Corporate Reporting on the Internet in Australia: An Exploratory Study

This paper documents a research study on corporate reporting on the Internet by Australian companies. The findings suggest that while corporate reporting on the Internet is emerging in Australia, current practice does not utilise the full potential of the Internet to disclose information to stakeholders. Only limited evidence was found of changes in the reporting practices of companies resulting from opportunities for innovation in information dissemination offered by this technology.     

Analysing tourist satisfaction at a mature and multi-product destination

The current study examines the meaning of ‘home’ and ‘away’ among visiting friends and relatives (VFR) tourists, utilising the multidimensional model suggested by Uriely [(2010). ‘Home’ and ‘away’ in VFR tourism. Annals of Tourism Research, 37(3), 857–860] to assess the VFR experience. Despite recent conceptualisations that emphasise the intersection of tourism and everyday life in various ways, as is prominently exemplified in VFR tourism, this empirical investigation provides evidence as to the limitations of this perspective. Specifically, the findings of this study indicate that when staying at friends and relatives, VFR tourists may feel at ‘home’ in terms of familiarity with place, but they also often experience feelings of ‘away’, in the sense of the loss of privacy and the limited situational control involved in this situation. As a result, the study points to the need to understand tourism, in general, and VFR, in particular, as complex phenomena in which elements of both ‘extraordinary’ and ‘everydayness’ coexist. The conclusion also discusses the marketing implications of the study and provides suggestions for future research.     

Extracting Sustainable Earnings from Profit Margins

Revenues and expenses are fundamentally proportional to one another, but are likely to be disproportionally affected by transitory items or economic shocks. We build on this observation and propose a new measure of sustainable earnings based on deviations from normal profit margins. While some other sustainable earnings metrics attempt to identify transitory components on a line-by-line basis, our measure, referred to as the intensity of core earnings (ICE), uses ratio analysis to extract the transitory portion of earnings from all line items. We find that the ICE, as measured here, is positively associated with earnings persistence, better earnings predictability, and stronger market reaction to unexpected earnings. We also find that our measure is positively associated with post-earnings announcement excess stock returns. Comparing our measure with an accrual-based measure of earnings quality, we find that, in general, the two metrics provide distinct incremental information relative to one another and in some instances our measure is better than an accrual-based measure in assessing earnings quality.     

Dynamic risk management

Both financing and risk management involve promises to pay that need to be collateralized, resulting in a financing versus risk management trade-off. We study this trade-off in a dynamic model of commodity price risk management and show that risk management is limited and that more financially constrained firms hedge less or not at all. We show that these predictions are consistent with the evidence using panel data for fuel price risk management by airlines. More constrained airlines hedge less both in the cross section and within airlines over time. Risk management drops substantially as airlines approach distress and recovers only slowly after airlines enter distress.     

The role of accounting disaggregation in detecting and mitigating earnings management

Though ample empirical evidence alludes to the importance of disaggregated accounting data in the context of earnings management, extant theory considers biases in reporting mostly at the aggregated level of the accounting report. By introducing accounting disaggregation into the conventional theoretical framework of earnings management, this study highlights the essential role that disaggregated accounting data play in detecting and mitigating reporting manipulations. Disaggregated reports are shown to be especially effective when they consist of accounting items that are tightly interrelated by their fundamental economic nature, differ considerably in their sensitivity to reporting manipulations, and vary in their signs.     

Systemic risk and the refinancing ratchet effect

The combination of rising home prices, declining interest rates, and near-frictionless refinancing opportunities can create unintentional synchronization of homeowner leverage, leading to a “ratchet” effect on leverage because homes are indivisible and owner-occupants cannot raise equity to reduce leverage when home prices fall. Our simulation of the U.S. housing market yields potential losses of $1.7 trillion from June 2006 to December 2008 with cash-out refinancing vs. only $330 billion in the absence of cash-out refinancing. The refinancing ratchet effect is a new type of systemic risk in the financial system and does not rely on any dysfunctional behaviors.     

A Markov regime switching approach for hedging stock indices

In this paper we describe a new approach for determining time‐varying minimum variance hedge ratio in stock index futures markets by using Markov Regime Switching (MRS) models. The rationale behind the use of these models stems from the fact that the dynamic relationship between spot and futures returns may be characterized by regime shifts, which, in turn, suggests that by allowing the hedge ratio to be dependent upon the “state of the market,” one may obtain more efficient hedge ratios and hence, superior hedging performance compared to other methods in the literature. The performance of the MRS hedge ratios is compared to that of alternative models such as GARCH, Error Correction and OLS in the FTSE 100 and S&P 500 markets. In and out‐of‐sample tests indicate that MRS hedge ratios outperform the other models in reducing portfolio risk in the FTSE 100 market. In the S&P 500 market the MRS model outperforms the other hedging strategies only within sample. Overall, the results indicate that by using MRS models market agents may be able to increase the performance of their hedges, measured in terms of variance reduction and increase in their utility. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:649–674, 2004     

Harvesting to Extinction: Is It Socially Rational?

This paper presents a critique of the neoclassical view of the optimal use of renewable resources and offers an alternative view based on the method of classical thermodynamics. The presentation is forwarded via the issue of harvesting to extinction. Based on simple models, the traditional theory suggests that society would benefit from wiping out any renewable resource whose intrinsic growth rate, though positive, is smaller than the social rate of time preference. The latter is the rate society is using to discount its future benefits and costs. To bypass this ecologically implausible outcome, the simplistic assumptions have been modified in various ways. For example, either the costs or the benefits of harvesting have been made to depend on the stock of the resource as well as on the yield. The modifications offered make society less prone to wipe out resources intentionally, but they still disregard a more fundamental difficulty: The traditional theory is not consistent with the second law of thermodynamics; it describes a process that defies the second law, which no known system is able to be undergoing. No doubt, the theory should be challenged first and foremost on this ground, but none of the offered modifications is capable of annulling this inconsistency. A deeper change is needed because the social values of the resource as perceived by a society that behaves in manners consistent with the second law and as defined by the traditional theory necessarily differ. The paper identifies the socially consistent value and shows that harvesting to extinction is never optimal socially. Were society to follow the socially inconsistent value, it would always underestimate the importance of self-sustained resources. However, the unlikely refutability of the second law turns this possibility and the socially favored extinctions into arguable outcomes of an untenable theory rather than undesirable outcomes of a sound theory. Potentially growing renewable resources are wiped out in real life for various reasons, but when they are preyed to extinction, their unfortunate fate is an outcome of the dynamics of a socially unregulated system rather than a social objective coming to fruition. This revised version was published online in July 2006 with corrections to the Cover Date.     

Consumption and risk sharing over the life cycle

A striking feature of U.S. data on income and consumption is that inequality increases with age. This paper asks if individual-specific earnings risk can provide a coherent explanation. We find that it can. We construct an overlapping generations general equilibrium model in which households face uninsurable earnings shocks over the course of their lifetimes. Earnings inequality is exogenous and is calibrated to match data from the U.S. Panel Study on Income Dynamics. Consumption inequality is endogenous and matches well data from the U.S. Consumer Expenditure Survey. The total risk households face is decomposed into that realized before entering the labor market and that realized throughout the working years. In welfare terms, the latter is found to be more important than the former.