Political and Regulatory Risk in Water Utilities: Beta Sensitivity in the United Kingdom

UK utilities are generally regulated by the periodic setting of a price cap (the RPI-X mechanism). To establish these caps, regulators must determine what returns are appropriate on the capital employed by utilities. This paper addresses the issue of the level of risk inherent in investment in the equity of regulated water utilities in the UK. It uses the techniques of the Kalman Filter to estimate daily betas for the major utilities in the period from privatisation to mid-1999. The paper demonstrates that water utilities' risk is time-variant. It demonstrates, also, that there have been significant political and regulatory influences in the systematic risk faced by water utility shareholders. It finds beta to display little evidence of cyclical variation across the regulatory review cycle. The paper also confirms that significant excess returns have been generated over the history of the privatised water sector and suggests that over-estimation of systematic risk faced by investors in the sector may imply further excess returns in the next regulatory review period.     

Profit sharing and investment by regulated utilities: A welfare analysis

We analyse the effects of different regulatory schemes (price cap and profit sharing) on the endogenous size of a firm's investment. Using a real option approach in continuous time, we show that profit sharing does not delay a firm's start-up investment compared to a pure price-cap scheme. Profit sharing does not necessarily affect total investment either, if the threshold for profit sharing is high enough. Only a profit sharing intervening for low profit levels could delay further investments. We also evaluate the effects of profit sharing on social welfare, determining profit level that should optimally trigger tighter regulation: profit sharing should be less stringent in sectors where there is more opportunity for larger investment.     

Research Assessment in the UK: An Overview of 1992–2008

Research assessment of UK universities has a history going back to at least 1986. A formal review system is operated by the Higher Education Funding Councils and their predecessors, and used to inform one stream of research funding. The current system was formalised in 1992 and continued until 2008, when a decision was taken to revise it more radically. This paper reviews the UK experience over two decades and attempts to draw some lessons from it, focusing on the area of Accounting & Finance (A&F) in particular and Business & Management (B&M) more generally. It considers the assessment process as a form of performance management, and reviews its operation from that standpoint, and also considers the proposals for change that are being considered in late 2009. The author has been a participant in all the review processes since 1992 and the paper benefits from this experience. It concludes that the process has had mainly beneficial outcomes, but is also in need of substantial redesign for the future.     

The orbit of consumer credit choices

Resulting from instability in the UK financial climate in recent times, consumers have increasingly turned to alternative credit sources such as payday loans, logbook loans (car title loans) and pawning. Recognising this increasingly important trend in UK society, this study explores how UK consumers manage and select alternative credit sources, through a Consumer Culture Theory lens. Primary data were sourced through a multi-stage interview process with ten consumers of alternative credit providers. Findings were subjected to a rigorous six-stage thematic analysis, which enabled generation of a three-ring orbit model showing how the consumers migrated between categories of credit sources. Furthermore, it was found that other concepts could be traced on to the orbit model, such as access to other credit sources, time pressures, perceived risk and emotional state. It is expected that the findings from this study will benefit lenders, policy makers and regulatory bodies from greater insights into understanding of the emotional state of their customers and the particularly the pressures they may be experiencing when taking last resort credit sources.     

基金投资者的分类监管

对投资者进行分类监管是发达国家通行的做法 ,美国、英国等监管机构对证券、基金行业的监管做法很值得我们借鉴。在大力国际化、市场化的进程中 ,我国应当按照投资者风险承受能力进行分类监管 ,并以此分配监管资源 ,提高监管效率 ,同时有效地降低系统风险。     

英国新建宏观审慎的金融监管框架及启示

英国金融体系未能幸免于2008年国际金融危机的冲击,暴露出英国金融监管框架同样存在明显缺陷。为此,英国政府决心对其金融监管框架进行改革,将基于系统整体的宏观审慎监管与传统的基于单个金融机构的微观审慎监管结合起来。文章介绍了英国监管当局对其旧监管体系的反思,及新监管框架的结构与运行模式,并在此基础上总结了当前国际金融业监管新趋势对我国的启示。     

国际债券二级市场监管框架比较研究

在债券二级市场中,政府监管和行业自律监管缺一不可,却又扮演着不同的角色。文章从政府监管和行业自律监管两个角度,对美、英、日、印等国家债券二级市场的监管框架进行了总结分析,为国内债券市场的监管提供了借鉴。     

Empirical models for the monitoring of UK corporations

This paper has four main aims. Firstly it attempts a critical appraisal of extant UK Z-score models and seeks to assess in each case their operational utility. Next two previously unpublished models are described which address respectively (i) the need for separate models for manufacturing and distribution companies, and (ii) the utility of the jackknife discriminant approach in practice. Then developments of the technique to enhance considerably its utility to the practitioner are described. Finally a brief review of how such approaches are currently being used in the UK and by whom is provided.     

Accountants divided: research selectivity and academic accounting labour in UK universities

This paper presents data from a postal survey designed to explore the impact of the Research Assessment Exercise (RAE) on academic accounting labour in the UK. The RAE is seen as integral to the growth of managerialism in UK higher education and to the increasing commodification of academic labour. The data indicates that academic accountants are divided in their perceptions of and reactions to the RAE. It is argued that in co-opting peer review for managerial ends, the RAE appeals to traditional academic identities, re-enforcing existing divisions within the academic accounting community and dissipating resistance to its perceived negative effects. The conclusion is that despite a significant degree of hostility to the RAE, UK accountants are themselves in large part responsible for enacting this particular managerial control strategy. In the process, there is a danger that academic accounting knowledge is being distorted, the profession divided and academics disillusioned by its power to direct what “counts" as high status academic research.     

On accounting classification and the international harmonisation debate

In an earlier issue of this journal, d'Arcy presents a classification of accounting systems that shows the UK and the US in separate groups and Australia as an outlier. It is suggested here that the classification is unsound because the data were unsuitable in nature and contained errors.     

英国金融市场基础设施监管状况及未来发展

文章剖析了英国金融市场基础设施（主要包括支付系统、中央对手方和证券结算系统）的监管框架,总结了监管工作在信用风险和流动性风险、恢复与处置和操作风险管理等方面取得的主要进展,阐述了其在国内、国际监管合作方面的监管权力运用,梳理了下一步的发展方向和酝酿的主要变革。     

Rules- versus judgement-based accounting disclosure in the UK

In the wake of recent corporate debacles, considerable debate has ensued on the relative merits of rules-based versus judgement-based accounting disclosure. This note contributes to the debate by examining disclosure practices in the UK where a well-established regulatory framework nevertheless upholds the right of corporate managers to exercise discretion.A specific template is developed to examine simultaneously the content of the segment report and the operating and financial review (OFR) to detect disclosure patterns. The findings indicate that companies which provide the fullest and most relevant segment reports provide less voluntary additional disclosure in the OFR than those companies that, superficially, provide less extensive disclosure in their segment reports. It is unclear, therefore, that changes to more rules-based disclosure regimes will automatically lead to an increase in the level of overall disclosure.     

Yardstick and incentive issues in UK electricity distribution price controls

Electricity distribution is a primary candidate for regulation since it is a natural monopoly whose costs it would be inefficient to duplicate in a competitive market. In the UK since privatisation of the electricity industry in 1990, this regulation has emphasised incentives for cost efficiency through the use of RPI‐X price capping applied to 14 regional distribution businesses. The paper examines the issues that have arisen in implementation, including the practice of bench‐marking the operating and capital expenditures of different companies. It analyses how the price set at the beginning of each review period depends on the determination of cost yardsticks, the weighted average cost of capital and the regulatory asset base of the companies. The analytical model is used to evaluate Ofgem's 1999 Distribution Price Control Review and compares it with other European distribution price regulations.     

The power of collaborative deliberation in stakeholder dialogue seminars

This paper quantifies the added value of using collaborative deliberation as an engagement element in a stakeholder dialogue seminar arranged over 3 days in Norway in 2015 with a wide range of national, regional and local stakeholders. The topic addressed was the possible impacts in western Norway from a hypothetical nuclear accident in the UK. The first day included information provision while the following 2 days were devoted to collaborative deliberation on the issue. Two questionnaire surveys were used to measure the degree of learning, networking, involvement and problem solving reported by the participants after the first day and the third day. The results from the surveys clearly suggest that collaborative deliberation gave an added value compared to information provision alone in our stakeholder dialogue seminar.     

Does the one man show pay? Theory and evidence on the dual CEO revisited

Contrary to the view expressed in several countries and the corresponding pressure exerted by shareholder activists and regulators to separate the titles of CEO and Board Chairman, this study proposes that there is an optimal board composition for each firm, which varies across firms and over time. A review of the extant empirical evidence reveals that most prior studies bypass this notion which raises serious implications for related empirical studies. In addition, this study documents striking differences in leadership structures between the US and the UK and calls for further research in an international context.     

The value relevance of cash flows, current accruals, and non-current accruals in the UK

Cash flow statements have a longstanding history as mandated financial statement disclosures, having replaced funds flow statements. The usefulness of such disclosures with respect to one of the main purposes of financial statements—providing information relevant to the assessment of future cash flows and their uncertainty, and the market value of firms—is still subject to debate. This study investigates whether various partitions of earnings involving combinations of a cash flow measure of performance and measures of current accruals and non-current accruals improve the ability to explain market values in the UK relative to using earnings alone. Using a valuation model-based methodology, and employing a UK sample of non-financial firms for the years 1993 to 2007, our results suggest strong support for the assertion that cash flows can have incremental value relevance relative to either earnings or funds flows. By implication, cash flows can have separate value relevance from total and, in particular, current accruals. There is slightly less consistent evidence that current and non-current accruals can have separate value relevance but, nonetheless, the results are still strongly in favour in this respect. Generally, the main source of increase in explanatory power for market values is the separate inclusion of our cash flow measure in the estimated regressions. As a consequence, we conclude that the statement of cash flows in the UK provides information useful to UK investors in valuing firms. Further, requiring a cash flow statement, as opposed to a funds flow statement, improves the information content of financial statements in the UK.     

Reducing Regulatory Risk: The Case for a New Regulatory Contract with the Privatized Utilities

Privatization was intended to reverse the inefficiencies of state ownership. When the public utilities were privatized in the UK, between 1984 and 1996, newdedicated regulatory offices were established: Oftel, Ofgas, Ofwat, Offer and the ORR. Terms of reference for the regulators were set out in the privatization legislation, but more generally the regulators were given considerable discretion over their industries. Against the background of the Government Green Paper on the future of regulation in the UK, this article argues that while regulatory discretion was desirable in the early days of regulation, there is now a stronger case for introducing 'contracts' which constrain regulatory discretion and reduce regulatory risk.     

Investigating the cost performance of UK credit unions using radial and non-radial efficiency measures

This paper examines the relative efficiency of UK credit unions. Radial and non-radial measures of input cost efficiency plus associated scale efficiency measures are computed for a selection of input output specifications. Both measures highlighted that UK credit unions have considerable scope for efficiency gains. It was mooted that the documented high levels of inefficiency may be indicative of the fact that credit unions, based on clearly defined and non-overlapping common bonds, are not in competition with each other for market share. Credit unions were also highlighted as suffering from a considerable degree of scale inefficiency with the majority of scale inefficient credit unions subject to decreasing returns to scale. The latter aspect highlights that the UK Government's goal of larger credit unions must be accompanied by greater regulatory freedom if inefficiency is to be avoided. One of the advantages of computing non-radial measures is that an insight into potential over- or under-expenditure on specific inputs can be obtained through a comparison of the non-radial measure of efficiency with the associated radial measure. Two interesting findings emerged, the first that UK credit unions over-spend on dividend payments and the second that they under-spend on labour costs.     

A Field Study of the Review Process: Research Note

Despite the stated importance of the audit review process in auditing standards and textbooks, research on the process itself is limited. This study provides evidence on the nature and purpose of the review process by examining the actual review notes prepared by managers of a Big-6 accounting firm. A sample of twenty-eight audit engagements resulting in 3,008 separate review notes was examined. The results suggest that quality control aspects appear to be the main focus of the review process. Review notes sometimes indicated the need to gather further information and/or undertake additional testing, and provided direct as well as indirect advice on the audit approach to subordinates. Few surprises resulted from the review process, and the review notes and approaches varied among managers.     

The production of normativity: A comparison of reporting regimes in Spain and the UK

This paper contributes to understandings of the production of normativity, i.e. the ways in which actors come to see rules as binding, in the context of corporate reporting regimes. Although the accounting literature recognises that a range of actors participate in the regulatory process, it continues to embrace dichotomous explanations of regulatory success based in the distinction between law and non-law, with law emanating from a binding system of rules, codified through state legislation and enforced by a coercive Westphalian state. Following this understanding there are calls for further regulation of reporting regimes in the literature. This paper demonstrates how a constructivist perspective can provide new insights to existing debates over regulation. More specifically, this theoretical perspective is applied to explore the production of normativity in two reporting regimes addressing environmental issues. One (the Spanish case study) was characterised by formal law enacted by the state which nonetheless lacked normativity. The other (the UK case study) was characterised by informal law induced by non-governmental organisations which appeared to acquire normativity. The problematisation of regulatory authority and legality offered by regime theory, constructivism and understandings of the processes by which norm cascades are generated reveals that, the internal legitimacy of the law is crucial in the construction of normativity and that while this was found in the UK case study, it was lacking in the Spanish case. These findings provide a more subtle set of considerations for understanding the role of regulation in reporting.