Australian Financial Sector Research Articles

IMPROVING THE PROCESS OF CHANGE IN AUSTRALIAN FINANCIAL SECTOR REGULATION

Various initiatives have recently been proposed for improving the process of regulatory change as it affects the Australian financial sector. This paper argues that, while these initiatives are valuable, we also need to do more to engage with the rhetoric of regulation as part of the formulation, as well as the implementation, of regulatory policy.

Online business reporting: An information management perspective

Online business reporting and the benefits thereof are widely reported in the academic and practitioner literatures. Much is made of its potential to transform information supply and demand and the dominant focus of the current discourse is on the automation and publishing aspects of online business reporting. These we argue are necessary aspects but present a narrow conception of the role of business information in organisations. Current research lacks an information management perspective, which focuses attention on the design, management and intellectual organisation of business information. Drawing on a preliminary study of the adoption and implementation of business reporting markup languages (in particular XBRL) in the Australian financial sector we draw out the issues for research and practice. We present a complementary perspective that makes information and information work visible and takes into account the complex inter-relationships between the activities of humans and the information itself.

The Multiple Roles of Participative Budgeting on Job Performance

Abstract This paper examines the multiple roles (i.e., cognitive, motivational and value attainment) of participative budgeting and the combined effects of these three roles on subordinates’ job performance. Specifically, this paper proposes that participative budgeting affects job performance via three intervening variables, namely role ambiguity, organizational commitment and job satisfaction. The responses of 74 senior-level managers, drawn from a cross-section of the Australian financial services sector, to a questionnaire survey were analyzed by using a path analytic technique. The results support the multiple roles of participative budgeting and the indirect effect of participative budgeting on subordinates’ job performance through role ambiguity, organizational commitment and job satisfaction.

An Investigation of the Impact of Interest Rates and Interest Rate Volatility on Australian Financial Sector Stock Return Distributions

Abstract: This paper extends the existing literature by analysing the dual impact of changes in the interest rate and interest rate volatility on the distribution of Australian financial sector stock returns. In addition, a multivariate GARCH‐M model is used to analyse the impact of deregulation on the financial institutions sector. It was found that there is a consistent inter‐temporal trade off between risk and return over the different regulatory periods. Moreover, finance corporations were found to be highly sensitive to new shocks across the financial sector and deregulation increased the risk faced by finance corporations and small banks – effectively increasing the required rate of return and explaining the continued rationalisation of these sectors. Furthermore, deregulation has changed the fundamental relationship between interest rates and large bank stock excess returns from positive in the pre‐deregulation period to negative in the post‐deregulation period. This reflects the changing institutional environment from one of controlled credit rationing to a more competitive environment.

The impact of market competition and budgetary participation on performance and job satisfaction: a research note

This paper examines the impact of the intensity of market competition and budgetary participation on performance and job satisfaction. The responses of 77 senior managers, drawn from a cross-section of the Australian financial services sector, to a questionnaire survey were analysed using a multiple regression technique. The results of our global analysis, which was based on the composite score of budgetary participation as the independent variable, showed that the higher the intensity of market competition, the more positive is the relationship between budgetary participation and performance and job satisfaction. In addition, the results of our dimensional analysis, which was based on the involvement and influence dimensions of budgetary participation as the independent variables, revealed that it was the involvement dimension of budgetary participation, which was principally responsible for the results of our global analysis. More specifically, our results revealed that the higher the intensity of market competition, the more positive is the relationship between the involvement dimension of budgetary participation and performance and job satisfaction. Our results, however, suggested that the influence dimension of budgetary participation and the intensity of market competition do not interact to affect performance and job satisfaction.

An Investigation of the Impact of Interest Rates and Interest Rate Volatility on Australian Financial Sector Stock Return Distributions

This paper extends the existing literature by analysing the dual impact of changes in the interest rate and interest rate volatility on the distribution of Australian financial sector stock returns. In addition, a multivariate GARCH-M model is used to analyse the impact of deregulation on the financial institutions sector. It was found that there is a consistent inter-temporal trade off between risk and return over the different regulatory periods. Moreover, finance corporations were found to be highly sensitive to new shocks across the financial sector and deregulation increased the risk faced by finance corporations and small banks - effectively increasing the required rate of return and explaining the continued rationalisation of these sectors. Furthermore, deregulation has changed the fundamental relationship between interest rates and large bank stock excess returns from positive in the pre-deregulation period to negative in the post-deregulation period. This reflects the changing institutional environment from one of controlled credit rationing to a more competitive environment.

The State and the finance sector: the evolution of regulatory apparatus

This paper seeks to explain the motivation for the growth of regulation of the Australian financial sector and banking in particular. It will be argued that the pace and direction of the growth of the regulatory apparatus from the 1930s until the 1980s was set by concerns of governments about macro–economic issues rather than issues affecting the financial sector per se. The drivers of regulatory change over the last two decades of the century reflect new concerns about the efficiency and underlying stability of financial markets, and equity issues.

Rural Finance in Australia: A Troubled History

The last twenty years has witnessed a seismic shift in the provision of and attitude towards differentiated financial facilities for the rural sector. Specialist facilities built up over a century have been dismantled. Official data collection has been narrowed, but anecdotal evidence indicates that segments of the rural economy are no longer being adequately serviced. The paper begins with a treatment of the uneasy relationship after World War II between the rural sector and the trading banks, the dominant segment of the Australian financial sector. There then follows a brief history of alternative financial institutions and instruments catering to the rural sector, especially those at the national level. These developments had, by 1980, ensured the rural sector greater access to credit and on more appropriate terms. Beginning in the 1970s, an ideological shift ushered in much proselytising of the merits of the ‘free market’. The significant report of the Campbell Committee (1981) provided legitimation for subsequent deregulation of the financial sector, which accompanied the gradual dismantling of much of the institutions and instruments specifically addressed to the rural sector. Agricultural economists, economically orthodox in analytical emphasis and worldview, have viewed this dismantling benignly. Because of the key role of this network in mediating rural policy, representative opinion is examined at some length. The 1990s is outlined as a period for which rural finance has become a non-issue for officialdom, and yet dissent has resurfaced. A final section examines specific institutional and cultural structures that have mediated the broad changes affecting the Australian rural sector. Domestic banking culture and ‘free market’ ideology appear to have exerted independent influences in the mediation of credit to the rural sector.

Modelling the Equity Beta Risk of Australian Financial Sector Companies

In this paper we apply the generalised auto-regressive conditional heteroskedasticity (GARCH) and Kalman Filter approaches to modelling the equity beta risk of a sample of fifteen Australian financial sector companies. A de-regulated environment in which strong competitive forces are at play typifies the period of investigation. Consistent with the existing literature, we find that these modelling techniques perform well and, in particular, that the Kalman Filter approach is preferred. Further, we find that considerable variability of risk occurs throughout the sample period. Thus, extending the evidence of Harper and Scheit (1992); Brooks and Faff (1995) and Brooks, Faff and McKenzie (1997), we find evidence consistent with the hypothesis that deregulation has impacted the risk of banking sector stocks.

Interest rate risk of Australian financial sector companies in a period of regulatory change

In a recent study, Madura and Zarruk (1995) provide evidence that interest rate risk is greater for non-US banks (British, Canadian, German and Japan) than for US banks. The primary contribution of the current paper is to extend the Madura and Zarruk analysis to the financial institutions of Australia over a period of extreme regulatory change, namely, 1978 to 1992. Our major findings are that there is evidence of (1) sensitivity to long-term interest rates; (2) instability of interest rate sensitivity across subperiods; and (3) interest rate sensitivity of large banks and finance companies.

Interest Rate Rish of Australian Financial Sector Companies in a Period of Regulatory Change.

In a recent study, Madura and Zarruk (1995) provide evidence that interest rate risk is greater for non-US banks (British, Canadian, German and Japan) than for US Banks. The primary contribution of this paper is to extend the Madura and Zarruk analysis to the financial institutions of Australia over a period of extreme regulatory change, namely, 1978 to 1992. The full sample period is partitioned into three subperiods of analysis, namely, January 1978 to November 1983 ("pre-deregulation" period): February l984 to September 1987 ("deregulation" period); and November 1987 to December 1992 ("post-deregulation" period) and the potential sensitivity to short, medium and long-term interest rate movements is examined in each sub-period. Our major findings are that (1) while there is some general evidence of interest rate sensitivity in the first two sub-periods, no such evidence is forthcoming in the final sub-period. (2) while the evidence of sensitivity at the long-term end is relatively strong, the short-term results are far less convincing; (3) there seems to be some degree of instability of interest rate sensitivity across sub-periods, particularly for long-term rates; (4) while significant interest rate sensitivity of a large banks portfolio and a finance companies portfolio is found, no such evidence is apparent in any subperiod for a small banks portfolio; and (5) there is a negligible role for a "shape of the term structure" effect. African Journal of Finance and Management Vol.7(2) 1999: 34-58