THE EFFECTS OF ALTERNATIVE REIMBURSEMENT SYSTEMS ON THE OPERATING BEHAVIOUR OF NURSING HOMES

Nursing home care in Australia is provided by both for-profit and not-for-profit nursing homes. Operating expenditure in nursing homes is funded by the Commonwealth Government. The reimbursement system currently in operation is linked to ownership structure. This paper examines differences in operating behaviour as a result of a reimbursement system based on ownership structure. The results of this study indicate that differences in behaviour occur as a result of ownership differences, ineffective controls and the lack of incentives in the reimbursement system to operate efficiently. These differences have important implications for policy change affecting the funding of nursing home care.     

ACCOUNTING STANDARDS FOR THE PUBLIC SECTOR IN AUSTRALIA

The need for better financial reporting by public sector entities as a means towards greater accountability has been widely canvassed. This paper discusses the development and application of accounting standards in Australia in this context. The responses of the accounting profession, through its standard setting process, and of the Commonwealth and several State governments are described and the conclusion reached that these developments will mean significant improvement in the information content of public sector financial reports.     

FINANCIAL ACCOUNTABILITY OF STATUTORY AUTHORITIES IN AUSTRALIA

In Australia, statutory authorities constitute the main form of non-Departmental organisation in the public sector. Although devised on UK Westminster blueprints, they have developed several unique characteristics as an organisational type. These characteristics have given rise to a number of problems of unsatisfactory performance, inadequate financial accountability and inappropriate creation processes. Although several improvement initiatives have recently been (or are about to be) adopted to address these issues there is a very real question hanging over their practicality. This paper looks at characteristics of Commonwealth statutory authorities which have an important bearing on these problems; particularly the problem of improving financial accountability for management performance. The paper reviews the accountability context and structures of Commonwealth statutory authorities, highlights various shortcomings which contribute to the present unsatisfactory situation and discusses factors that may determine the possible extent of real improvement from forthcoming initiatives.     

THE ROLE OF CORPORATE GOVERNANCE IN SOUTH KOREAN ECONOMIC REFORM

In South Korea, as in some other troubled Asian economies, banks and large public corporations have been run more in the interest of the government and the controlling share-holder group than to maximize efficiency and overall shareholder wealth. Any serious attempt to reform the South Korean economy must thus include significant changes in its system of corporate governance. After discussing in general terms how corporate ownership and control can affect economic performance, this article examines the corporate governance institutions that prevail in different countries, with particular attention to the U.S., Japan, and Germany. From such comparative analysis it then develops a set of criteria for appraising the effectiveness of corporate governance systems that are applied to the specific case of South Korea. The article concludes with number of suggestions for reforming the South Korean corporate governance system, including:

• 1 greater legal protection for minority shareholders from transactions involving potential conflicts of interest; and
• 2 strengthening of the incentives of management and large corporate holders, such as house or main banks, to maximize value (as the author notes, “charging management or the board with a legal mandate to ‘balance’ the interests of various constituencies or stakeholders is merely to diminish any legally enforceable responsibility to shareholders”).

As the article notes in closing, the main beneficiaries of such governance reforms will not be the new shareholders–including those foreign investors who might be persuaded to buy the stocks–but rather the existing owners, whose shares will command a higher price from “outside” investors. And the greatest beneficiary will be the South Korean nation as a whole, since the resulting improvements in corporate performance and reductions in cost of capital will increase productivity and international competitiveness.     

AT THE CROSSROADS: THE LIFE INSURANCE INDUSTRY AND FINANCIAL SERVICES REFORM

Abstract: In September of 1996, The Board of Directors of the American Council of Life Insurance ("ACLI")reversed decades of policy and embraced for the first time the concept of reciprocal ownership or "affiliations" between life insurance companies and commercial banks. Under this new policy mandate, the ACLI is advocating federal legislation that would permit banks to sell all types of insurance and control insurance underwriters through separate affiliates or subsidiaries. In return, 1) insurers would have the authority to acquire banks; 2) the insurance activities of banks would be fully subject to state insurance regulation; and 3) federal bank regulators would be precluded from preempting state regulatory authority.
This article reviews the various factors that precipitated this watershed policy decision, discusses the structural and regulatory issues that are important to life insurers, and speculates briefly on the prospects for financial services legislation.     

INTERNAL ALLOCATION OF FUNDS: CHANGES AND CHALLENGES FOR AUSTRALIAN UNIVERSITIES

At the institutional level universities in Australia have put in place funding allocation models which mimic the policy model used by the Commonwealth Government at the system-wide level, despite explicit government statements that such a model is unsuitable at the lower level. The impetus for this may be traced to the crisis in Australian higher education revolving around forced amalgamations, the introduction of the Unified National System of Higher Education, and the imposition ofgreatly increased accountability. This paper examines the contributing factors which have resulted in the Australian university sector adopting an externally contrived funding model rather than developing institutionally specific mechanisms.     

Evolving dynamics of the relationship between US core inflation and unemployment

Labor market dynamics in the US are changing due to long-term factors including decelerating labor force growth, rising age of the labor force, and the rapid advance of e-commerce, as well as the one-time downward adjustment during 2009–2013 of the size of state and local government work forces. We discuss some of the controversies revolving around how to analyze labor markets in this dynamic environment from the perspective of monetary policymaking, given the dual mandate of the Federal Reserve to encourage both full employment and price stability.Our statistical research documents the changing association between US unemployment and core inflation. There was a perceived trade-off between inflation and unemployment in the 1950s and 1960s that gave way to stagflation in the 1970s, when both unemployment and inflation were rising. The 1980s were a transition period where the trade-off was perceived to have returned. This trade-off has not been so clear, however, when one looks at the last twenty years. Since 1995, a period of stable and low inflation was consistently observed despite considerable cycles in the unemployment rate.Our theoretical discussion provides a dynamic interpretation of the shifting nature of labor markets, with the objective of pointing the way for future research while highlighting crucial differences in possible interpretations that could fuel debate, both inside and outside the Fed, over how the Fed should manage its dual mandate. The dynamic changes being seen in US labor markets all suggest that the effectiveness of monetary policy to encourage full employment may be vastly overstated. If this interpretation is correct, the Fed may need to reconsider how to manage its dual mandate and react less aggressively to perceived labor slack that may be due to longer-term structural shifts over which the Fed has no influence.     

Imperialism and the integration of accountancy in the Commonwealth Caribbean

The Commonwealth Caribbean has become aware that foreign accounting education and training programmes, in particular the dominant British qualification system, may no longer be relevant to post-independence regional economies. Considering the limited resources to localise accountancy in each country, in October 1988 the chartered institutes in the region signed a memorandum of understanding (MOU) to integrate regional accountancy. However, almost 25 years since signing the MOU, the dream of independent regional accountancy has yet to become a reality. Through the frame of imperialism, this study provides up-to-date evidence of the internal influence of colonialism and the external pressure of globalisation, which remain obstacles to the integration of accountancy in the Commonwealth Caribbean. Given the local, regional and transnational capitalism interest, regional legislative support may be necessary for the dream of accountancy integration to be actualised in the region.     

GASB mandatory disclosure rules and municipal bond yield spreads

The implementation of the Government Accounting Standards Board’s Statement 45 mandates disclosure of “other post-employment benefits” (OPEB) in a standardized format. The mandate provides an opportunity to analyze noninformation impacts of mandatory disclosures, as key components of the information were already publicly available. We find that this mandate is associated with a significant 15 and 73 basis-point increase in yield spreads among tax-exempt and taxable bonds, respectively. This effect is particularly pronounced for riskier bonds—nonrated and longer maturity taxable bonds. However, states that do not follow the GASB 45 recommendation of prefunding the OPEB obligations face a greater increase in their yield spreads.     

The Development of Accountancy Links in the Commonwealth

This paper has been produced as part of a larger study financed by the Social Science Research Council on the nature and significance of professional links in the Commonwealth.     

THE POWER OF TESTS OF FUND MANAGER PERFORMANCE

Recent work in this and other journals has re-examined the econometric pro-cedures which are used to investigate the performance of fund managers. This has resulted in considerable refinement of the methodology used to assess whether fund managers can time the relative proportions of equity and fixed interest securities in their portfolios. In this paper the power of these refine-ments is examined. It is shown that at the level of forecasting ability observed in market professionals, a statistically significant superior performance is unlikely to be found in ex-post investigations of the performance of individual fund managers. It is argued though that this observed level of forecasting ability is still sufficient to produce a significant improvement in the returns on managed funds.     

Derivatives Clearing Mandates: Cure or Curse?

The Dodd-Frank Act mandates the widespread adoption of centralized clearing of OTC derivatives and also includes measures designed to move more derivatives trading onto exchanges. But, as the author points out, such a clearing mandate appears to be based on the premise that the recent experience in OTC derivatives represents a major market failure and that participants in what is now the world's largest financial market have been systematically choosing the wrong institutions for risk management and trading. In this article, the author begins by explaining why all derivatives are not cleared or exchange-traded, and why the attempt to mandate such practices (as opposed to encouraging voluntary adoption through differential capital requirements) could have serious unwanted consequences. Among such consequences is a possible increase in the very systemic risk that such mandates are supposed to prevent.     

THE IMPACT OF SSAP 25 AND THE 10% MATERIALITY RULE ON SEGMENT DISCLOSURE IN THE UK

The identification of reportable segments has long been recognised as a fundamental obstacle to meaningful disclosure of disaggregated data. SSAP 25 introduced the 10% rule to help directors identify those classes of business and geographic segments which are significant to the enterprise as a whole. Its application is non-mandatory. In this paper we address the inter-related issues of the initial impact of SSAP 25 on segment disclosure, the ways in which managers have interpreted the standard and its materiality guideline, and whether these have changed as company directors have become more familiar with the disclosure requirements. A sample of UK companies» disclosure practices for the years 1989, 1992 and 1995 is reported to detect underlying trends. Disquietingly, whilst the introduction of the standard has increased the volume of disclosure, notably net asset data, our results suggest that growing familiarity with the standard has led to a subsequent decline in the detail of disclosure, namely the number of reported segments, particularly for geographic operations. When companies are classified as inadequate disclosers, compliers or voluntary disclosers, based on their reporting practice in 1989, we find that this trend is most pronounced amongst the complying disclosers. Thus, contrary to the intention of the standard, the evidence indicates that the 10% rule is used to identify fewer and larger segments and that a convergence of disclosure practice across the three groups has resulted. Whilst the requirements now appear to be generally followed by the 1989 inadequate disclosers, the complying and voluntary disclosers seem to be reducing the detail of disclosure. It therefore appears that the 10% rule has induced a disclosure pattern which confounds the original intention of the standard.     

THE EFFECTS OF THE INSIDER TRADING SANCTIONS ACT OF 1984: THE CASE OF SEASONED EQUITY OFFERINGS

Previous empirical research indicates that corporate insiders tend to increase (decrease) their shareholdings before events that increase (decrease) firm value. More recent evidence suggests, however, that passage of the Insider Trading Sanctions Act of 1984 (ITSA) may have deterred this behavior. Our results indicate that before passage of the ITSA, insiders exploited their access to nonpublic information by selling shares before the announcement of equity issues. However, after passage of the ITSA insiders no longer displayed this behavior. We conclude the ITSA has a deterrent effect, which is more heavily concentrated on insiders at the highest level of the firm who are most visible to regulators and other market participants.     

THE MARGINAL-EFFICIENCY-OF-CAPITAL FUNCTION OF THE FIRM

In this paper, the author points out that over a decade ago E. Norman Bailey identified the marginal-efficiency-of-capital (MEC) function as erroneous and argued that revisions in capital budgeting theory and teaching were necessary. The author develops more fully the arguments against the function and offers the theoretically correct MEC function. The development of the correct MEC function is a straightforward application of basic price theory; however, this application requires that the capital of the firm be viewed as a collection of complementary resources, in addition to its role as an income-producing investment.     

Margins,Liquidity, and the Cost of Hedging

Recent financial reforms, such as the Dodd‐Frank Act in the U.S. and the European Market Infrastructure Regulation, encourage greater use of clearing and therefore increased margining of derivative trades. They also impose margining requirements on noncleared derivative trades. Such requirements have sparked a debate about whether a margin mandate increases the cost of hedging by nonfinancial corporations—the so‐called end‐users of derivatives. The authors argue that it does not. They show that a nonmargined derivative is equivalent to a package of (1) a margined derivative and (2) a contingent line of credit. The main effect of a margin mandate is to require that this package be marketed as two distinct products. But it does not change the total financing or capital required to hedge. Nor does it raise the cost to banks or other dealers of offering the package, at least not directly. Nevertheless, there may be indirect effects if, for example, the clearing mandate succeeds in lowering total counterparty exposures and therefore systemic risk. Although the authors do not explore these effects, they do offer one explanation for the popularity of over‐the‐counter, and thus noncleared, derivatives: accounting rules and bank regulations that treat the implicit lines‐of‐credit embedded in nonmargined derivatives differently from explicit lines of credit used to fund margins.     

Does one size fit all? Evidence on XBRL adoption and 10-K filing lag

This paper examines how XBRL adoption is associated with 10-K filing timeliness. Using a sample of 10-K filings from 2007 to 2016, we find that 10-K filing lag decreases for Tier 1, Tier 2 and Tier 3 accelerated filers following the XBRL mandate. For Tier 3 smaller reporting companies, however, filing lag increases significantly in the post-XBRL period. Results from a difference-in-differences specification as well as using an alternative measure of filing timeliness produce similar inferences. We then investigate factors associated with the delay. We find that 10-K filing lag increases with XBRL filing complexity, whereas the deployment of a more experienced service provider can mitigate the lag. Overall, this study provides evidence that XBRL mandate improves preparer efficiency for most firms; however, our finding that the effect for smaller reporting companies goes in the opposite direction leads to the question whether XBRL can be viewed as a one-size-fits-all solution to financial reporting.     

Cyclicality of SME lending and government involvement in banks

Recent regulatory efforts aim at lowering the cyclicality of bank lending because of its potentially detrimental effects on financial stability and the real economy. We investigate the cyclicality of SME lending of local banks with versus without a public mandate, controlling for location, size, loan maturity, capitalization, funding structure, liquidity, profitability, and credit demand-side factors. The public mandate is set by local governments and stipulates a sustainable provision of financial services to local customers and a deviation from strict profit maximization. We find that banks with a public mandate are 25% less cyclical than other local banks. The result is credit supply-side driven and especially strong for public mandate banks with high liquidity and stable deposit funding. Our findings have implications for the bank structure, financial stability and the finance-growth nexus in a local context.     

THE SLOPE OF THE TERM STRUCTURE OF CREDIT SPREADS: AN EMPIRICAL INVESTIGATION

In this article we analyze the slope of the term structure of credit spreads. We investigate the explanatory role of interest rate, market, and idiosyncratic equity variables that the recent empirical literature highlights as important determinants of credit spread levels. This study extends the analysis and assesses its effect on credit slopes for a sample of corporate bonds. We find that these factors affect credit spreads at short and long maturities in a significantly different way. A closer inspection of the credit spread slope also reveals that it is a useful indicator of the direction of changes in future short‐term credit spreads. This evidence has important implications for the trading and risk management of portfolios of bonds with different maturities.     

The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China

We examine how mandatory disclosure of corporate social responsibility (CSR) impacts firm performance and social externalities. Our analysis exploits China's 2008 mandate requiring firms to disclose CSR activities, using a difference-in-differences design. Although the mandate does not require firms to spend on CSR, we find that mandatory CSR reporting firms experience a decrease in profitability subsequent to the mandate. In addition, the cities most impacted by the disclosure mandate experience a decrease in their industrial wastewater and SO₂ emission levels. These findings suggest that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders.