuting the popular view that independent board directors increase firm value. The researchers studied the performance of almost 1000 Australian companies since the ASX introduced voluntary governance guidelines in 2003. Those that followed the board independence recommendations increased CEO and director pay yet under-performed financially. “We estimate these losses conservatively at about A$69 billion over the period 2003-2011,” Swan says. “If the director has no substantial financial interest in the affairs of the company, the only thing they’re going to care about is their own wellbeing.”
From: October 15, 2013 thumbnail Adaptable and Agile: Why Attention is Turning to the Mid-Market
Small and medium-sized enterprises have long been the lifeblood of the Australian economy. But academics and investors are lately focusing on the specific advantages of the mid-market – companies that have annual revenues of between A$10 million and A$250 million. Businesses in this range are better placed than their smaller and larger counterparts to take advantage of new opportunities and to react swiftly to changing conditions. As George Shinkle from the Australian School of Business says: “A lot of innovation comes from the mid-market, because the firms have enough capabilities to really do things, yet they’re not so big” that they’re constrained by corporate processes.
From: September 16, 2013 thumbnail Counting the Collection: Can the Taxman Keep Pace With Multinationals?
Tax bases are being eroded across the globe as collection concepts developed for the industrial age struggle to keep pace with the tax minimisation options of the digital era. Profit shifting between jurisdictions is widespread. Experts from the school of taxation and business law at the Australian School of Business (ASB) have identified systemic weaknesses and proposed solutions in a government submission.  International reform is on the agenda at the Brisbane G20 summit in November 2014. But, as ASB associate professor Nolan Sharkey notes, change will require consensus and some of the mooted ideas may not be viewed as good for everyone.
From: September 16, 2013 thumbnail Why Tinkering Too Much with Your Portfolio Won't Pay Off
When it comes to your investment portfolio, how much attention is too much – and what constitutes too little? In a recent paper, Wharton finance professor Andrew B. Abel and two colleagues found that even when transaction costs are small, it makes more sense to act according to a schedule with surprisingly long intervals. Too much fussing, in other words, is counterproductive – even if it's cheap.
From: August 15, 2013 thumbnail Go Figure: Why Job Dissatisfaction Diminishes Auditing Quality
Auditor credibility is in the news with accounting giant KPMG being sued over a missed discrepancy of A$1.9 billion in a client's presentation of debt. The practice code of lead auditors has the force of law, but not so the work of junior staff. A new study from the Australian School of Business (ASB) proposes tighter controls on young auditors accepting job offers from clients they are auditing. Self-interest affects valuation judgments, but ASB accounting professor Gary Monroe says that ethical conflict can be mitigated by intrinsic job satisfaction – enabling auditors to remain objective, even when tempted with a better-paid position.
From: August 15, 2013

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Knowledge@Australian School of Business