Journal of Law and Financial Management - Volume 5 (1) June 2006
Volume 5 (1) June 2006
Contractual and Accounting Controls in Outsourcing Agreements
By Suresh Cuganesan, Jim Rooney & Riccardo Silvi
Growing evidence of failure amongst outsourcing arrangements has raised concerns about the mechanisms that govern and control inter-organisational networks and alliances. This paper investigates the use of contractual and accounting mechanisms in the governance of inter-organisational relationships. Despite both accounting and contracts forming part of the formal control mechanisms that parties can employ to govern inter-organisational relationships, there has been little research that has simultaneously examined both. The objectives of the paper are two-fold. The first objective of the paper is to re-examine the role of formal controls and specifically, contractual and accounting mechanisms. The second objective is to examine the utilisation of these mechanisms in practice. This is achieved through a content analysis of contracts governing outsourcing relationships in the Australian financial services industry. Thus the paper is exploratory in explicating the mix of formal controls comprising both contractual and accounting control mechanisms that is explicitly stipulated in contractual and supporting documentation.
Assessment of Law and Practice Relating to the Mortgage Origination Process in Securtisation Programs
By Pelma Jacinth Rajapakse
Securitisation is the process by which a credit institution either a bank or an independent mortgage provider (IMP) sells assets on its loan book specifically, accounts receivable on its loan book to another financial intermediary, which then funds its holdings by issuing asset-backed securities to investors. By this process, the original illiquid asset is transformed into a tradeable, more liquid debt security.
The purpose of this article is to examine the relevant aspects of commercial law and practice as they relate to three of the most critical features of mortgage origination within the securitisation process. Firstly, the article will analyse the following legal and regulatory aspects in the origination stage: (1) the concept of the as it relates to the mortgage securitisation process; (2) the legal consequences for various stakeholders of registering a mortgage as security on a loan; and (3) the impact of the Australian Prudential Regulation Authority (APRA) capital adequacy guidelines on relevant stakeholders in the mortgage origination stage within the RMBS programs.
Uncovered Share Return Parity for Australian Shares
By Tom Valentine
Interest rate parity (both covered and uncovered) is a well-established relationship in international finance. This theory has led by analogy to the suggestion that an equivalent relationship would exist for share returns.
This paper explores such a share return parity relationship for the Australian and US share markets. An initial estimation suggests that Australian share returns do not fully reflect movements in US share returns. There are a number of explanations for this result. First, since market participants must react to expected returns, the expectations generating mechanisms (including that for changes in exchange rates) used in Australia and the United States may differ.
Secondly, Australian and US shares may not be perfect substitutes. In particular, they may be perceived to have different risk characteristics. When this possibility is taken into account, a good explanation is obtained. The results throw some light on the desirability of offshore investment for Australian investors. However, the problem of proxying for expectations remains.