Business Commons^™

Audit Firms And Disclaimers: Is The Bar Set Too Low?, Keith Hooper, Jing Wang

Faculty of Business - Papers (Archive)

This paper makes the case for the greater regulation of auditors. It argues that the courts are too sympathetic to the use of disclaimers to escape liability to investors, individual shareholders and third parties. The approach is to review the relevant court cases which established the concept of "opinions" and disclaimers as a means of protection and argue for greater recognition of the wider impact of the audit role. The paper finds that the best explanation as to why auditors use disclaimers is Social Darwinism. The application of professional ethics as adumbrated in various codes is not relevant to this …

Corporate Opacity And Cost Of Debt For Family Firms, Liangbo Ma, Shiguang Ma, Gary G. Tian

Faculty of Business - Papers (Archive)

This paper uses a sample of Chinese firms to examine the impact of corporate opacity on the relationship between family control and firms' cost of debt. We find that family control is associated with a lower cost of debt on average, and a negative impact exists mainly in firms with relatively low corporate opacity. We further provide evidence that the moderating effect of corporate opacity becomes more pronounced when investors' perception of controlling families' moral hazard of expropriation is higher. Our results are robust to alternative opacity proxies and controlling for endogeneity of family control using the instrumental variable method. …

The Effect Of Financial Status On Earnings Quality Of Chinese-Listed Firms, Feng Li, Indra Abeysekera, Shiguang Ma

Faculty of Business - Papers (Archive)

This article investigates the relation between accounting-based earnings quality attributes and the financial status of Chinese companies listed in Shanghai and Shenzhen stock exchanges from 2005 to 2007 by classifying them as either "healthy" or "bankrupt" firms. The authors find that accruals quality, earnings predictability, and earnings smoothness are significantly different between healthy and bankrupt firms, but not earnings persistence. Additional analysis undertaken indicates that firm categories (healthy, financially distressed, and bankrupt) based on financial status does not indicate distinct differences in earnings quality attributes.

Dynamic Forecasts Of Financial Distress Of Australian Firms, Maria Kim, Graham Partington

Faculty of Business - Papers (Archive)

Dynamic forecasts of financial distress have received far less attention than static forecasts, particularly in Australia. This study, therefore, investigates dynamic probability forecasts for Australian firms. Novel features of the modelling are the use of time-varying variables in forecasts from a Cox model. Not only is this one of relatively few studies to apply dynamic variables in forecasting financial distress, but to the authors' knowledge it is the first to provide forecasts of survival probabilities using the Cox model with time-varying variables. Forecast accuracy is evaluated using receiver operating characteristics curves and the Brier Score. It was found that the …

Do Venture Capitalists Play A Monitoring Role In An Emerging Market? Evidence From The Pay-Performance Relationship Of Chinese Entrepreneurial Firms, Jerry Cao, Qigui Liu, Gary Tian

Faculty of Business - Papers (Archive)

This paper investigates venture capitalists' monitoring of managerial behaviour by examining their impact on CEO pay-performance sensitivity across various controlling structures in Chinese firms. We find that the effectiveness of venture capitalists' monitoring depends on different types of agency conflict. In particular, we find that venture capital (VC) monitoring is hampered in firms that experience severe controlling-minority agency problems caused by disproportionate ownership structures. We provide further evidence that VC is more likely to exert close monitoring in firms that have greater managerial agency conflict, and thus require more direct monitoring. However, controlling-minority agency problems have a greater impact on …

Theories To Define And Understand Family Firms, Mary Barrett

Faculty of Business - Papers (Archive)

My earlier chapter in this volume on the four phases of learning in family firms relies on some important theories about the nature of family firms and how they differ from non-family firms. This chapter explains them briefly.

Does Banks' Dual Holding Affect Bank Lending And Firms' Investment Decisions? Evidence From China, Xiaofei Pan, Gary Tian

Faculty of Business - Papers (Archive)

This study investigates the effect of banks' dual holding on bank lending and firms' investment decisions using a sample of listed firms in China. We find that dual holding leads to easier access to bank loans, a result that is more pronounced for non-state-owned enterprises (non-SOEs) than SOEs. We also find that dual holding distorts banks' lending decisions and harms the investment efficiency for SOEs, while resulting in optimal lending decisions and enhanced investment efficiency for non-SOEs. For non-SOEs, further analysis suggests that optimal lending decisions and efficient investment can be achieved for firms with higher ownership concentration, and firms …

Internationalization Of Malaysian Firms And The Effects Of Major External Economic Crises, Ah Ba Sim

Faculty of Business - Papers (Archive)

This paper examines and analyzes the internationalization of international firms from Malaysia over two time periods of major external economic crises, the Asian financial crisis and the global economic crisis based on a study of four case firms. The findings indicate variations and changes in strategies during early and continued internationalization over the 11 year time studied. These findings and their research implications are examined and discussed.

The Puzzle Of Negative Association Of Earnings Quality With Corporate Performance: A Finding From Chinese Publicly Listed Firms, Shiguang Ma

Faculty of Business - Papers (Archive)

Introduction

- Earnings management - Accounting data management. - Real earnings management.

- Earnings quality - Financial statement accurately and unbiased reports corporate operating status and financial position. - Earnings quality as the degree to which earnings persists or sustains into next period.

- Corporate performance - Low earnings quality leads to low corporate performance. - Theoretically approved, but empirical evidences are not consistent.

- The Puzzle of Negative Association of Earnings Quality with Corporate Performance in China - Probably, it is rational in an emerging market.

Innovation In Small And Medium-Sized Wood-Furniture Firms In Central Java, Indonesia, Amie Kusumawardhani, Grace Mccarthy

Sydney Business School - Papers

The aim of this paper is to explore the perception of innovation within Indonesian SMEs in the wood-furniture industry in Central Java, Indonesia. Qualitative research was employed by interviewing SMEs managers/owners. The study showed that SMEs' perception of innovation was not necessarily related to 'newness' or 'novelty' as suggested by some scholars. The innovation carried out by the majority of SMEs in this study is likely to be considered as incremental innovation. The characteristics of the wood-furniture industry and SMEs are believed to contribute to the different perspectives concerning innovation than those reported in the literature. Even so, they are …

A Comparative Case Study Of The Internationalization Strategies Of Malaysian, Singaporean And Taiwanese Firms, Ah Ba Sim

Faculty of Commerce - Papers (Archive)

Comparative empirical research on the internationalization strategies of Asian multinational enterprises (MNEs) from countries at different levels of development is lacking. This paper examines and analyzes the internationalization characteristics and strategies of MNEs from three Asian countries at two different levels of development. Primary data from matched sample firms from Malaysia (a fast developing economy) and Singapore and Taiwan (representing newly industrialized economies) in the textile and electronics industries are used for this study. The findings indicate some differences among the Malaysian, Singaporean and Taiwanese MNEs. These differences and their implications are examined. The empirical findings, particularly the contextual aspects …

Board Structure And Survival Of New Economy Ipo Firms, Nongnit Chancharat, Chandrasekhar Krishnamurti, Gary G. Tian

Faculty of Commerce - Papers (Archive)

Research Question/Issue: This study examines the relevance of currently accepted best practice recommendations regarding board structure on the survival likelihood of new economy initial public offering companies. We argue that industry context determines governance outcomes.Research Findings/Insights: We study 125 Australian new economy firms listed between 1994 and 2002. Each firm is tracked until the end of 2007 for monitoring their survival. We find that board independence is associated with an increase in the likelihood of corporate survival. We also find that the benefits of board independence increase at a decreasing rate.Theoretical/Academic Implications: The standard best practice recommendation of board independence …

Political Connection, Founder-Manager And Their Impact On Tunneling In China's Listed Firms, Liangbo Ma, Shiguang Ma, Gary G. Tian

Faculty of Business - Papers (Archive)

Reciprocal relationship, often regarded as mutually beneficial and secure, can actually be destructive and result in inefficiency. We provide evidence of such double-blade by studying the impact of political connection on corporate governance. Private firms in countries where the government controls the allocation of resources have incentives to seek political connections by hiring politicians or ex-politicians as top executives. Such political capital, however, may turn into political constraint when the CEOs fail to perform but use connections to entrench themselves. We take advantage of the unique setting in China to illustrate this argument. We show that politically connected CEOs have …

Survive Or Die? An Empirical Study On Chinese St Firms, Yanran-Annie Zhou, Maria H. Kim, Shiguang Ma

Faculty of Business - Papers (Archive)

A number of listed firms that are experiencing financial distress have had a Special Treatment (ST) 'cap' imposed on them by the China Securities Regulatory Commission. The ST 'cap' can be removed if the firms survive financial distress by becoming profitable. Alternatively, a ST firm which goes bankrupt is delisted from the market. Using a sample of 441 ST firms tracked from 1998 to 2011, this paper employs Cox's proportional hazards model to predict turnaround probability for a distressed firm to remove the ST 'cap'. The predictor variables incorporate: (1) accounting-driven ratios, (2) market-driven variables, and (3) information on ownership …

The Stock Market Implication Of Political Connections: Evidence From Firms' Dividend Policy, Jerry Cao, Sheng Huang, Qigui Liu, Gary G. Tian

Faculty of Business - Papers (Archive)

Political connections are valuable for shareholders of privately-run firms especially in countries with weak legal institutions. We study the effect of a firm's political connections in the public equity market by focusing on its impact on the firms' dividend policy. Prior studies suggest that dividends signal the commitment for proper treatment of minority shareholders and thus high growth firms pay dividends to establish such a reputation for better access to equity market in the future. Using a sample of privately-owned Chinese firms, we find that politically connected firms are less likely to pay dividends and pay less if they pay. …

The Effect Of Ownership Structure On Leverage Decision: New Evidence From Chinese Listed Firms, Qigui Liu, Gary Tian, Xiaoming Wang

Faculty of Commerce - Papers (Archive)

This paper examines the effect of state control and ownership structure on the leverage decision of firms listed in the Chinese stock market. Our results show that state-owned enterprises (SOEs) have higher leverage ratios than non-SOEs, and SOEs in regions with a poorer institutional environment have higher leverage ratios than SOEs in better regions. We also show that the largest shareholding (the percentage of shares held by the largest shareholder) in the SOEs has a negative relationship with the leverage ratio, while the largest shareholding in non-SOEs has a non-linear relationship with the short-term and long-term debt ratios. Finally, this …

Informal Flexibility? Issues For Accountants Working Part-Time In Small Firms, Mary Barrett, Glenda Strachan

Faculty of Commerce - Papers (Archive)

Formally sanctioned flexible working conditions are now common in Australian workplaces. While large organisations have policies for part-time work, career breaks, and leave options, research indicates employees may still suffer employment disadvantage if they use them (French and Sheridan 2010; Lyonette and Crompton 2008). This paper examines this issue for a lesser known population: professional and managerial employees in small accounting firms (<50 employees), particularly those working fewer than 35 hours per week and those who took career breaks. Results are drawn from a survey of all CPA Australia members working in small firms.

Unsurprisingly, given that women undertake more family and household work (ABS 2009; Burgess and Strachan 2005), more women than men worked part-time, and women had taken longer career breaks. Arrangements for part-time work and other flexible options …

Earnings Management And The Effect Of Earnings Quality In Relation To Stress Level And Bankruptcy Level Of Chinese Listed Firms, Feng Li, Indra Abeysekera, Shiguang Ma

Faculty of Commerce - Papers (Archive)

This paper investigates the link between earnings management and earnings quality for the Chinese firms listed in the Shanghai and Shenzhen stock exchanges from 2003 to 2007. The earnings quality is measured by four separate earnings attributes: accruals quality, earnings persistence, earnings predictability, and earnings smoothness. We find that the stressed/bankrupt firms prefer opportunistic earnings management; the non-stressed/non-bankrupt firms are more likely to choose more efficient earnings management than the stressed/non-bankrupt firms. We find that earnings management performs better than earnings quality in predicting future profitability. We also find that the earnings quality has deteriorated over the sample period; the …

Disproportional Ownership Structure And Pay–Performance Relationship: Evidence From China's Listed Firms, Jerry Cao, Xiaofei Pan, Gary Tian

Faculty of Commerce - Papers (Archive)

This paper examines the impact of ownership structure on executive compensation in China's listed firms. We find that the cash flow rights of ultimate controlling shareholders have a positive effect on the pay–performance relationship, while a divergence between control rights and cash flow rights has a significantly negative effect on the pay–performance relationship. We divide our sample based on ultimate controlling shareholders' type into state owned enterprises (SOE), state assets management bureaus (SAMB), and privately controlled firms. We find that in SOE controlled firms cash flow rights have a significant impact on accounting based pay–performance relationship. In privately controlled firms, …

Political Connections, Founding Family Ownership And Leverage Decision Of Privately Owned Firms, Qigui Liu, Gary G. Tian

Faculty of Commerce - Papers (Archive)

In this paper, we examine the effect of political connections versus founding family ownership on the relationship between disproportional ownership structure and leverage decisions of privately owned firms listed in Chinese market. We find that disproportional ownership has positive effect on leverage, indicating that controlling shareholder tends to use both disproportional ownership structure and debt to expropriate. We also find that the interacted term between disproportional ownership and political connections has a positive impact on leverage ratio, and disproportional ownership structure is negatively related with leverage ratio of founding-family controlled firms, which indicate a substitute effect between political connections and …

The Ownership And Ownership Concentration? The Impact On The Performance Of China's Firms, Shiguang Ma, Tony Naughton, Gary G. Tian

Faculty of Business - Papers (Archive)

This paper investigates the impact of ownership and ownership concentration on the performance of China's listed firms. By recognizing the differences between ownership and ownership concentration, and between total ownership concentration and tradable ownership concentration, we find that ownership concentration is more powerful than any category of ownership in determining firm performance and that it has approximately positive linear relations with firm value. The tradable ownership concentration has a more significant and positive influence on firm performance than total ownership concentration. The highest level of firm performance is approached when a firm is characterized with both total ownership concentration and …

The Influence Of Board Size On Intellectual Capital Disclosure By Kenyan Listed Firms, Indra Abeysekera

Faculty of Commerce - Papers (Archive)

Purpose – The purpose of this paper is to examine the effect of board size on firms disclosing more, rather than less, strategic and tactical intellectual capital resources using the top 26 of the 52 firms ranked by the Nairobi Stock Exchange for market capitalization in 2002 and in 2003. This study identifies intellectual capital disclosure by three separate categories: internal capital, external capital, and human capital. Hence, this study examines the influence of board size on six disclosure outcomes. Design/methodology/approach – The study develops hypotheses using the resource dependency theory. Using content analysis for data generation, this study classifies …

Disproportional Ownership Structure And Pay-Performance Relationship: Evidence From China's Listed Firms, Jerry Cao, Xiaofei Pan, Gary G. Tian

Faculty of Commerce - Papers (Archive)

This paper examines the impact of disproportional ownership structure on the pay-performance relationship in China’s listed firms. We find that the cash flow rights of the ultimate controlling shareholder have a positive effect on this relationship while a divergence between the control rights and cash flow rights has a significantly negative effect. By dividing our sample into state owned enterprises (SOE), state assets management bureaus (SAMB), and privately controlled firms, we find that cash flow rights in SOE controlled firms have a significant impact on accounting based pay performance and cash flow rights in privately controlled firms also affect the …

Subsidiary Management In Malaysian Multinational Firms, Ah Ba Sim

Faculty of Commerce - Papers (Archive)

Research on Asian multinational enterprises (MNEs) from the newly industrialized economies (NIEs) has gained popularity recently. But there are limited studies on MNEs from the lesser developed Asian countries and even less research attention has been given to the area of subsidiary management in Asian MNEs. This paper aims to contribute to this knowledge gap with empirical evidence on subsidiary management from a study based on nine case studies of MNEs from Malaysia, a rapidly developing country. Some differences as well as commonalities in the management of their subsidiaries were found among our sample firms. These findings are discussed in …

Size Still Matters When Firms Choose Business Collaborators, Yu Zhang, Charles Harvie

Faculty of Commerce - Papers (Archive)

Collaborate with peer-sized or larger-sized partner helps the firm to enhance its process, product quality, reputation, and market position. Therefore, when choosing collaborator, firms prefer peer-sized or lager-sized partners. Many empirical researches try to link the firm’s size with the performance and result of collaboration. However, there are still many debates. Instead of using the firm’s size, this paper use the compared size or size difference between collaborating firms to examine its influence on the performance of inter-firm collaboration. The results from qualitative case study and quantitative online survey in both Australia and China supported that size matters when firms …

Performance Implication Of Ownership Structure And Ownership Concentration: Evidence From Sri Lankan Firms, Athula S. Manawaduge, Anura De Zoysa, Kathleen M. Rudkin

Faculty of Commerce - Papers (Archive)

Purpose - This paper seeks to examine the impact of ownership concentration and ownership structure on firms’ performance of a sample of public listed companies in Sri Lanka in the premise of an agency theory framework.

Design/methodology/approach - The paper first investigates the nature of ownership structure and concentration and then examines whether there is strong evidence to support the observation that the variations of ownership structure across firms result in systematic variations in firm performance. This hypothesis is tested by assessing the impact of ownership structure and concentration on firm performance measured in terms of accounting profitability and market …

When The Going Gets Tough: Board Capital And Survival Of New Economy Ipo Firms, Nongnit Chancharat, Chandrasekhar Krishnamurti, Gary G. Tian

Faculty of Commerce - Papers (Archive)

The high profile corporate collapse of Enron and WorldCom has been attributed to corporate governance failures. This implicit linkage between governance failures and corporate failures raises the important question of whether good governance will mitigate the probability of failure of a firm faced with extreme financial duress. Additionally, recent studies question the assumption that a single board structure will be optimal for all firms. We empirically address this issue in the context of survival of new economy Australian IPOs. We characterize governance by board structure and leadership. Our results show that one of the key principles of the Cadbury Code …

Fostering Women's Entrepreneurial Leadership In Family Firms: Ten Lessons, Mary Barrett, Ken Moores

Faculty of Commerce - Papers (Archive)

Women's potential to lead a firm - whether one started by a family member or a new venture of their own - is still not often enough acknowledged. With family firms acknowledged as the seeding grounds for the next generation of entrepreneurs, and with increasing attention in research and public policy to women's entrepreneurship, it is important to understand the factors in family firms which help and hinder their women members' leadership and entrepreneurship potential. This article, based on the authors' book Women in Family Business Leadership Roles: Daughters on the Stage (Edward Elgar, 2009), presents ten lessons for family …

State Owned Vs. Privately Owned Firms: Whose Ceos Are Better Compensated?, Jerry Cao, Xiaofei Pan, Gary G. Tian

Faculty of Commerce - Papers (Archive)

This paper investigates CEO pay and pay-performance relationshipin China s listed firms. We distinguish four firm types based on theircontrolling owners: state owned enterprises affiliated with stateasset management bureaus (SAMBs), state owned enterprisesaffiliated with the central government (SOECGs), state ownedenterprises affiliated with a local government (SOELGs), and privatefirms controlled by private investors. We also distinguish betweenfirms with foreign investors and those without. Because thedifferent types of controlling owners have different objectives,motivations, and political interests, they affect managerscompensation in the firms in which they invest. Our results indicatethat CEO pay is lowest in SAMB controlled firms and highest inSOECG controlled firms. …

Managerial Compensation, Ownership Structure And Firm Performance In China's Listed Firms, Xiaofei Pan, Gary G. Tian, Shiguang Ma, Aelee Jun, Qingliang Tang

Faculty of Commerce - Papers (Archive)

This paper investigates managerial compensation and its relationship with firm performance in China's listed firms. In China, the largest shareholder dominates other shareholders, controls the firm and therefore exercises substantial impacts on manager compensation. After controlling for other firm and industry characteristics, we find that manager remuneration is greater and pay-performance relation is stronger for privately-controlled firms than for state-controlled firms. We also document that state-controlled firms exercise performance-based manager incentive schemes, which is contrary to evidence found in some earlier studies. Our results also indicate that top executives in firms with a foreign ownership are more highly compensated, relative …