Journal of Law and Financial Management - Volume 12 (1) June 2013

Editorial »

The Albatross Around the Neck of Company Directors: A Journey Through Case Law, Legislation and Corporate Governance 

By Lisa Barnes

Corporate governance is not a new concept. In fact the popularity of the subject area has generated much academic debate and research particularly in the last 15 years with the large- scale international corporate collapses of the early 2000s and the recent global financial crisis. The object of this research is to demonstrate the nature of the current climate of corporate governance in an Australian context through case law and legislation. It does not prescribe a 'one-size-fits-all' corporate governance solution, in fact this research clearly demonstrates that corporate governance can be linked to compliance with Corporations Act 2001 in particular directors' duties. Australian case law has demonstrated the continuing need for clarification of the legislation but this research acknowledges it also adds to the increasing burden already bestowed upon company directors.

Download »

A Weighted Mean Model for Operational Risk Assessment

By Yundong Huang, L Murphy Smith and David Durr 

Assessing operational risk, particularly related to internal control, is increasingly important to business firms. This is especially the case for publicly-traded companies that are engaged in multinational operations, which involve additional complexity and risk. In the United States, for example, the Sarbanes-Oxley Act requires public companies to document adequate internal control in their annual report. However, there is no standard or uniformly accepted solution for internal risk analysis. Several complex methods have been introduced in the academic field. These complex methods, while theoretically sound, may be problematic in practice due to the necessity of sufficient historical data. When insufficient data are available for measuring operational risk, most of the models, which are based on probability theory, do not work. As a consequence, in most companies' annual reports, the internal risk disclosure is still rather ambiguous and intuitive. In this paper, we will present a simple weighted mean model that can be used for internal risk assessment. This weighted mean model offers an approach that is relatively easy to use and overcomes deficiencies of more complex models. This model can be a viable alternative to empirical or intuitive methods.

Download »

Natural Disaster-Induced Australian Equity Market Reaction: Discrimination Across Industries 

By Siqiwen Li

Natural disasters in Australia have caused significant damage to the local economy and businesses. This paper employs the event study methodology to examine the natural disaster induced equity market reaction using daily equity return of 32 Australian firms within the following seven major industries in the State of Queensland: agriculture, banking, insurance, mining, construction, retailing and transportation. The result indicates that the 2005-2011 natural disasters in Queensland (severe storms, hail, cyclones and floods) have had evident negative effects on the Australian equity market, whereas the net effects across industries may be either positive or negative to different extents. Most of the effects of natural disasters on equity market returns have been statistically evident two days prior to the days of the events due to weather information disclosures, the days of the events and, with some adjustments, the days following the event, as economic and/or insured loss information is released.

Download »