Faculty of Business, Economics and Law
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The Faculty of Business, Economics and Law is committed to conducting research that matters. Research that matters is both research of high academic quality and impact, and research of relevance and value for business, the professions, government and society.
The Faculty of Business, Economics and Law, comprises The AUT Business School, The AUT Law School and The School of Economics as well as a research institute and five research centres.
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Browsing Faculty of Business, Economics and Law by Subject "1402 Applied Economics"
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- ItemAerospace Competition, Investor Attention, and Stock Return Comovement(Elsevier BV, 2023-11-01) Do, HX; Nguyen, NH; Nguyen, QMP; Truong, CFierce aerospace competition among global superpowers has resulted in strong public attention on satellite launch events in the U.S. Given limited attentional resources, U.S. investors pay more attention to market-level shocks than to firm-specific shocks, making stock returns comove more with the market on satellite launch days than on other days. We find that the effect is significantly stronger for military-related satellite launches, launches before the dissolution of the former Soviet Union, and international satellite launches by other competitors, highlighting a greater concern for national security. A trading strategy that exploits the potential satellite-induced mispricing yields an annualized abnormal risk-adjusted return of up to 17% within the three-day window around launch date. Our results are robust to a battery of robustness analyses that consider the different characteristics of satellite launches, the exclusion of aerospace firms, and stock return comovement with industries.
- ItemAligning Disclosure Requirements for Managerial Assessments of Going Concern Risk: Initial Evidence From New Zealand(Wiley, 2023-10-20) Grosse, Matthew; Scott, Tom; Zang, ZetingThis study examines the impact of the Financial Reporting Standard No. 44 New Zealand Additional Disclosures (FRS 44) amendment issued by the New Zealand Accounting Standards Board (NZASB). The FRS 44 amendment aligned disclosure requirements for managerial assessments of going concern risk in financial reports with auditing standards for periods ending on or after 30 September 2020. We first present descriptive evidence on the frequency of going concern opinions (GCO), frequency of going concern issues identified as key audit matters (GCKAM), and frequency and content of managerial assessments of going concern risk (GCMA) before and after the FRS 44 amendment. Second, we show lower audit fees and shorter audit lags for financially distressed companies post-FRS 44 implementation. This suggests that the harmonisation of accounting and auditing disclosure requirements alleviates tension during the going concern decision-making process for affected companies, subsequently leading to reduced audit fees.
- ItemControl Strategies for Impactful Exits in Impact Private Equity Firms(Wiley, 2024-05-02) Islam, SM; Akroyd, CTraditional private equity firms aim to maximise their financial returns when exiting an investment. In contrast, a major consideration for impact private equity firms is to ensure an impactful exit from their investments – increasing the chance of impact continuity in portfolio companies post exit. However, impactful exits may not be realised due to ownership-, management-, and operations-related threats. Drawing on data from 45 impact private equity firms, we identify the control strategies that impact investors use throughout the investment lifecycle to manage impactful exits from investment. We also highlight how control-related issues differ between traditional and impact private equity firms.
- ItemCovenant Violation Concern and Investors’ Pricing of Level 3 Fair Value Adjustments(Elsevier BV, 2023-11-13) Mehnaz, L; Rahman, A; Kabir, HWe examine the influence of concerns relating to violation of the borrowing covenant on the investors’ valuation of Level 3 fair value adjustments. We reason that managerial bias in Level 3 fair value estimation is greater for firms approaching violation of the borrowing covenant. Based on a sample of Australian real estate firms, we find that managers report upward adjustments to Level 3 investment property values when they approach the threshold where the borrowing covenant is violated; and further find that this deliberate use of discretion is significant for firms closer to the interest coverage thresholds, but not for those approaching the gearing thresholds. We then find that, while fair value adjustments are priced positively, investors apply incremental discounts for firms closer to the violation threshold, or firms which are in technical default of borrowing covenants relative to those that are far from violation. Additionally, we show that the pricing discount on fair value adjustments attributable to the concern over covenant violation is significant only for the weaker governance sub-sample, indicating that effective monitoring mitigates faithful representation concerns about Level 3 fair value estimations.
- ItemDisplaced or Depressed? Working in Automatable Jobs and Mental Health(Wiley, 2024-01-04) Blasco, S; Rochut, J; Rouland, BAutomation may destroy jobs and change the labor demand structure, thereby potentially impacting workers' mental health. Implementing propensity score matching on French individual survey data, we find that working in an automatable job is associated with a 3 pp increase in the probability of suffering from mental disorders. Fear of automation through fear of job loss, expectation of a required change in skills, and fear of unwanted job mobility seem to be relevant channels to explain the findings.
- ItemHow Impact Investing Firms Use Reference Frameworks to Manage Their Impact Performance: An Industry-Level Study(Wiley, 2023-06-21) Islam, Syrus M; Habib, AhsanUsing meaning-oriented content analysis, we show how impact investing firms use various reference frameworks (e.g., International Finance Corporation (IFC) Performance Standards, Impact Management Project framework, UN Sustainable Development Goals) to manage their impact performance throughout the investment lifecycle. Our study provides an industry-level picture of the various roles that different reference frameworks play to help impact investors attain their impact goals. We also discuss the potential industry effects on management accounting practice, that is, how reference frameworks used in performance management in the impact investing industry differ from those used in some other industries.
- ItemImpact Investment Deal Flow and Sustainable Development Goals: “Mind the gap?”(Wiley, 2023-02-05) Islam, SM; Rahman, AWe examine the linkage between the available impact investment deals and Sustainable Development Goals (SDGs) to ascertain to what extent those deals are likely to achieve the aims of the SDGs, that of a sustainable and prosperous world. Drawing on 292 available deals, we find that most deals are directly or indirectly linked to only four of the 17 SDGs and are concentrated in two regions of the world. Accordingly, we conclude that impact investing has a significant imbalance in the SDG–deal flow–region nexus. Without addressing such an imbalance, impact investing will have only a limited impact on overall SDG attainment. Therefore, we also share some thoughts on addressing the imbalance.
- ItemState Dependence in Immunization and the Role of Discouragement(Elsevier, 2023-11-07) Plum, Alexander; Pacheco, Gail; Dasgupta, KabirWe investigate whether having a child immunized at a prior schedule genuinely increases the likelihood of vaccinating the child at the subsequent schedule. We use longitudinal data from the Growing Up in New Zealand study and apply a dynamic random-effects model that also controls for the initial immunization status. Prior to any covariate-adjusted estimations, our data shows that almost 96% of the children immunized at the previous schedule are also immunized at the subsequent schedule. In comparison, only 29% of children who were not immunized at the prior schedule receive immunization at the next milestone, thereby indicating an unadjusted state dependence in immunization of 67 percentage points (p.p.). Upon controlling for relevant covariates and unobserved heterogeneities, the genuine state dependence in immunization is, on average, estimated to be 20 p.p. Importantly, the magnitude of the state dependence is greater for Māori (by 5 p.p.) and also greater for mothers that report being discouraged from having their child immunized during the antenatal period (by 10 p.p.).
- ItemToxic Chemical Releases and Idiosyncratic Return Volatility: A Prospect Theory Perspective(Wiley, 2022-04-24) Bahadar, S; Nadeem, M; Zaman, RWe investigated whether and how firms’ toxic chemical releases (TCRs) affect idiosyncratic return volatility (IRV) using a prospect theory lens. Utilising a large sample of US public listed firms over the period 2001–2018, we find a significant and positive association between TCRs and IRV, suggesting that firms releasing more toxic chemicals have higher IRV. Additional analyses show that a positive association between TCR and IRV is more evident among firms with (i) high revenue, (ii) lower financial constraints and (iii) fewer environmental violations. A further test also suggests that a positive association between TCRs and IRV is contingent on political leadership ideology and market states. Our results remain consistent with weighted TCRs, IRV based on the Fama–French three-factor model, fixed-effect two-stage least square estimator (FE-2SLS), and other robustness checks. These findings shed light on the role of equity markets as a driver for capital-intensive pollution abatement activities and enhanced compliance with environmental laws, standards and best practices.
- ItemUS Cross-Listing and Domestic High-Frequency Trading: Evidence From Canadian Stocks(Elsevier BV, 2023-03-24) Dodd, Olga; Frijns, Bart; Indriawan, Ivan; Pascual, RobertoWe find that US cross-listing of Canadian stocks enhances domestic high-frequency trading (HFT) activity in the form of both opportunistic trading and market-making. First, US cross-listing boosts HFT low-latency cross-border arbitrage. This highly correlated HFT arbitrage activity across markets enhances stock price efficiency by correcting mispricing. Second, US cross-listing leads to an increase in news trading activity by high-frequency traders around US public macro-news releases. Finally, cross-listing increases a stock’s reliance on high-frequency market makers to provide liquidity. Yet, we find no evidence of higher fragility in liquidity supply after cross-listing.