The use of loan loss provisions for capital management, earnings management and signalling by Australian banks

The objective of this study is to examine whether and to what extent Australian banks use loan loss provisions (LLPs) for capital management, earnings management and signalling. We examine if there were changes in the use of LLPs due to the implementation of banking regulations consistent with the Basel Accord of 1988 which made loan loss reserves no longer part of Tier I capital in the numerator of the capital adequacy ratio. We find some evidence to indicate that Australian banks use LLPs for capital management, but no evidence of a change in this behaviour after the implementation of the Basel Accord. Our results indicate that banks in Australia use LLPs to manage earnings. Further, listed commercial banks engage more aggressively in earnings management using LLPs than unlisted commercial banks. We also find that earnings management behaviour is more pronounced in the post-Basel period. Overall, we find a significant understating of LLPs in the post-Basel period relative to the pre-Basel period. This indicates that reported earnings may not reflect the true economic reality underlying those numbers. Finally, Australian banks do not appear to use LLPs for signalling future intentions of higher earnings to investors.capital management; earnings management; signalling; Australian banks

Data quilting: Art and science of analyzing disparate data

Motivated by incongruences between today’s complex data, problems and requirements and available methodological frameworks, we propose data quilting as a means of combining and presenting the analysis of multiple types of data to create a single cohesive deliverable. We introduce data quilting as a new analysis methodology that combines both art and science to address a research problem. Using a three-layer approach and drawing on the comparable and parallel process of quilting, we introduce and describe each layer: backing, batting and top. The backing of the data quilt is the research problem and method, which supports the upper layers. The batting of the data quilt is the data and data analysis, which adds depth and dimension to the data quilt. Finally, the top layer of the data quilt is the presentation, visualization and storytelling, which pieces together the results into a single, cohesive deliverable. For illustrative purposes, we demonstrate a data quilt analysis using a real-world example concerning identity theft

Developing Human Capital through Personal Web Use in the Workplace: Mapping Employee Perceptions

Personal web usage can be defined as any voluntary act of employees using their company\u27s web access during office hours to surf non-work related websites for non-work purposes. Previous research suggested that personal web usage is a negative force with productivity losses, congested computer resources, security costs, and the potential risk of legal liability. However, using qualitative research we investigated the attitudes of a diverse set of individuals to personal web usage. Our findings suggest that personal web usage in the workplace can be potentially constructive, although we acknowledge the potential for negative uses as well. We suggest an extension of social contract theory to explain these findings

Selecting IT Applications in Manufacturing: A KBS Approach

The use of the right type of Information Technology (IT) applications or manufacturing systems is expected to usher in a competitive advantage. Selection of the right type of IT application is, however, a challenging task. When a company, with a given dominant process structure, emphasizes two or more competitive priorities, such as quality, product flexibility, etc., an unaided manager faces a complex decision problem in choosing from alternative IT applications available in the areas of product design through distribution. In this paper, we present a Knowledge Based System (KBS) that would assist managers with the identification of IT applications that are consistent with both the competitive priorities and the process structure. Validation of the system illustrates that its performance is consistent with the human experts, and it has the potential to facilitate effective and swift decision-making in the selection of appropriate IT applications that best match an organization\u27s manufacturing strategy

Linking IT Applications with Manufacturing Strategy: An Intelligent Decision Support System Approach

Research has indicated the importance of matching Information Technology (IT) applications or manufacturing systems with the competitive strategy of a company. Selection of the right type of IT application is, however, a challenging task. When a company, with a given dominant process structure, emphasizes two or more competitive priorities, such as quality, product flexibility, etc., an unaided manager faces a complex decision problem in choosing from alternative IT applications available in the areas of product design through distribution. In this paper, we developed an Intelligent Decision Support System (IDSS) that would assist managers with: assessment of the relative importance of competitive priorities in their organization, evaluation of the fit between the competitive priorities and their dominant process structure, and identification of the IT applications that are consistent with both the competitive priorities and the process structure. The IDSS is comprised of an interactive user interface, a knowledge database, a decision model, and a Knowledge-Based System (KBS) that was developed using the 1st class KBS shell. Validation of the system illustrates that its performance is good as the human expert, and it has the potential to facilitate effective and swift decision-making in the selection of appropriate IT applications that best match an organization’s manufacturing strategy. The choice and use of the right type of IT application should provide a company with a competitive edge

Internet Usage in an Emerging Economy: The Role of Skills, Support, and Attitudes

The Internet has revolutionized the business environment, enabling the conception of the e-economy. Irrespective of the technology divide between developed and developing countries, it is imperative for multinational corporations, their affiliates, and local businesses operating in these economies to use the Internet to sustain their competitive edge in a global market. Hence, this paper provides theoretical insights into Internet usage progression in an emerging economy. Furthermore, the paper examines empirical factors that influence Internet usage in an organizational context. Data gathered from 224 employees who had access to the Internet at work in 33 organizations in Nigeria were used to examine the relationships between Internet skills, management support, and Internet usage. We also investigated the moderating effects of attitudes on the skills, support, and Internet usage relationships. The correlation and regression results provide strong support for the hypothesized relationships. The findings reveal that Internet skills (general and advanced) and management support contribute to Internet usage in organizations in the emerging economy. Some moderating effects of attitudes were also found. Implications and directions for future studies are discussed

Evaluating cost taxonomies for information systems management

The consideration of costs, benefits and risks underpin many Information System (IS) evaluation decisions. Yet, vendors and project-champions alike tend to identify and focus much of their effort on the benefits achievable from the adoption of new technology, as it is often not in the interest of key stakeholders to spend too much time considering the wider cost and risk implications of enterprise-wide technology adoptions. In identifying a void in the literature, the authors of the paper present a critical analysis of IS-cost taxonomies. In doing so, the authors establish that such cost taxonomies tend to be esoteric and difficult to operationalize, as they lack specifics in detail. Therefore, in developing a deeper understanding of IS-related costs, the authors position the need to identify, control and reduce IS-related costs within the information systems evaluation domain, through culminating and then synthesizing the literature into a frame of reference that supports the evaluation of information systems through a deeper understanding of IS-cost taxonomies. The paper then concludes by emphasizing that the total costs associated with IS-adoption can only be determined after having considered the multi-faceted dimensions of information system investments

Information systems evaluation: Navigating through the problem domain

Information systems (IS) make it possible to improve organizational efficiency and effectiveness, which can provide competitive advantage. There is, however, a great deal of difficulty reported in the normative literature when it comes to the evaluation of investments in IS, with companies often finding themselves unable to assess the full implications of their IS infrastructure. Although many of the savings resulting from IS are considered suitable for inclusion within traditional accountancy frameworks, it is the intangible and non-financial benefits, together with indirect project costs that complicate the justification process. In exploring this phenomenon, the paper reviews the normative literature in the area of IS evaluation, and then proposes a set of conjectures. These were tested within a case study to analyze the investment justification process of a manufacturing IS investment. The idiosyncrasies of the case study and problems experienced during its attempts to evaluate, implement, and realize the holistic implications of the IS investment are presented and critically analyzed. The paper concludes by identifying lessons learnt and thus, proposes a number of empirical findings for consideration by decisionmakers during the investment evaluation process

An analysis of loan loss provisioning behaviour in Vietnamese banking

This paper investigates loan loss provisioning (LLP) behaviour by Vietnamese banks during the period 2006–2012. We test the capital, income-smoothing and cyclical management hypotheses and examine whether the inclusion of X-efficiencies and/or risk control variables influences provisioning behaviour. When the X-efficiency estimates are incorporated into the models, Vietnamese banks do not exhibit counter-cyclical or capital management manipulation by managers, but counter cyclical income smoothing. Yet, the inclusion of risk control variables in X-efficiency scores (either equity or reserves for impaired loans) supports the addition of capital management hypotheses