Corporate Governance and Company Performance in Australia

This study tests whether the adoption of Australian best practice corporate governance recommendations is associated with financial performance measured by return on assets (ROA) and Tobin's Q. Results suggest that recommended corporate governance structures relating to the adoption of board sub‐committees are sound policy recommendations that enhance performance using the accounting measure ROA and the market‐based measure Tobin's Q. In contrast, the emphasis on board independence guidelines, specifically having outside independent directors, has a negative impact on ROA and Tobin's Q. However, there are conflicting significant results between the accounting and market measures for having a dual CEO/chairperson and board size.     

Bias-correcting the realized range-based variance in the presence of market microstructure noise

Market microstructure noise is a challenge to high-frequency based estimation of the integrated variance, because the noise accumulates with the sampling frequency. This has led to widespread use of constructing the realized variance, a sum of squared intraday returns, from sparsely sampled data, for example 5- or 15-minute returns. In this paper, we analyze the impact of microstructure noise on the realized range-based variance and propose a bias correction to the range-statistic. The new estimator is shown to be consistent for the integrated variance and asymptotically mixed Gaussian under simple forms of microstructure noise. We can select an optimal partition of the high-frequency data in order to minimize its asymptotic conditional variance. The finite sample properties of our estimator are studied with Monte Carlo simulations and we implement it using Microsoft high-frequency data from TAQ. We find that a bias-corrected range-statistic often leads to much smaller confidence intervals for the integrated variance, relative to the realized variance. We should like to thank an anonymous referee and the associate editor for insightful comments on an earlier draft. Parts of this paper were written while Kim Christensen was at the University of California, San Diego, whose hospitality is gratefully acknowledged. Mark Podolskij received financial support from CREATES funded by the Danish National Research Foundation, and Mathias Vetter was supported by the Deutsche Forschungsgemeinschaft grant SFB 475 “Reduction of Complexity in Multivariate Data Structures.” The code for this paper was written in the Ox programming language, due to Doornik (2002). All views expressed here are those of the authors and do not necessarily represent the views of Nordea.     

Inducing Corporate Social Responsibility: Should Investors Reward the Responsible or Punish the Irresponsible?

Journal of Business Ethics - Investors with a pro-social or sustainability agenda increasingly attempt to influence firm managers to adopt socially responsible behavior, either through...     

Initial assessment and validation of an instrument to measure student perceptions of leadership skills

This article reports on development and validation of an instrument for use in measuring student perceptions of leadership skills. The article describes the development process of an instrument through use of subject matter experts for measuring leadership skill perception among students and use of an exploratory factor analysis technique to validate the resulting instrument. These data were obtained from a survey of 214 students in a small liberal arts college of business. The article presents an instrument for assistance with measuring leadership skill perception, development, and importance as well as further reports on the initial validity and reliability measures resulting from the analysis. In addition, the usefulness of the instrument for educators and workplace trainers is explored.     

Why do firms rarely adopt IFRS voluntarily? Academics find significant benefits and the costs appear to be low

Kim and Shi (Rev Account Stud, doi:10.1007/s11142-012-9190-y, this issue) document that voluntary IFRS adoption is associated with significant benefits and argue that the effect is causal??a conclusion that is similar to many published papers on IFRS adoption. Yet voluntary IFRS adopters constitute only a small percentage of the global population of firms, which implies that either practitioners behave irrationally or the benefits are incorrectly estimated by academics. In this discussion I argue that the error is on the part of academics, not practitioners, and that it is mainly due to the lack of exogenous variation in accounting standards. This conclusion is based on inconsistencies between the estimated benefits and costs of IFRS adoption, as well as the accounting standards choices of presumed rational managers. I also propose a contracting explanation for the capital market benefits around IFRS adoption in which managers behave rationally, but IFRS per se is not the cause.     

Stürze gezielt vermeiden

Ein kleiner Stolperschritt, ein kurzer Schwindel – schon ist es passiert. Die Folgen sind oft schwerwiegend: Denn Hüftfrakturen oder Oberschenkelhalsbrüche k?nnen zum Ausl?ser von Pflegebedürftigkeit werden. Besonders gef?hrdet sind ?ltere Menschen.     

The Informational Effects of Tightening Oil and Gas Disclosure Rules

We exploit two regulatory shocks to examine the informational effects of tightening preexisting mandatory disclosure rules. Canadian National Instrument 51-101 in 2003 and the U.S. rule “Modernization of Oil and Gas Reporting” in 2009 introduced quasi-identical amendments which effectively tightened the rules governing oil and gas reserve disclosures in both countries. We document significant changes in firms' reporting outcomes when the new regulations are introduced. We also find that the reserve disclosures filed under the new regulations are more closely associated with stock price changes and with decreases in bid-ask spreads. Our findings are robust to controlling for other confounding factors such as time trends, other information disclosed simultaneously, financial reporting incentives, mispricing, and monitoring efforts.     

Heterogeneity in Consumer Demands and the Income Effect: Evidence from Panel Data

This paper uses unique Spanish panel data on household expenditures to test whether unobservable heterogeneity in household demands (taste, etc.) is correlated with total expenditures (income). The main finding is that tastes are indeed correlated with income for about half of the goods considered, implying that cross‐sectional estimates of income elasticities for these goods are biased. The goods are the following: food eaten outside home, alcohol and tobacco, transportation, and energy. The elasticity of alcohol and tobacco is more than halved when taking unobserved heterogeneity into account. For transportation, the bias is sufficiently large to misclassify the good as a luxury.     

Determinants of farmers’ willingness to participate in subsidy schemes for pesticide-free buffer zones—A choice experiment study

Danish farmers have been far less interested in agri-environmental subsidy schemes (AES) than anticipated. In order to examine how to improve the appeal of such schemes, a choice experiment was conducted concerning 444 Danish farmers’ preferences for subsidy schemes for pesticide-free buffer zones. A random parameter logit framework was used to capture heterogeneity among farmers. Our results indicate that 1) the vast majority of farmers are willing to trade off the size of the subsidy for less restrictive scheme requirements and that 2) the amount of the subsidy they are willing to trade off varies with specific scheme requirements, suggesting which features are most important for successful policy design. Our results suggest that farmers value flexible contract terms higher than reduced administrative burdens. Finally, we suggest a practical approach to estimating a monetary value of farmers’ reluctance to participate in AES. While the trade off's that farmers are willing to make between subsidy size and individual scheme requirements are case specific, our results concerning increased use of farm advisors, farmers ability of valuing different types of flexibility, and our attempt to place a monetary value on farmers’ reluctance to engage in regulatory subsidy schemes have a potentially broader application platform.     

Sequential Communication in Agencies

This paper examines a principal-agent model in which the agent receives a sequence of two signals about the future outcome from his actions. Conditions are identified under which sequential communication (signals reported when received) is strictly preferred to simultaneous communication (signals only reported after all are received). If the second signal does not provide additional information about the outcome, then it can only be valuable if its report is verified. If the first signal is informative about the second and the second provides additional information about the outcome, then there exist settings in which sequential unverified reporting is strictly valuable.