Stock Exchange Listing Research Articles

The adoption of “Western” management accounting/controls in China's state-owned enterprises during economic transition

This study explores the influences on the adoption of “Western” management accounting/control practices by China's state-owned enterprises (SOEs). This topic is important given the potential for such practices to affect SOE operations in the midst of China's continued privatization programme, and the continued opening of its markets to competition. In-depth interviews were conducted with managers at four SOEs and two of their joint ventures. These interviews indicated increased use of a range of Western management accounting/controls in the SOEs. They also shed light on the factors that influenced the level of adoption. These findings were used to refine a survey instrument for data collection from 82 other SOEs. The survey indicated significant and predicted influences from use of limited-term employment contracts, joint venture experience, stock exchange listing, and the availability of training.

Developments in SME Financing: Expanding the Practitioner’s Role Beyond Compliance

Findings of the recent Financial System Inquiry (Wallis Report) and subsequent policydevelopments and private sector initiatives provide the scope for accounting practitioners to expand their assistance and advisory role to SMEs wishing to raise capital and to clients as potential investors. Despite adequate access to debt financing with higher loan approvalrates and lower loan fees, equity capital has continued to be more difficult to obtain due to scale, risk and reporting information factors. However, Corporations Act changes provide some relief from onerous prospectus requirements and the advent of the Newcastle and Bendigo Stock Exchanges facilitate fundraising by SMEs through minimum issue quantityrequirements and scope to avoid the preparation of a prospectus. The relaxation of Australian Stock Exchange Listing requirements has also facilitated capital raising by medium enterprises.

A comparative study of de jure and de facto disclosure between Australia and Singapore

The study analyses dejuredisclosure harmony between Australia and Singapore by examining selected disclosure requirements from the statutes, stock exchange listing rules and five accounting standards. Empirical evidence as to Australian and Singaporean companies'de factodisclosure is provided. Two disclosure indices, specifically the no‐violation‐for‐non‐disclosure (NVND) index and the violation‐for‐non‐disclosure (VND), were used to assess the extent of company's disclosure of the selected requirements contained within their respective country's rules.

The Economics of Stock Exchange Listing Fees and Listing Requirements

This paper investigates the once and future role of listing fees. We consider the theory of listing fees and why such a pricing structure initially evolved. We show how capital market developments have changed the desirability, and even viability, of this pricing structure. We then analyze the economics of listing fees. While providing revenue to the exchange, listing fees impose large (opportunity) costs, and we analyze this trade-off, presenting evidence from the New York Stock Exchange. We also discuss what types of listing requirements make economics sense for exchanges (or perhaps regulators) to impose on companies. Finally we consider whether listing fees will continue to survive. Journal of Economic Literature Classification Numbers: G10, G18, K22, K23.

The Short Life and Resurrection of SEC Rule 19c-4

In the 1980s, many corporations adopted disparate voting rights plans (also known as dual class stock plans) to concentrate voting control in the hands of incumbent managers and their allies. At most adopting firms, such plans were intended mainly to deter unsolicited takeover bids. Incumbent managers who cannot be outvoted, after all, cannot be ousted. In 1988, the Securities and Exchange Commission adopted rule 19c-4 pursuant to a claim of regulatory authority under Section 19(c) of the Securities Exchange Act of 1934. Rule 19c-4 purported to amend the listing standards of the self-regulatory organizations (i.e., the major stock exchanges and NASDAQ) so as to prohibit most forms of dual class stock. The United States Court of Appeals for the District of Columbia Circuit, however, subsequently invalidated rule 19c-4 as exceeding the scope of the SEC's delegated authority. This article reviews the history of dual class stock and stock exchange listing standards affecting it. The article then demonstrates that the D.C. Circuit was correct in concluding that the SEC lacked authority to adopt rule 19c-4. Finally, the article proposed an alternative exchange listing standard that responded to the conflict of interest inherent when management proposes a dual class stock recapitalization.

COST EFFICIENCY IN AUSTRALIAN GENERAL INSURERS: A NON-PARAMETRIC APPROACH

Data envelopment analysis is used to calculate pure technical, scale, allocative and cost efficiency indices for a sample of forty-six Australian general insurers. The inputs used are labour, physical capital (in the form of both information technology and plant and equipment), and financial capital. The outputs are net premium revenues for housing-related, transport-related, indemnity-related, mortgage-related, and other insurance, along with invested assets. The results indicate that the major source of overall cost inefficiency would appear to be allocative inefficiency rather than technical inefficiency and that the largest 20% of insurers are significantly more efficient than the remaining firms. A second-stage analysis uses limited dependent variable regression techniques to relate efficiency scores to firm-specific information. Cost efficiency appears to be closely related to asset size but not to stock exchange listing or product diversification or specialization.

Enhancing Share Price With Superior Investor Protection

This paper considers techniques of providing shareholders with superior investor protection in start up firms to reduce the cost of raising equity and/or for maximising the share price after an IPO. Various approaches are considered for embedding into corporate constitutions the separation of powers introduced by a shareholders agreement with a venture capitalist or the Associates of a LBO. Shareholder agreements typically limit changes in ownership, composition, and the application of cash that also limits strategic direction in a way similar to the conditions found in negative pledge loan covenants that were responsible for the development of audit committees. Audit committees were created to protect directors not shareholders and changing banking practices exacerbate the false comfort that they provide investors. The paper identifies how superior investor protection can be achieved with appropriate changes in the constitution of firms to create a watchdog elected in parallel with the operating board. Supervisory boards can also act as watchdogs but they have a vertical relationship to the shareholders, as it is they who appoint the operating board. Described and compared are parallel watchdog boards used by the author for two start-ups, a Corporate Governance Board (CGB) proposed in the Australian Parliament for IPOs and a Conflict board described by a US legal scholar. The Corporate Senate established by the author for one start up company provided the role model for the CGB elected on a democratic basis of one vote per shareholder in parallel with the plutocratic election of directors by one vote per share and/or director. Corporate Senates do not need any changes to be made in corporate law or stock exchange listing rules. An active dominant shareholder acts in effect as a supervisory as found in Europe. As the majority of publicly traded companies around the world have an active dominant shareholder, publicly traded firms governed by more than one are a common phenomena however it is a neglected topic of research. Multiple boards can introduce operating advantages in a similar way as achieved by unitary controlled firms decomposing decision making labour by adopting a multi-divisional form. The paper concludes that the requirement by stock exchanges that audit committees be a condition for a company to be publicly traded be replaced by the establishment of a democratically elected watchdog along the lines of a Corporate Senate.

The Reverse Take-over of Berjaya Textiles and Back-door Listing of Jaya Tiasa: A Malaysian Case

A reverse take-over of a listed company can provide an alternative method of going public for entrepreneurs seeking a stock exchange listing for shares in their company. This paper is a first step in the investigation of reverse take-over as a listing device and seeks to attract attention to the relative attractiveness of reverse take-over versus initial public offering. It provides an in depth case study of a high profile reverse take-over completed in 1995 that resulted in a back-door listing of a private company, Jaya Tiasa Plywood, via listed Berjaya Textiles (now renamed Jaya Tiasa Holdings). The wealth effects on the participating parties, namely owners of Jaya Tiasa Plywood, the minority shareholders and former controlling shareholder of Berjaya Textiles are analysed which clearly show a win-win-win situation for all. Three possible sources of gains are identified namely Chang's (1998) share-financed acquisition of private target conveying positive information about acquiring company, Merton's (1987) investor recognition hypothesis, and Lang, Stulz and Walkling (1989) and Servaes (1991) bidder and target relative Qs hypothesis.

Performance reporting by oil and gas firms: contractual and value implications

Performance reporting by oil and gas firms is multidimensional, with earnings, cash flows from operations and changes in reserves revealing different facets of underlying firm performance. However, for Canadian oil and gas firms, managerial incentives for earnings management as well as investors’ appreciation of various performance metrics can be affected by the intensity of external monitoring that accompanies a U.S. stock exchange listing. From a contractual perspective, our findings provide some evidence that managers of Canadian oil and gas firms engage in income smoothing, with a U.S. listing as well as large firm size leading to more conservative accruals. From a value perspective, our findings suggest that cash flow is the performance metric most closely associated with stock market valuation and the best predictor of future cash flows. Discoveries are also found to be a reliable and relevant performance metric. However, only investors in U.S. listed firms appear to adjust reported earnings and cash flow figures for the potential overstatement that is caused by the use of the full cost method. Investors in firms that are listed only in Canada do not appear to take the full cost/successful efforts choice fully into account when assigning value multiples to earnings or cash flow.

THE CANADIAN AUDIT MARKET IN THE FIRST HALF OF THE TWENTIETH CENTURY

This paper explores the structure of the Canadian audit market between 1901 and 1941 based on a sample of 3661 financial statements from 956 firms. Two aspects of the market are examined: first, the overall degree of market concentration, and second, the existence of market segmentation. In addition, a specific concern of the paper is to analyse competition between domestic accounting firms and the international accounting firms leading to the merger of major independent Canadian firms with international accounting firm networks after World War Two. The data show a pattern of increasing concentration during the period among a small set of domestic and international firms. The data identify both a national market and a series of regional markets for audit services. There is also evidence of market segmentation by industry and stock exchange listing. Overall, the evidence suggests that the early Canadian audit market was competitive but fragmented into a series of niche markets. Domestic firms were able to compete with the international firms but the market was becoming increasingly concentrated.

The JORC code

The 1999 edition of the Australasian code for reporting of mineral resources and ore reserves (the JORC code) became effective in September, 1999, and is the latest revision of a code that was originally issued in 1989, but has an ancestry dating back to the first JORC report released in 1972. The JORC code has been operating successfully for more than ten years and, together with complementary developments in stock exchange listing rules, has brought about substantially improved standards of public reporting by Australasian mining and exploration companies. The code is now regarded as the world leader in this field; other countries use it as a template for their own reporting standards and it gives Australia a leading role in the development of international reporting standards. The reasons for the success of the code are varied, foremost among them being its adoption in full by the Australian and New Zealand Stock Exchanges and the ability and willingness of mining-industry organizations to bring 'Competent Persons' to account when necessary.

The Initial Listing Decisions of Firms That Go Public

We analyze the initial listing decisions of IPOs that qualify for New York Stock Exchange listing. We find that IPOs are more likely to list on the exchange where their industry peers are listed. Further, reverse LBOs and carveouts are more likely to choose the NYSE if the firm or their parent was previously NYSE-listed. Consistent with avoidance of delisting costs, we find that smaller, riskier firms tend to list on Nasdaq. Although direct issue costs are higher on the NYSE than on Nasdaq, total issue costs do not differ across exchanges and are unlikely to affect the listing decision. Historically, publicly held firms in the US began trading on the regional or over-the-counter markets and, in some cases, eventually moved to the New York Stock Exchange (NYSE). However, the NYSE changed its listing rules in 1983, making it easier for initial public offerings (IPOs) to meet minimum listing requirements. Now that many large IPOs could list directly on the NYSE, the initial listing decision became an important part of the IPO process. In this paper, we analyze the factors that affect the initial listing decision. We examine a sample of IPOs from 1991 to 1996 that either listed on the NYSE or met the NYSE's minimum-listing requirements, but chose to list on the Nasdaq National Market (Nasdaq). Our sample allows us to examine the initial listing decisions of firms for which NYSE listing was actually a consideration. Of the 438 IPOs that meet our sample criteria, 337 (76.9%) listed on the NYSE. The significant number of NYSE listings suggests that the change in listing rules and the NYSE's increased marketing efforts have had an important effect on the listing decisions of IPO firms. However, the fact that many NYSE-eligible IPOs continue to list on Nasdaq suggests that the perceived costs and benefits of listing vary across firms. We find that firms tend to list on the exchange where other firms in their industry are currently listed. In addition, reverse LBOs and carveouts are more likely to list on the NYSE if the firm or parent firm was listed on the NYSE prior to the LBO or carveout, respectively. These results suggest that prior exchange relationships and exchange expertise are important considerations in the choice of listing venue. Smaller, riskier firms are more likely to list on Nasdaq. This finding suggests that firms avoid expected delisting costs. The fact that small firms tend to list on Nasdaq may also suggest that sponsorship is an important factor in the listing decision. However, we find no evidence that younger firms, which would also benefit from sponsorship, are more likely to list on Nasdaq

Globalizing Corporate Governance: Convergence of Form or Function

This paper examines the interplay between selection-driven functional adaptivity on the one hand, and formal institutional persistence or path dependency on the other, that will determine whether such corporate governance convergence as we observe will be formal or functional. Five combinations of formal and functional covergence are considered: 1) purely functional convergence, as with the displacement of inefficient management; 2) the use of formal tools to catalyze the breakdown of formal barriers to functional convergence as with the elimination of tax on the sale of cross holdings; 3) the need for elements of both formal and functional convergence as with the creation of the institutional infrastructure that supports a venture capital market; 4) convergence by contract as with security design or foreign stock exchange listing; and 5) convergence through regulatory competition -- the hybrid of private and public ordering introduced to the European Community by the European Court of Justice's recent decision in Centros.

Firm Characteristics of Swiss Companies that Utilize International Accounting Standards

This study examines firm specific characteristics of Swiss companies that have voluntarily elected to prepare financial reports using International Accounting Standards (IASs). An identification of differences between companies that select to adopt IASs and those that do not should aid in determining what the perceived benefits might be. The variables tested were foreign sales activity, foreign stock exchange listings, debt/equity ratio, market value, size and audit firm. The study used MANOVA and stepwise discriminant analysis to determine if differences existed between the group of 22 Swiss companies that adopted IASs and a group of 22 Swiss companies that use local standards, based on six independent variables. The foreign activity variables, percent of foreign exchange listings and percent of foreign sales were found to be statistically significant. Thus, the perceived benefits might be that international standards facilitate reporting to multinational stakeholders, and are not necessary for companies that are only required to report to domestic users. This study is an initial examination of Swiss companies that use IASs. Numerous questions, such as how does the market value companies ' that utilize IASs, remain to be asked and investigated.

New Zealand takeover notice provision selection and share price reaction

By the end of 1995, all publicly listed companies in New Zealand were forced to select one of three takeover notice and defence provisions under rule 4 of the New Zealand Stock Exchange Listing Rules (1995). These three rules vary in their level of restriction and notice. An event study using the market model was used to test for relative support for the Management Entrenchment hypothesis or the Shareholder Interest hypothesis. While the findings are mixed, most support is offered to the Shareholder Interest hypothesis. It is argued that within the New Zealand regulatory environment with few controls on bids, the notice provisions have a positive impact in that they provide time for an auction to take place.

The Initial Listing Decisions of Firms that Go Public

We analyze the initial listing decisions of IPOs that qualify for New York Stock Exchange listing. We find that IPOs are more likely to list on the exchange where their industry peers are listed. Further, reverse LBOs and carveouts are more likely to choose the NYSE if the firm or their parent was previously NYSE-listed. Consistent with avoidance of delisting costs, we find that smaller, riskier firms tend to list on Nasdaq. Although direct issue costs are higher on the NYSE than on Nasdaq, total issue costs do not differ across exchanges and are unlikely to affect the listing decision.

The Influence of Regulation on the Publication of Consolidated Statements

The impact of regulation on the publication of consolidated statements by Australian listed companies is examined by reviewing evidence of the first use of consolidated statements by holding companies listed on the Sydney Stock Exchange, excluding companies incorporated elsewhere, and relating that evidence to the chronology of the development of statutory, professional and stock‐exchange regulations permitting or prescribing the use of consolidated statements. The findings are that the wider adoption of consolidation accounting has been associated with changes in statutory and other forms of regulation. These findings contradict the conclusions of earlier studies (Whittred, 1986, 1987, 1988), namely that regulation was of minimal influence, and that the adoption of consolidation accounting was explainable by ‘contracting cost variables’. Major flaws identified in these earlier studies were an apparent failure to recognize that Sydney listed companies may have been subject to regulations established in other jurisdictions, and a crucial misinterpretation of the history of Australian stock exchange listing rules, which led to the misidentification of listed companies as having adopted consolidation ‘voluntarily’.The findings also underline comments made previously in critiques of other papers which have tested hypotheses incorporating agency or contracting costs. While historical analysis can assist the exercise of judgment in the classification of events, those who rely on historical evidence in the development of theories and in framing hypotheses should use that evidence with care, having regard to pertinent contextual factors.

Hotelling and the New York stock exchange

We analyze the hierarchical Stackelberg equilibria in a model of one-sided locational competition based on the market for stock exchange listings. The equilibria are symmetric—there is no first mover advantage, nor is there a last mover disadvantage.

The Cost of Equity and Exchange Listing: Evidence from the French Stock Market

We reconsider the behaviour of prices around the period close to the listing on the Marche a Reglement Mensuel (RM). First, an event study based on a sample of 60 firms has been set up to test the existence of the exchange listing effect on the French market. Then we discuss and test the financial reasons which can justify abnormal returns around the announcement day and the day of the listing. We explore four reasons to explain the impact of the stock exchange listings: one is the informative content of the operation which induces an upward revision of the future earnings. Three other hypotheses rely on a decrease in the discount rate originated by less risky cash flows, an increase in trading activity and/or, an increase in the relative size of the firm’s investor base. We establish a relation between the abnormal returns and the changes in the parameters of the market model after listing on the RM. Cross-sectional regressions provide support for this model but the fact that the RM is a forward market also matters. Trading activity seems to play an indirect role in explaining the abnormal returns. However, the model does not explain the price behaviour at the announcement of listing.

Some determinants of social and environmental disclosures in New Zealand companies

Reports the results of a study on the social and environmental disclosure practices of New Zealand companies. In addition to providing an up‐to‐date description of such practices, and placing them in an international context, examines some potential determinants of these practices. Replicates and extends a recent US study (Patten, 1991). Makes improvements on Patten’s study by measuring the amount of disclosure as a continuous variable using both page amount and the number of sentences. The results indicate both measures are highly correlated. Consistent with Patten (1991) and other studies, reports that both company size and industry are significantly associated with social and environmental disclosures, and that profitability (both current and lagged) is not. In addition to these variables, provides some tentative evidence that New Zealand companies with dual (overseas) stock exchange listings are greater disclosers of social and environmental information.