Failure to unify Australia’s leading accounting professional bodies

Purpose: The purpose of this paper is to provide a historical account of four unsuccessful merger attempts between Australia’s two major professional accounting bodies over a 30-year period (1969 to 1998), each of which ultimately failed. An analysis of the commonalities and differences across the four attempts is provided and social identity theory is used to explain the differences between members level of support for these merger bids. Design/methodology/approach: This study adopts a qualitative approach using a historical research methodology to source surviving business records from public archives and other data gathered from oral history interviews. Findings: The study found that, across all four merger attempts between Australia’s two professional accounting bodies, there was strong support from society members (the perceived lower-status group) and opposition exhibited by institute members (the perceived higher-status group). This study also found that the perceived higher-status organisation always initiated merger discussions, while its members rejected the proposals in the members’ vote. Research limitations/implications: This paper focusses on the Australian accounting profession, considering a historical account of merger attempts. Further research is required that includes interviews and surveys of those involved in making decisions regarding merger attempts. Originality/value: This paper is the first to examine in detail these four unsuccessful merger attempts between the largest accounting organisations in Australia. © 2020, Emerald Publishing Limited

Accounting variables and stock returns: the impact of leverage

The fundamental relationship between accounting variables and firm valuation is a recurring theme in capital market research. This paper investigates this relationship within a balance sheet context and highlights the importance of controlling for relevant economic factors. We do this by conditioning explanatory power on the firm's relative financial leverage position, after controlling for cashflows and firm size, and using an arctan regression model to take account of temporary components in cash and earnings flows. Using data for 743 firm-years for Australian Stock Exchange listed stocks, we find that for firms which are 'above optimal leverage': (i) earnings contain a greater level of transitory items, particularly when firm size is small; and (ii) cashflows provide higher incremental information. Our results are consistent with investors perceiving earnings as progressively less informative as the probability of failure increases, and the likelihood of earnings manipulation for the purpose of reducing proximity to debt covenants increases