H. Y. Izan

Factors Influencing Voluntary Corporate Disclosure by Kenyan Companies

There has been considerable research in respect of voluntary disclosure by companies and factors that may explain such disclosure. However, most of the research has been centred in developed countries. This study extends the previous literature by examining voluntary disclosure in a developing country, namely Kenya. Over the last decade, the Kenyan Government has initiated several far-reaching reforms at the Nairobi Stock Exchange (NSE) in order to mobilise domestic savings and attract foreign capital investment. These measures include privatisation of state corporations through the stock exchange and allowing foreign investors to own shares in the listed companies. This study provides a longitudinal examination of voluntary disclosure practices in the annual reports of listed companies in Kenya from 1992 to 2001. The study investigates the extent to which corporate governance attributes, ownership structure and company characteristics influence voluntary disclosure practices. Copyright (c) 2006 The Authors; Journal compilation (c) 2006 Blackwell Publishing Ltd.

The Measurement of Inflation: A stochastic approach

The stochastic approach to index number theory views each commodity price change as an independent observation on the underlying rate of inflation so that inflation can be estimated by averaging over all the prices. This article extends the approach by (a) allowing for sustained changes in relative prices, (b) showing the link with Divisia index numbers, and (c) deriving standard errors for the inflation estimates. The results are illustrated with Australian data.

Price clustering on the Australian Stock Exchange

Abstract Price clustering is manifest in some prices being observed more frequently than others, when underlying value is uniformly distributed over the range of admissible prices. It is frequently observed in financial markets. We investigate clustering in individual trades effected on the Australian Stock Exchanges wholly computerised, order-driven trading system. We find that price clustering is pervasive, tending to follow an overall pattern somewhat similar to that found in US securities markets. Clustering results from imprecise beliefs (‘haziness’) about firm value together with the existence of conventional, salient focal points within regions of haziness. Thus we find that clustering increases with the price of the stock (reflecting imprecision in beliefs about firm value) and with surrogates for greater haziness such as higher market-wide volatility, own stock volatility, trade size, and the size of the bid-ask spread. Clustering is lower when price discovery is likely to be more efficient; that is, it decreases with trading frequency, and it is lower for stocks with options traded on them and for stocks that can be sold short.

Does CEO Pay Reflect Performance? Some Australian Evidence

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’’.

CEO Compensation from M&As in Australia

We investigate Australian CEO compensation following mergers and acquisitions (M&As). We find CEOs of acquiring firms receive higher compensation in the year of M&A completion and one year after. We also find a positive correlation between CEO compensation and firm performance, and some measures of CEO effort and skill in completing the deal. However, CEOs of bidding firms receive a lower bonus and other compensation if they wield more managerial power (that is, if the CEO sits on the nominating committee, has a higher level of share ownership, or the board has more executive directors). This result is in sharp contrast to the US where compensation is influenced by CEO power. Overall our findings are more consistent with the predictions of the incentive alignment theory rather than the managerial power theory.

International Diversification and Estimation Risk: Australian Evidence

This paper examines whether the benefits to the Australian investor from international diversification documented by previous Australian studies are still present when we control for estimation risk. The perfor Mance of the Bayes-Stein international portfolio which controls directly for such risk is compared to the perfor Mance of three other international portfolios and the Australian index. The results confirm the existence of those benefits: strategies that control for estimation risk dominate those that do not. Strategies that hedge against foreign currency fluctuations are also found to significantly dominate their unhedged counterpart.

An Intraday Analysis of the Probability of Trading on the ASX at the Asking Price

We explain the probability of a trade at the asking price across time. The database contains intraday bid‐ask quotes and transaction prices on the Australian Stock Exchange. We find systematic patterns in the probability of a trade at the asking price, corresponding to previously documented return anomalies, including the day‐of‐week, end‐of‐day and turn‐of‐year anomalies. The probability is higher when a trade is of lower dollar volume, lower buy‐order imbalance, lower bid‐ask spread, when it is a trade of a smaller firm, a trade of a stock with higher trading frequency, higher price level, and the security is approved for short selling.

The World Real Interest Rate: Stochastic index number perspectives

Abstract In a recent paper, Gagnon and Unferth (1995). [Is there a real world interest rate? J. Int. Money Finance 14, 845–855] test the hypothesis of real interest rate equality by regressing real interest rates for all major countries on dummy variables for each country and each period. We show that this model can be interpreted as an application of the stochastic approach to index numbers. This approach leads to estimates of, and standard errors for, the real rate for the world as a whole, which have appealing index-number interpretations and foundations. We also extend Gagnon and Unferths approach by weighting countries to recognise their differing importance in the world economy, in terms of relative GDP and trade. Weighting does not lead to appreciable changes in the results. However, when the WPI, which gives more prominence to goods entering into international trade, is used as the deflator, our results indicate that real rates are equalized internationally.

Idiosyncrasies in Australian petrol price behaviour: evidence of seasonalities

It has been argued that there are certain idiosyncrasies in Australian petrol price behaviour. To the extent that these idiosyncrasies result in large magnitude differences in petrol prices, they may be exploited by consumers to significantly reduce their household expenditure on the product. Similarly, such seasonalities may influence retailers in their purchase and storage decision. The objective of this paper is to test for seasonalities in the Australian retail petrol market. The approach adopted is similar to that for determining calendar anomalies as documented in the financial and commodity markets literature. We find that a monthly seasonal effect is pronounced with petrol prices lower in the months of February–May and highest in July and August. A day-of-the-week effect is also apparent and is manifest in all petrol prices for capital cities (Adelaide, Brisbane, Melbourne and Sydney) across various years. However, the half-month effect, as is common in stock returns, is not observed. Moreover, contrary to popular belief that petrol prices are higher surrounding holidays, no evidence of the holiday effect is found. In Brisbane and Melbourne, petrol prices also have some relationship to the mood of consumers, as proxied using weather conditions. This is not observed in Adelaide and Sydney.

Testing for Changes in Relative Risk

The paper demonstrates a technique for testing for the approximate “timing” of significant changes in relative risk. This technique is useful in cases where we are interested to see whether the timing of such a change is related to certain events in history. It is applied here to changes in relative risk of banking stocks when a mandatory audit requirement was introduced.