Bajada, C & Shashnov, M 2018, 'The Effects of Regulatory Change on Taxpayer Compliance Behaviour in the Building and Construction Industry', Journal of Australian Taxation, vol. 20, no. 1.
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Using the results from a comprehensive telephone survey of home builders during 2007-8 and 2014-15, we provide an analysis of the behaviour, characteristics and perceptions of cash economy activity in the building and construction sector in Australia. In 2012-13, the ATO introduced the Taxable Payment Reporting System which yielded an additional compliance dividend. By comparing responses of builders before and after the introduction of this reporting system, we evaluate the impact of this regulatory change on grassroots activity in the cash economy. Although this regulatory change has impacted on certain cash economy activities, more targeted strategies are still required.I.
Bird, R, Foster, FD, Gray, J, Raftery, AM, Thorp, S & Yeung, D 2018, 'Who starts a self-managed superannuation fund and why?', Australian Journal of Management, vol. 43, no. 3, pp. 373-403.
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Self-managed superannuation funds (SMSFs) – small retirement savings funds with four or fewer members – now manage almost one-third of retirement savings in Australia, and serve over 1 million members. The number of SMSFs has increased to more than half a million in two decades, yet little is known about the reasons people start the funds and how they operate. We use a survey of more than 500 SMSF members and 500 large superannuation fund members to analyse why SMSF members commence and manage their own fund, compared to similar people who stay with a large fund. We find that control over investments and tax minimisation are the most common reasons for starting a SMSF, while satisfaction with large funds and unwillingness to take on the administrative burden of self-management are the most common reasons for not doing so. SMSF members do not show any greater financial skills than non-members, but they do display overconfidence, a higher risk tolerance and a more trusting attitude to financial professionals. Model results show that the majority of SMSF members start their funds at the suggestion of financial professionals. We also show that those who say they are thinking about starting a SMSF are different in significant ways from the eventual SMSF members, further evidence of the influence of the advice industry.
Casavecchia, L & Hulley, H 2018, 'Are mutual fund investors paying for noise?', International Review of Financial Analysis, vol. 58, pp. 8-23.
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Casavecchia, L, Loudon, GF & Wu, E 2018, 'What moves benchmark money market rates? Evidence from the BBSW market', Pacific-Basin Finance Journal, vol. 51, pp. 137-154.
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© 2018 Elsevier B.V. In this study we examine the daily movements of a benchmark interest rate using the bank bill swap rate (BBSW) over the period from 2006 to 2016. By decomposing the BBSW into its credit risk and liquidity risk components we reveal that the relative importance of these priced components are conditional on economic uncertainty. Although the compensation required for credit risk increased markedly during the period 2007–2009, the liquidity risk component exerted a disproportionately stronger effect on short-term BBSW spreads relative to credit risk. Our findings show that using a market-based approach to setting credit-based benchmark interest rates introduces both a liquidity and credit risk premia into benchmark interest rates, and both of these risk premia are affected by market forces.
Chan, K & Zhao, R 2018, 'Do the S&P 500 index revisions affect corporate bonds and earnings performance?', Managerial Finance, vol. 44, no. 10, pp. 1237-1249.
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PurposeThe purpose of this paper is to examine the information content in the Standard & Poor (S&P) 500 index revision and its impact on the corporate bonds and earnings of the firms whose stocks are added to or deleted from the index.Design/methodology/approachThe paper uses panel regressions on a 13-year sample of the companies added and deleted from the S&P 500 index.FindingsThe regression results on the bond yields and earnings show that analysts and investors draw positive (negative) information from Index additions (deletions) and adjust their expectations of the firm performance as well as the required rates of return on corporate bonds after index revisions.Research limitations/implicationsThe paper suggests that deletions from the Index have significantly negative impacts on corporate bonds and earnings performance of deleted firms while additions to the index do not have significant impacts on the bonds or realized earnings of added firms.Originality/valueThis paper uses corporate bonds and earnings to test competing hypotheses proposed to explain the excess stock returns of index revision, including information content hypothesis and liquidity hypothesis. The results are consistent with the information content hypothesis and do not support the liquidity hypothesis.
Cheng, B, Nikitopoulos, CS & Schlögl, E 2018, 'Pricing of long-dated commodity derivatives: Do stochastic interest rates matter?', Journal of Banking & Finance, vol. 95, pp. 148-166.
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© 2017 Elsevier B.V. Does modelling stochastic interest rates, beyond stochastic volatility, improve pricing performance on long-dated commodity derivatives? To answer this question, we consider futures price models for commodity derivatives that allow for stochastic volatility and stochastic interest rates and a correlation structure between the underlying variables. We examine the empirical pricing performance of these models on pricing long-dated crude oil derivatives. Estimating the model parameters from historical crude oil futures prices and option prices, we find that stochastic interest rate models improve pricing performance on long-dated crude oil derivatives, when the interest rate volatility is relatively high. Furthermore, increasing the model dimensionality does not tend to improve the pricing performance on long-dated crude oil option prices, but it matters for long-dated futures prices. We also find empirical evidence for a negative correlation between crude oil futures prices and interest rates that contributes to improving fit to long-dated crude oil option prices.
Foley, S, Karlsen, JR & Putniņš, TJ 2018, 'Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed Through Cryptocurrencies?', Review of Financial Studies, vol. 32, no. 5, pp. 1798-1853.
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© The Author(s) 2019. Cryptocurrencies are among the largest unregulated markets in the world. We find that approximately one-quarter of bitcoin users are involved in illegal activity.We estimate that around 76 billion of illegal activity per year involve bitcoin (46% of bitcoin transactions), which is close to the scale of the U.S. and European markets for illegal drugs. The illegal share of bitcoin activity declines with mainstream interest in bitcoin and with the emergence of more opaque cryptocurrencies. The techniques developed in this paper have applications in cryptocurrency surveillance. Our findings suggest that cryptocurrencies are transforming the black markets by enabling black e-commerce. (JEL G18, O31, O32, O33).
Hutcheson, T & Newell, G 2018, 'Decision-making in the management of property investment by Australian superannuation funds', Australian Journal of Management, vol. 43, no. 3, pp. 404-420.
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Decision-making in property investment by superannuation funds is an important investment decision, but it is different to their decision-making on other asset classes included in their asset portfolios. The large value and heterogeneous nature of individual pieces of real estate make the market for real estate relatively illiquid and subject to larger transaction costs than other asset classes. Based on interview surveys of Australian superannuation funds, using the analytical hierarchical process (AHP), we identified strategic decision-making as being the most important factor used by the superannuation funds when making decisions on the management of their property investment portfolio. Comments during the interviews indicated that their decisions were influenced by restrictions in their fund’s investment mandate and the level of funds that they had to invest. The AHP technique has allowed this research to provide a more in-depth understanding of the management of decision-making factors than previous surveys.
Krüger, S, Oehme, T, Rösch, D & Scheule, H 2018, 'A copula sample selection model for predicting multi-year LGDs and Lifetime Expected Losses', Journal of Empirical Finance, vol. 47, pp. 246-262.
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© 2018 Elsevier B.V. Recent credit risk literature has proposed (i) sample selection models for dependencies between the one-year Probability of Default (PD) and Loss Given Default (LGD), and (ii) multi-year approaches which are limited to default risk. This paper provides a model for the simultaneous prediction of continuous default times and multi-year LGDs. These measures are paramount to predict term structures of LGDs and Lifetime Expected Losses for the revised loan loss provisioning framework of IFRS 9 and US GAAP (current expected credit loss, CECL). The model includes a variation of copulas and corrects for sample selection bias of LGDs, which are only observed given a default event. We find empirical evidence that bonds which default closer to origination tend to generate higher LGDs. The model enables more precise estimates of Lifetime Expected Losses and prevents a severe underestimation in contrast to more restricted credit risk models.
Krüger, S, Rösch, D & Scheule, H 2018, 'The impact of loan loss provisioning on bank capital requirements', Journal of Financial Stability, vol. 36, pp. 114-129.
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© 2018 Elsevier B.V. This paper shows that the revised loan loss provisioning based on the International Financial Reporting Standards (IFRS) and the US Generally Accepted Accounting Principles (GAAP) implies a reduction of Tier 1 capital. The paper finds in a counterfactual analysis that these changes are more severe (i) during economic downturns, (ii) for credit portfolios of low quality, (iii) for banks that do not tighten capital standards during downturns, and (iv) under a more comprehensive definition of significant increase in credit risk (SICR) under IFRS. The provisioning rules further increase the procyclicality of bank capital requirements. Adjustments of the SICR threshold or capital buffers are suggested as ways to mitigate a regulatory pressure that may emerges due to the reduction of regulatory capital.
Malceniece, L, Malcenieks, K & Putniņš, TJ 2018, 'High Frequency Trading and Co-Movement in Financial Markets', Journal of Financial Economics, vol. 134, no. 2, pp. 381-399.
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© 2019 Elsevier B.V. Using the staggered entry of Chi-X in 12 European equity markets as a source of exogenous variation in high frequency trading (HFT), we find that HFT causes significant increases in comovement in returns and in liquidity. About one-third of the increase in return comovement is due to faster diffusion of market-wide information. We attribute the remaining two-thirds to correlated trading strategies of HFTs. The increase in liquidity comovement is consistent with HFT liquidity providers being better able to monitor other stocks and adjust their liquidity provision accordingly. Our findings suggest a channel by which HFT impacts the cost of capital.
Nguyen, P, Rahman, N & Zhao, R 2018, 'CEO characteristics and firm valuation: a quantile regression analysis', Journal of Management & Governance, vol. 22, no. 1, pp. 133-151.
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© 2017, Springer Science+Business Media, LLC. This study investigates the effects of three highly-visible CEO characteristics on firm valuation. Using a sample of 2702 observations for Australian firms over the period 2001–2011, we find that CEO age is uniformly associated with lower firm valuation. CEO tenure is also associated with lower valuation, but more significantly so in the higher quantiles of firm valuation, that is for firms with high-growth opportunities. In contrast, CEO duality is found to be beneficial only for firms with high-growth opportunities. Overall, the study highlights the contingent relationship between CEO characteristics and firm valuation.
Phua, K, Tham, TM & Wei, C 2018, 'Are overconfident CEOs better leaders? Evidence from stakeholder commitments', Journal of Financial Economics, vol. 127, no. 3, pp. 519-545.
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We find evidence that the leadership of overconfident chief executive officers (CEOs) induces stakeholders to take actions that contribute to the leader's vision. By being intentionally overexposed to the idiosyncratic risk of their firms, overconfident CEOs exhibit a strong belief in their firms’ prospects. This belief attracts suppliers beyond the firm's observable expansionary corporate activities. Overconfident CEOs induce more supplier commitments including greater relationship-specific investment and longer relationship duration. Overconfident CEOs also induce stronger labor commitments as employees exhibit lower turnover rates and greater ownership of company stock in benefit plans.
To, TY, Navone, M & Wu, E 2018, 'Analyst coverage and the quality of corporate investment decisions', Journal of Corporate Finance, vol. 51, pp. 164-181.
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© 2018 In this paper, we examine the effect of financial analysts on the quality of corporate investment decisions. We show that greater analyst coverage leads to higher total factor productivity within firms, a finding that is robust after using both an instrumental variable approach and an experimental design that exploits exogenous reductions in analyst coverage due to broker mergers and closures. We further identify that the positive effect of analysts on firm-level productivity emanates from their critical role in information distribution and external monitoring within more opaque and financially constrained firms and also firms with weaker investor protection.
Twu, M & Wang, J 2018, 'Call auction frequency and market quality: Evidence from the Taiwan Stock Exchange', Journal of Asian Economics, vol. 57, pp. 53-62.
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© 2018 Financial market quality is generally assessed with respect to efficiency, liquidity, and stability. The frequency of trading contributes to these attributes. The Taiwan Stock Exchange uses a periodic call auction as its main trading mechanism. From 2010 to 2014 the call auction interval was reduced four times, from 25 to 5 s, providing a natural experiment to test the impact on market quality. Using multiple measures of efficiency, liquidity, and stability we provide evidence that the reductions in call auction interval have improved overall market quality. We find that higher auction frequencies are associated with a lower trade-to-auction ratio and less aggressive trading behaviour. The evidence suggests that there are more gains to be made through further reduction in the call auction interval to around 2 s.
Armanious, A 1970, 'Financial Dependence, Fragility and Interconnectedness among Eurozone Financial Sectors: Evidence from Copulas', British Accounting and Finance Association Conference, London.
Bohmann, M & Patel, V 1970, 'Informed Options Trading Around U.S. FDA Announcements', SSRN Electronic Journal, Financial Management Conference, Elsevier BV, San Diego.
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Cheng, B, Sklibosios Nikitopoulos, C & Schlögl, E 1970, 'Pricing of Long-Dated Commodity Derivatives: Do Stochastic Interest Rates Matter?', Journal of Banking and Finance, Energy and Commodity Finance Conference, Paris, France.
Nikitopoulos Sklibosios, C, Squires, M, Thorp, S & Yeung, D 1970, 'Determinants of the Crude Oil Futures Curve: Inventory, Consumption and Volatility', 2nd Australasian Commodity Markets Conference, Sydney, Australia.
Patel, V, Bohmann, M & Michayluk, D 1970, 'Price discovery in commodity derivatives: Speculation or hedging?', Auckland Derivative Markets Conference, Auckland.
Patel, V, Easley, D, Michayluk, D, O'Hara, M & Putnins, T 1970, 'Information flows and systematic risk', UBS Equity Markets Conference, Hong Kong.
Patel, V, Easley, D, Michayluk, D, O'Hara, M & Putnins, T 1970, 'Information flows and systematic risk', Quantitative Investing Conference, New York, USA.
Patel, V, Easley, D, Michayluk, D, O'Hara, M & Putnins, T 1970, 'Information flows and systematic risk', J.P.Morgan Quantference, Sydney, Australia.
Patel, V, Michayluk, D, Putnins, T, Easley, D & O'Hara, M 1970, 'Information Flows and Systematic Risk', UBS Future of Active Management Conference, Sydney, Australia.
Patel, V, Michayluk, D, Walsh, K & Bohmann, M 1970, 'Liquidity and earnings in event studies: Does data granularity matter?', Accounting & Finance Association of Australia and New Zealand Special Interest Group Conference, Auckland.
Xu, J 1970, 'The Gender Gap in Executive Promotions', Financial Management Association 2018 Annual Meeting, San Diego, USA.
Xu, J 1970, 'The Gender Gap in Executive Promotions', Asian Finance Association 2018 Conference, Tokyo, Japan.
Xu, J 1970, 'The Gender Gap in Executive Promotions', Showcasing Women in Finance 2018 Meeting, Miami, USA.
