Can supervise: YES
Regulators and previous research have expressed concern about the effect of compensation consultants on CEO pay. We use the Australian setting, where fees for both compensation and other consulting services supplied by compensation consultants are mandated disclosures for all firms, to provide evidence on the role of compensation consultants on CEO pay. We find that the use of compensation consultants or remuneration advisers, fees for compensation services and positive residual compensation service fees are associated with higher CEO pay. In contrast, both the provision and the proportion of fees from other services provided by compensation consultants are not. Furthermore, these positive associations are not observed when a Big 4 accounting firm is the compensation consultant.
Grosse, M, Ma, N & Scott, T 2018, 'Interim reviews and the association between partner rotations and audit fees', International Journal of Auditing, vol. 22, no. 2, pp. 214-229.View/Download from: UTS OPUS or Publisher's site
This paper considers whether the association between partner rotation and audit fees varies based on whether the partner is rotated before the interim review or annual report audit. Consistent with prior literature, there is some evidence of higher fees in the year of rotation, but we find this effect is driven by partner rotations that occur before the interim review, which are 7.14% higher on average. We argue that rotations before the annual report audit are less likely to be planned, and thus audit firms cannot pass on increased costs due to a weaker bargaining position. Supporting evidence is provided, as results only persist when client bargaining power is low, and in contrast there are lower fees for rotations that occur before the annual report audit when client bargaining power is high.
Grosse, MJ, Kean, S & Scott, T 2017, 'Shareholder say on pay and CEO compensation: three strikes and the board is out', Accounting and Finance, vol. 57, no. 3, pp. 701-725.View/Download from: UTS OPUS or Publisher's site
From 2011 in Australia, if over 25% of shareholders vote against a non-binding remuneration resolution, firms are awarded a 'strike'. We examine 237 firms that receive a strike relative to matched firms, and find no association with any measure of CEO pay. However, we do find that strike firms have higher book-to-market and leverage ratios, suggesting that the remuneration vote is not used to target excessive pay. We also find that firms respond to a strike by decreasing the discretionary bonus component of CEO pay by 57.10% more than non-strike firms and increasing their remuneration disclosure by 10.95%.
Feigin, A, Ferguson, AC, Grosse, M & Scott, T 2016, 'Evidence on why firms use different disclosure outlets: Purchased analyst research, investor presentations and Open Briefings', Accounting Research Journal, vol. 29, no. 3, pp. 274-291.View/Download from: UTS OPUS or Publisher's site
Bird, R, Grosse, M & Yeung, DC 2013, 'The market response to exploration, resource and reserve announcements by mining companies: Australian data', Australian Journal of Management, vol. 38, no. 2, pp. 311-331.View/Download from: UTS OPUS or Publisher's site
This is the first paper to study the market response to Joint Ore Reserve Committee compliant announcements made by Australian mining firms. Results from an event study based on matched firms suggest that these announcements are highly value relevant, with the market reacting in a significantly positive way to both exploration and resource announcements. Larger abnormal returns are found to accrue to smaller firms, to firms that use positive adjectives in their announcement headlines and to firms whose announcements imply larger percentage increases in resource levels. We also find evidence of markets anticipating both exploration and resource announcements a few days before they are released, which may be suggestive of some insider trading.
In response to criticism directed at the resource sector's corporate governance, this paper examines the corporate governance and underlying firm characteristics of resource development stage entities (DSEs) relative to a size-matched sample of non-resource firms. We find that resource DSEs have different governance characteristics in the measures of board independence, chair/CEO duality and CEO cash bonuses. Furthermore, there are differences in the information environment measures of analyst following, debt levels, stock market return and stock turnover. Considering we document substantial differences in underlying firm characteristics, corporate governance differences are likely appropriate to the mining industry and should not be uniformly labelled as 'bad~ Our results suggest that media rankings based on corporate governance scores may not accurately portray the resource sector. Overall, our results are of interest to Australian investors and regulators and contribute to a broader understanding of contextually contingent corporate governance.
Ghannam, S, Grosse, M, Loyeung, A & Ma, N 2018, 'The Role of Powerful CEOs in the Appointment of Accounting Financial Experts to the Audit Committee', European Accounting Association Annual Congress., Milan.
Ghannam, S, Grosse, MJ, Loyeung, AL & Ma, N 2017, 'The Role of Powerful CEOs in the Appointment of Accounting Financial Experts to the Audit Committee', Accounting Theory and Practice Conference & Asian Accounting Associations conference.
Grosse, M, Ma, N & Scott, T 2017, 'Evidence on compensation consultant fees and CEO pay in a mandatory disclosure setting', Journal of Accounting, Auditing and Finance Conference 2017, University of Otago, Dunedin, New Zealand.View/Download from: UTS OPUS
Grosse, M, Ma, N & Scott, T 2017, 'Evidence on compensation consultant fees and CEO pay in a mandatory disclosure setting', 2017 Accounting and Finance Association of Australia and New Zealand Conference, Adelaide.
Grosse, MJ, Ma, N & Scott, T 2017, 'Evidence on compensation consultant fees and CEO pay in amandatory disclosure setting', Journal of Contemporary Accounting & Economics Annual Symposium 2017, Taiwan.
Grosse, MJ & Scott, T 2016, 'Pricing Initial Engagements and Interim Reviews', 14th Annual ANCAAR Audit Research Forum, Australian National University.
Scott, T & Grosse, MJ 2016, 'Pricing Initial Engagements and Interim Reviews', AFAANZ Conference, Gold Coast.
Grosse, MJ & Scott, T 2016, 'The Information Content of Interim Reviews: Do Interim Going Concern Opinions Provide an Early Warning?', Accounting and Finance Association of Australia and New Zealand Conference, Gold Coast.
Grosse, MJ & Scott, T 2016, 'Interim reviews and the association between audit partner rotations and audit fees', Auckland Region Accounting Conference, Auckland University of Technology.
Grosse, MJ, Ma, N & Scott, T 2016, 'Evidence on compensation consultant fees and CEO pay in a mandatory disclosure setting', UTS/SMU/UNSW Accounting Research Conference, University of Technology Sydney.
Grosse, MJ & Scott, T 2013, 'Shareholder say on pay and CEO compensation: three strikes and the board is out', Quantitative Accounting Research Symposium, Auckland University.
Bird, R, Grosse, M & Yeung, DC 2010, 'The market response to exploration, resource and reserve announcements by mining companies: Australian findings', Proceedings of the European Financial Management Association 2010 Meetings, European Financial Management Association Conference, EFMA, Aarhus, Denmark, pp. 1-26.
This paper is the first to conduct an event study on the market response to exploration, resource and reserve announcements made by mining firms. Results from an event study using a matched firm approach suggest that markets react positively to both the exploration and the resource announcements at the time of their release but find no information value in the reserve announcements possibly because all of the information in these announcements has been anticipated by the market and/or contained in prior announcements.
Prior studies of bank loan announcements depict significant capital market reactions. More recent evidence however, fails to identify such reactions (Fields et al. 2006, Maskara & Mullineaux 2011). In this study, we consider market reactions to loan initiations where the borrower has no prior record of bank lending. Zero-leverage firms are firms that have zero outstanding short-term or long-term debt in their capital structure (Strebulaev & Yang 2013). Using a unique hand collected sample of bank loan announcements for Australian Mining Development Stage entities, we find that both initial bank loans and subsequent bank loans attract significant market reactions. Further, we produce evidence consistent with announcements of such loans reducing information asymmetry which we proxy for with bid-ask spreads and trading volume. Our final analysis examines evidence of bank specialisation. We find that borrowers from the industry leader in terms of loan origination (Macquarie Bank) in this sector exhibit stronger abnormal returns.