No abstract

We investigate the value-relevance of capitalised R&D on the balance sheet, and the extent to which R&D accruals improve the association between accounting-based measures of firm performance and capital market returns for Australian listed companies. This is a regulatory setting where management discretion in the capitalisation decision is permitted and can be empirically observed. Our results suggest that capitalised R&D on the balance sheets of selective capitalisers is value-relevant; that is, the ability of capitalised R&D to explain information contained in prices (given information conveyed by other components of the balance sheet) is statistically significant. For the same group of firms R&D accruals (particularly the initial capitalisation) improve accounting earnings as a measure of performance but only for the pooled sample using contemporaneous returns. The results for the fully expensing sample are less clear, perhaps due to the small sample size.

Regulation Fair Disclosure (FD), imposed by the Securities and Exchange Commission in October 2000, was designed to prohibit disclosure of material private information to selected market participants. The informational advantage such select participants gain is unclear. If multiple "insiders" receive identical information, private information is immediately incorporated in price and each insider has zero expected profit. If, on the other hand, Regulation FD has curtailed the flow of information from firms, private information becomes longer-lived and more valuable. Hence, market makers will demand increased compensation by widening the adverse selection component of the bid-ask spread. We identify the cost components of the bid-ask spread for a sample of NASDAQ stocks surrounding the implementation of Regulation FD. Controlling for other factors affecting the spread, we find that adverse selection costs increase approximately 36% after Regulation FD. We interpret our finding as Regulation FD failing to achieve one of its desired objectives.

We examine the relation between Australian CEO pay and accounting and share price performance indicators, as well as firm size, from 1987 to 1992 inclusive. Our results show no evidence of a linkage between CEO pay and performance. This finding is robust to the use of single year or pooled tests, as well as the specific identification of CEO changes.``Long window'' analysis of the pay-performance relation yields similar results. Possible explanations include incomplete disclosure of CEO compensation, the influence of other claimholders (e.g., debtholders), the existence of alternative monitoring mechanisms and the extent to which CEO compensation is effectively deferred. However, subject to these possibilities, our results can be interpreted as consistent with allegations that Australian CEOs have had, by international standards, a relatively small proportion of total compensation``at risk''.

In October 2014, the Australian National University announced that it was divesting from seven fossil fuel-intensive companies. This announcement sparked an unprecedented response in the community, both positive and negative. We examine this decision, the divestment movement in general, the science behind the issue and strategic responses, both policy and organisational. We argue that a confluence between policy responses and organisational responses is beginning to emerge that will lead to greater action on climate change.