Identifying ways organisations improve their governance, financial systems and sustainability

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We conduct innovative research in the areas of governance, financial systems and sustainability using a variety of quantitative and qualitative methodologies. We possess expertise in a range of systems, programs and knowledge in these areas across both established economies and emerging markets. We also subscribe to many national and international databases that support our research.

Our sustainability research considers corporate social responsibility performance, disclosure and sustainability practices of management and their impacts on the economy, profitability, operations, the community, the environment and society in general.

Our corporate governance research is structured to analyse the firm’s performance and the reporting of it in conformance with rules, regulations and legislation. Specifically, we undertake assessments of regulatory frameworks, external auditors and audit committees in monitoring financial reporting quality, internal control, and risk management, and the remuneration and nominations committees in setting and overseeing the firm’s compensation structure. This incorporates an examination of agency relations, guanxi relations, behavioural finance and the role of various stakeholders such as management, BOD, analysts, shareholders, creditors and institutional investors.

Our financial systems research encapsulates firm-level and country-level financial reporting comparability and transparency, earnings management, accounting conservatism and financial distress. This research includes an analysis of the role of financial institutions, behavioural and corporate finance, corporate taxation, fraud prevention, firm profitability and investment efficiency.

Key projects

Auditing efficiency in the public sector Researcher: Dr June Cao

We investigate the influence of an exogenous institutional environment shock on auditing efficiency in the public sector. Using the government measures campaign in China as a quasi-natural experiment, we find that that this campaign enhances government auditing efficiency, and further has positive impacts on the economy and environment. Our study indicates that the top-down monitoring system plays an effective role in curbing corruption and in enhancing government accountability, and economic, environmental, and social sustainability.

CEO pay gap Researchers: A/Prof. Shams Pathan, Prof. Robert Durand, Prof. Robert DeYoung (Kansas), Dr Mamiza Haq (UQ), Jacob Morgan (NAB)

The large compensation received by bank executives is among the many factors blamed for the risk-taking that led to the 2008-2009 financial crisis. We test whether and how pay disparities between CEO and non-CEO executives—the so-called CEO pay gap—influenced bank stability and performance. Perhaps surprisingly, we find strong evidence that larger CEO pay gaps are associated with greater bank stability, improved financial performance, and greater information transparency. Our results imply that placing absolute limits on bank CEO pay would likely result in increased bank risk-taking.

Shareholders’ say-on-pay voice (SoP) Researchers: Prof. Shams Pathan, Prof. Robert Durand, Prof. Carlos Fernandez Mendez (Oviedo)

Both long-term institutional investors (e.g., pension funds and mutual funds) and short-term institutional investors (e.g., hedge funds) have increased their shareholdings over the past few years. These increased shareholdings have been accompanied by increased assertiveness in influencing the decisions of their portfolio firms. The changes in activism of both short-term and long-term institutional shareholders and the growing engagement of long-term shareholders with their investee boards have attracted considerable attention from the public, regulators, and academics. We attempt to understand how these significant institutional investors influence important firm outcomes such as transparency.