Allan Hodgson

The structure and crystallization of thin water films on Pt(111)

When water is adsorbed on Pt(111) above 135 K several different ice structures crystallize, depending on the thickness of the ice layer. At low coverage water forms extended islands of ice with a (square root(37) x square root(37))R25(o) unit cell, which compresses as the monolayer saturates to form a (square root(39) x square root(39))R16(o) structure. The square root(39) low-energy electron diffraction (LEED) pattern becomes more intense as the second layer grows, remaining bright for films up of 10-15 layers and then fading and disappearing for films more than ca. 40 layers thick. The ice multilayer consists of an ordered square root(39) wetting layer, on which ice grows as a crystalline film which progressively loses its registry to the wetting layer. Ice films more than ca. 50 layers thick develop a hexagonal LEED pattern, the entire film and wetting layer reorienting to form an incommensurate bulk ice. These changes are reflected in the vibrational spectra which show changes in line shape and intensity associated with the different ice structures. Thin amorphous solid water films crystallize to form the same phases observed during growth, implying that these structures are thermodynamically stable and not kinetic phases formed during growth. The change from a square root(39) registry to incommensurate bulk ice at ca. 50 layers is associated with a change in crystallization kinetics from nucleation at the Pt(111) interface in thin films to nucleation of incommensurate bulk ice in amorphous solid water films more than 50 layers thick.

Earnings, cashflows and returns: Functional relations and the impact of firm size

The relation between stock returns, earnings and cashflows is of importance because it directly addresses the issue of whether accounting data provide value relevant information. The empirical evidence to date, however, has documented low explanatory power for earnings and inconclusive incremental information content for cashflows. This research re-evaluates the incremental information content debate using Australian data. Our research is motivated by: recent innovations in research design, including the specification of nonlinear functional relations between accounting variables and prices, and the fact that differences in firm size characteristics may influence the relative information content of the accounting variables. We observe that: (i) a nonlinear functional relation provides greater explanatory power for both earnings and cashflows; (ii) the results are consistent with more transitory earnings components for smaller firms; and (iii) contrary to received theory, cashflows add greater incremental explanatory power for large firms.

On the Intertemporal Value Relevance of Conventional Financial Accounting in Australia

This paper examines whether the relevance of conventional (earnings focused) accounting information for valuation has declined in Australia over a recent period of 28 years. Motivation is provided by the anecdotal concerns of financial analysts, accounting regulators, and a cluster of US centric academic research papers that conclude that the relevance of financial accounting (and earnings in particular) has declined over time. After controlling for nonlinearities and stock price inefficiencies, we find that the value relevance of core accounting earnings has not declined. A possible exception is found for small stocks. We also observe that net book values are relatively less important in Australia when compared to the USA. Our results are informative for investors who require feedback on valuation issues and the International Accounting Standards Board regulators in any further moves towards a balance sheet focus.

Determinants of Derivative Usage in the Life and General Insurance Industry: The Australian Evidence

Core business and financial market risks are not easily reduced by standard operating procedures in insurance companies. Derivatives theoretically provide a cost effective vehicle to hedge these risks. This paper provides an empirical analysis of the determinants of derivative usage as well as the extent of derivative usage in the Australian insurance industry in both life and general insurance companies for the period 1997–1999. Empirical results for the Australian life insurance industry in general confirm the findings of UK and US based research. However, the Australian general insurance industry does not appear to follow the conclusions of previous literature. Our results indicate that for life insurers, the determinants of derivative usage were size, leverage and reinsurance. For the general insurance industry the determinants were size and the extent of long tail lines of business written. As regards the determinants of the extent of derivative usage, these were size and asset-liability duration mismatches for life insurers. For the general insurance industry the determinants of the extent of derivative usage were size, the extent of long tail lines of business written, and the reporting year.

Stock market synchronicity: an alternative approach to assessing the information impact of Australian IFRS

How has the mandatory adoption in 2005 of International Financial Reporting Standards in (IFRS) affected information flow for investors in Australia? This paper investigates impact by examining synchronicity issues. Morck et al. (2000) label the degree to which stock prices depend upon market and industry wide information as market synchronicity, and the degree to which they reflect firm specific information as idiosyncratic dependency. Increased synchronicity can signal several events, including a loss of confidence in firm specific accounting data, reduced transparency, or evidence of a greater degree of cross sectional comparability. We develop and test three theoretical models on the impact of IFRS and find a general decrease in synchronicity in the first two post‐IFRS years, followed by a reversion to a significantly higher level in later years. Further tests reveal lower analyst forecast earnings errors post‐IFRS. Results provide restrictive support for the International Accounting Standards Board contention that IFRS accounting provides higher specific and comparable information content – at least for sophisticated financial analysts.

Mispricing in Stock Index Futures: A Re‐Examination Using the SPI

This paper re‐examines and extends stock index futures pricing in Australia. The paper has two objectives. First, the paper provides a comprehensive examination of stock index futures pricing which is, as far as possible, free from method bias which has been problematic in previous studies. Second, the paper analyses the behaviour of the mispricing series in relation to a number of explanatory variables. The results indicate that a frequent but small mispricing series is prevalent and highly predictable. The series is related to time‐to‐expiry, which is consistent with the arbitrage position having an option component, and has a positive association with both volatility from the overnight US market and contemporaneous futures market volatility. Some institutional and time features are sample specific, whilst surprises in futures trading volume also have an impact on absolute mispricing. We conclude that the relationship between the markets is dynamic and likely to be driven by more complex nonlinear relationships.

How informative is the Thai corporate governance index? A financial approach

Purpose - Prior research, in mainly Western economies, suggests the level of corporate governance is financially important. As an emerging economy case study, the purpose of this paper is to investigate whether the Thai Institute of Directors (IOD) corporate governance index provides investors with financial information about fundamental value and arbitrage portfolio decisions, and if/how information content changes over time. Design/methodology/approach - Logistic regressions using 11 financially dependent variables and a “good governance” dummy variable, constructing zero-cost buy-sell portfolios, and Fama-French cumulative average returns (CARs), over the period 2001-2006. Findings - The predicted significant relationships between a “good governance” categorization and financial proxies for firm performance; and zero-cost portfolios that generate very high future monthly excess returns early in the study period, which are then dissipated by 2006, are found. These high returns were also associated with insignificant or inconsistent ten-day CARs after the announcement of an improving (deteriorating) index category, but with a more rapid reaction in 2006. Research limitations/implications - Results suggest that either (or in a combination): the Thai stock market had a slow learning adjustment to the governance index because of uncertainty as to information content; the IOD was incomplete and needed fine tuning and updating before full information impact was realized; and other time-specific factors meant the IOD was of a lesser importance. One limitation is the data time period and the extension of the governance analysis to the global financial crisis years. Practical implications - Governance information content in Thailand was not (initially) fully integrated into prices with substantial arbitrage returns available to astute investors. Continual re-assessment and improvement of governance reporting should be an agenda requirement. Originality/value - The paper forms an extension of governance studies into an Asian emerging economy, and determination of time-varying information content and arbitrage opportunities.

Accounting competencies and the changing role of accountants in emerging economies: The Case of Romania

Over a recent short period, a number of interventions potentially helped move the Romanian accounting system away from being a tool simply used to support a planned economy. They include harmonization with the European Directives, the introduction of International Financial Reporting Standards (IFRS) and an increased move towards modern information technologies such as Enterprise Resource Planning (ERP) software. In this study, we directly explore these influences by applying job-offer analysis as a reflection of the current and future demand for accounting competencies. We first document current competencies expected from accountants in Romanian businesses and then assess the intervention impact on financial and management accountants. We hypothesize external influences would move Romanian accountants away from the traditional separate specialized positions towards more hybrid accounting positions, such as that adopted in the UK. Whilst our analysis supports a degree of transition with alignment to recent global trends, it also reveals some intransigence in the sense that management and financial accounting positions still tend to retain attributes associated with the two-cycle accounting system. Our findings have implications for harmonization issues and accounting education in Romania.

Assessing the risk relevance of accounting variables in diverse economic conditions

Purpose - This paper aims to examine the contemporary association between accounting information and a number of measures of systematic (beta) risk that incorporate dynamic market features. The goal is to determine the fundamental accounting drivers of beta and to assess whether their explanatory variable power has changed or declined over time. Design/methodology/approach - Beta estimates are calculated using adjustments for thin-trading, central tendency, leverage, and time variance. Accounting risk variables are derived from theoretical foundations and prior empirical research, and classified as operating, financial or growth. Findings - Results show a strong association between accounting variables (operating and growth) and systematic risk that is consistent over time, but with some industry and size differences and possible country effects. Accounting variables are able to capture dynamic risk shifts and generally are able to outperform naive M-GARCH and industry betas in predicting next years systematic risk. Practical implications - Internal management and external decision making enable the development of more efficient Originality/value - This is the first paper that assesses the association between a range of dynamic risk measures and accounting variables and tests whether this long-run association has changed over time.

Water desorption from an oxygen covered Pt(111) surface: multichannel desorption

Mixed OH/H2O structures, formed by the reaction of O and water on Pt(111), decompose near 200 K as water desorbs. With an apparent activation barrier that varies between 0.42 and 0.86 eV depending on the composition, coverage, and heating rate of the film, water desorption does not follow a simple kinetic form. The adsorbate is stabilized by the formation of a complete hydrogen bonding network between equivalent amounts of OH and H2O, island edges, and defects in the structure enhancing the decomposition rate. Monte Carlo simulations of water desorption were made using a model potential fitted to first-principles calculations. We find that desorption occurs via several distinct pathways, including direct or proton-transfer mediated desorption and OH recombination. Hence, no single rate determining step has been found. Desorption occurs preferentially from low coordination defect or edge sites, leading to complex kinetics which are sensitive to both the temperature, composition, and history of the sample.