Abstract
I am very pleased to report that in the latest JCR Impact Factor release, the Australian Journal of Management has achieved an inaugural 5-year impact factor of 0.69, and a significant improvement in its 2-year impact factor from 0.381 in 2011 to 0.629 in the 2012 rankings. This is a pleasing improvement and speaks to the quality of papers we publish. I would like to congratulate and thank our team of Associate Editors and referees for their continuing efforts in supporting the AJM and increasing its reach and impact.
In other news, I would like to draw your attention to the inaugural Australian Journal of Management Symposium which was held at the University of Melbourne on 5th July 2013. I am very grateful to Professor Greg Clinch (University of Melbourne and Board Member of the Journal) for conceptualizing, funding and organising the entire event. Special thanks are also due to Julee McMahon at the University of Melbourne, who managed all the operational details. The Symposium featured papers from prominent Australian academics who have made a significant contribution to the field of Accounting. The six speakers were Professors Patricia Dechow (Berkeley), Terry Shevlin (California, Irvine), Doug Skinner (Chicago), Richard Sloan (Berkeley), Stephen Taylor (UTS) and Greg Clinch (Melbourne). All the papers will be published in a Special Issue of the Australian Journal of Management.
This August 2013 Issue brings together nine papers, in the following order:
Dichev and Li consider whether firm growth might provide a summary measure of firms’ ability to implement aggressive accounting choices. If this were the case then it would offer researchers a way to model both (previously studied) incentives, as well as the ability to choose aggressive reporting practices, making for tighter research designs. However, in a large sample study, they fail to find any reliable relationship between growth and aggressive accounting choice.
Lepone et al. study information leakages from analyst reports given the uneven access to such reports by various investors. They document cumulative abnormal returns of just over six per cent for upgrades and over twelve per cent for downgrades over a four week period, despite a generous provision for transaction costs. They find greater evidence of leakage from smaller brokers on stock downgrades.
The effect of CEO departures on stock return volatility is re-examined by Cheung and Jackson after some refinements in the classification of forced and voluntary departures. They document increased volatility following all CEO departures but the increase is significantly higher following forced exits, consistent with signalling theory that these events convey previously unknown information.
Bird et al. offer evidence on the impact on stock returns of the release of announcements by Australian mining companies pursuant to the requirements of the Joint Ore Reserves Committee. These announcements on exploration activity and ore reserves are highly value-relevant and larger effects are observed for smaller firms and for firms that use positive adjectives in their ‘headlines’.
In Faff and Treepongkaruna, the performance of the Longstaff and Schwartz two-factor model is tested using real yields (as opposed to prior testing using nominal yields). The forecasting ability of this model is also compared to the Cox-Ingersoll-Ross one-factor term structure model. The paper confirms the superior performance of the two-factor model.
Following the long tradition of chasing equity market anomalies, Dou et al. test for the presence of eight previously documented ones (based on size, value, momentum, contrarian, profitability, earnings growth, asset growth and accruals) in the Australian stock market. They are first to investigate all the main anomalies together in the Australian context. They also investigate whether their evidence is consistent with a risk-based explanation. They find that the presence of individual anomalies is highly contextual rather than pervasive. Interestingly, their evidence contradicts risk-based explanations.
Chai et al. examine the impact of a new proxy for liquidity on stock returns in the Fama-French framework. They supplement the Carhart four-factor model with this liquidity factor to find it explains some of the variation in returns beyond size, book-to-market and momentum. But the explanatory power added to contemporary asset pricing models is marginal.
Chen et al. test the cost-benefit of an emulation fund strategy, where a multi-manager fund attempts to lower transaction costs by delaying, and potentially combining, trading decisions from each employed fund manager to eliminate offsetting trades. While the benefits of reducing transaction costs are visible, the cost of delaying transactions and the resulting trade-off has not previously been examined. The paper documents that the cost-benefit trade-off is actually negative based on transaction level data from a large Australian pension fund.
The Issue closes with a short but important paper by Zhu which tackles the spurious correlation problem in capital structure studies induced by the use of ratios in traditional regression analysis. For example, prior capital structure studies document a negative relation between leverage and profitability, which is difficult to reconcile with reality. Zhu offers a potential solution based on a probit model, and is able to show a positive relation between profitability and debt issuance (increasing leverage).