Journal of Law and Financial Management - Volume 4 (2) November 2005
Volume 4 (2) November 2005
Does the Use of Hybrids Cause Financial Statement Disclosure Distortions?
By Nigel Finch
This paper reports on a study of a sample of hybrid securities issued by large Australian listed corporations between 2002 and 2004. The paper focuses on the key financial reporting impacts of this sample. From a balance sheet perspective these include the frequency with which the securities were classified as equity and the resulting impact on leverage ratios and other traditional risk measures. The impact of these securities on reported earnings and key financial performance metrics is also discussed. Policy implications are drawn from the findings by way of conclusion.
Good Faith in Contractual Performance - Smoke Without Flame?
By Tyrone M Carlin
The question of the status of implied good faith performance obligations as an element of the Australian law of contract continues to lurk as a vital yet unresolved jurisprudential puzzle. Given the vital importance of contract as a foundation for commercial exchange and the potential for a good faith performance doctrine to materially impact the operation of contracts, this is an undesirable state of affairs. The evidence presented in this paper suggests that the approach taken to good faith performance has fragmented along jurisdictional lines. Further, far from representing a well developed and established doctrine, it has been the project of a very limited number of judges primarily drawn from just one state. These observations raise significant questions as to the legitimacy of the alleged doctrine.
Executive Options Schemes - How Much are they Costing and What do they Look Like?
By Guy Ford and Richard Petty
In this paper we provide an overview of empirical data relating to the use, scale and cost of executive options schemes in Australia. Our data is based on a sample of 100 large listed Australian corporations. Our data suggests that approximately 80% of large listed corporations in Australia presently employ executive options schemes, but that the size and cost of these schemes reduced significantly after 2000. We argue that this reflects the impact of increased public scrutiny over options schemes and the impending move in Australia towards a financial reporting regime in which treating the cost of options as an expense for the purposes of calculating annual profit and loss is mandatory.