Summer Research Projects
Applications for Summer Research Program have closed. See programs below or visit employability.uq.edu.au/summer-winter-research
Climate-related Risk Disclosures: Implications for Investors and Auditors
Supervisors
Joint principal supervision by Mr Kevin Thai and Dr Yang Xu (with associate supervision of Associate Professor Kathleen Herbohn).
Project duration
6-10 weeks with a start/end date negotiable with the supervisors.
(Typically, it would run from December 2020 – mid February 2021 with a break for the Christmas/New Year period).
Description
Research Objectives:
To investigate: (1) the extent to which companies implement APS/PS 2 ‘Making Materiality Judgements’ in disclosing their climate-related risks; (2) the capital market valuation impact of such risk reporting in the financial statements; and (3) the effect on the auditors as reflected in audit fees and assurance quality.
Background:
In the aftermath of recent climate change induced disasters, it is clear that climate-change risk affects most businesses, if not all, and cannot be diversified away. Consequently, investors increasingly seek financial statement disclosures about what is recognised by the business community as one of their most significant issues – climate-related risk.1 However, there is an apparent disconnect between the demand for climate-related risk disclosures and its supply with disclosures to retail investors and other stakeholders, where the latter is limited, patchy, and inconsistent.2
To address the disconnect between the demand for climate-related risk disclosure and its supply, in December 2018, the Australian Accounting Standards Board (AASB) and Auditing and Assurance Standards Board (AUASB) issued a joint bulletin, ‘Climate-related and other emerging risks disclosures: Assessing financial statement materiality using AASB/IASB Practice Statement 2’ (APS/PS 2). A central underlying assumption of the bulletin is that:
“entities can no longer treat climate-related risks as merely a matter of corporate social responsibility and should consider them also in the context of their financial statements” (AASB, 2019, p. 3).
Whilst the recommendations of APS/PS 2 are not mandatory, reporting entities face pressure to comply in light of recent lawsuits brought against companies for not adequately disclosing their climate-related risks to investors and growing pressure from institutional investors for more transparency (Peel et al., 2017).3 Balanced against the pressures on companies to comply with the recommendations of APS/PS2 are two potentially negative consequences – uncertain capital market reactions to the financial statement disclosures, and reductions in assurance quality and increase in audit fees as auditors struggle to verify the climate-related risk disclosures. This project seeks to provide evidence on these two potential impacts of APS/PS2. As background, the uptake of APS/PS2 by companies will be documented allowing examination of: (A) the capital market valuation impact, if any, of climate-related risk disclosures; and (B) the audit fees and assurance quality implications of climate-related risk disclosures. Each is discussed in more detail below.
(A) Changes in Financial Statement Disclosures and Valuation Impacts:
Inter alia, APS/PS2 recommends that for half-year and full year financial statements from 1 January 2019, companies use an updated definition of materiality4 to assess whether climate-related risks5 are material and if so, the appropriate level of disclosure in financial statements. Equally importantly, APS/PS2 emphasises the qualitative dimension of materiality that is often overlooked by both companies and their auditors. That is, regardless of the magnitude of a risk’s potential numerical impact, qualitative external factors such as the industry in which the entity operates and investor expectations may render such a risk material, and thus warranting disclosure, should be reflected in the financial statements. However, as noted in Dobler (2008), there is invariably room for disclosure discretion given the inherently subjective and partly non-verifiable nature of risk reporting (especially qualitative information), even in the presence of mandatory regulation.6
Given the discretion available to managers in complying with the recommendations in APS/PS 2 and climate change-related institutional and economic pressures, reporting entities now need to explain what areas of the financial statements could be impacted and the basis for the assumptions on which they make the disclosure, or explain why their operations are not exposed to such risks. Examples of potential financial implications arising from climate-related risks may include asset impairment calculations (as carbon intensive assets are stranded), fair valuation of financial assets and loan portfolios, recognition of provisions and contingent liabilities arising from fines and penalties.
This project seeks to examine the implications of any climate-related risk disclosures for the valuation of assets at price and returns levels, as well as net future cash flows.
(B) Changes in Audit Quality and Audit Fees:
Adoption of APS/PS 2 is expected to influence auditors as climate-related risks can impact the quality of the audit. The key challenge relating to the audit of the climate-related risk disclosures is verifiability of the information. For example, auditors can cross check the dollar value of the company’s electricity bill with the utility company, but it is arguably harder to identify what proportion of total carbon emissions can be attributed to the bill.
Auditors’ responsibilities over the climate-related risk disclosures depends on where and how such disclosures are made. If the climate-related risk disclosure is integrated into the financial statements, auditors need to assess whether the assumptions implied are reasonable and whether the material impact have been sufficiently reflected in the disclosure. As a result, auditors may increase their engagement hours, audit efforts and audit fees. Further, if climate-related risk disclosures are made outside the annual report and external assurance is sought on this information, ASAE 3000 Assurance Engagements Other than Audits of Reviews of Historical Financial Information is applied. However, different from financial reports for which audits are performed against generally accepted accounting standards, when auditors perform assurance service for a stand-alone report (e.g. sustainability report or climate change report), companies can choose established criteria or even create their own criteria. The use of firm-specific assurance criteria makes it questionable that the information disclosed are credible, relevant and comparable to other companies. In addition, if the climate-related information is disclosed in annual report but not in the financial statements (e.g. operating financial review, corporate governance, directors’ report or risk assessment report), auditors only need to report them in the other matters paragraph only when the information is materially inconsistent with the financial report. In this case, we expect the implementation of APS/PS 2 has minimum impact on audit quality and fees.
1 A survey by KPMG revealed that climate-related risk is recognised as businesses as one of their most material issues. (https://home.kpmg/xx/en/home/insights/2017/10/the-kpmg-survey-of-corporate-responsibility-reporting-2017.html)
2 Solomon, J. F., A. Solomon, S. D. Norton, and N. L. Joseph. (2011). Private climate change reporting: an emerging discourse of risk and opportunity? Accounting, Auditing & Accountability Journal, 24(8), 1119-1148.
3 Peel, J., Osofsky, H., & Foerster, A. (2017). Shaping the Next Generation of Climate Change Litigation in Australia. Melbourne University Law Review, 41, 793.
4 AASB made amendments to the definition of “materiality” in December 2018 following those amendments made by the International Accounting Standards Board (IASB). Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that users make based on financial information about a specific reporting entity.
5 Climate-related risks and other merging risks include those from potential acute or chronic natural disasters, change in climate patterns and the related technology, market, legal and changes in government policies risks (AASB, 2019).
6 Dobler, M. (2008). Incentives for risk reporting—A discretionary disclosure and cheap talk approach. The International Journal of Accounting, 43(2), 184-206.
Method/Approach:
For the ASX 200 (the largest 200 companies by capitalisation listed on the Australian Securities Commission (ASX)), hand collect climate-related risk disclosures and audit-related information from the financial statements (i.e. exclude sustainability reports, web disclosures, CDP disclosures) pre- and post- APS/PS 2 ‘Making Materiality Judgements’. We will analyse these disclosures using a disclosure index constructed based on the disclosure requirements of several accounting standards that are potentially impacted by the implementation of APS/PS 2 (i.e. asset impairment, contingencies, provisions, financial instruments, fair value measurement).
In the light of the emphasis of qualitative disclosures in ASP/PS 2, we also employ automated content analysis tools to measure qualitative attributes of the climate-change risk disclosures including length, tone, specificity, and repetition.
Capturing the nature of climate-related risk disclosures via the disclosure index and analysis of qualitative characteristics of the disclosure allows an investigation of:
- The impact on the valuation of assets (at price and returns levels as well as net future cash flows) attributable to the climate-related risk disclosures in financial statements.
- How the climate-related risk disclosures are assured by the auditors, including the level of assurance and the specific assurance criteria applied.
- The costs associated with the assurance service obtained from the auditors.
Expected outcomes and deliverables
The applicant will gain skills in data collection, data management and a familiarity with empirical databases since the data will be collected as follows: share price data from SIRCA’s SPPR, and financial data from MorningStar. Details about climate-related risks and assurance data will be manually collected from half-year reports and annual reports from 1 January 2018 to 31 December 2019. The applicant will also develop a better sense of the institutions and reporting behaviour of firms by spending time reading different sections/types of disclosures.
Additional research skills that will be developed for the applicant relate to the automated content analyses of narrative reporting in financial statements. The software to be used include DICTION and Stylewriter.
More generally, the applicant will gain experience with research by participating actively in the development of a research project from an initial idea through to the start of a working paper.
Suitable for
This project is open to applications from students (both undergraduate and postgraduate levels) with a background in Commerce and/or Economics. The applicant should have a natural curiosity about potential drivers of disclosures made by business; as well as a good command of English since there is data collection and analysis required around public disclosures.
Further information
If you would like additional information on this project, please contact Mr Kevin Thai.
Inquiries prior to submitting an application are encouraged.
Repairs, Reconciliation & Remembrance: Re-designing the Cooktown Boathouse Museum
Supervisors
A/Prof Karen Hughes and Dr Damien Jacobsen
Project duration
This project will be conducted over 10 weeks, commencing on 23 November and finishing on 12 February (allowing for a 2 week break over Christmas/New Year).
Description
The Cooktown Re-enactment Association is a not-for-profit organisation dedicated to sharing the history of the Aboriginal and European people who encountered each other at the Endeavour River in Cooktown in 1770. Cook and his crew stayed on the river's edge from 17 June to 4 August.
The year 2020 marks the 250th anniversary of this important historic event. In recognition of this milestone and the significance of this event to European settlement of Australia, the Association has been awarded funding to re-build and re-furbish their small museum.
The current museum, known locally as the Boathouse, is staffed by volunteers and operated in conjunction with the traditional owners of the land. Located in Cooktown’s historic main street, it aims to provide visitors with an insight into the meetings between Cook and the Guugu Yimithirr Bama people. The centrepiece of the museum is a series of murals depicting the story of Captain Cook's historic forty-eight days at the Endeavour River, including images of Cook and a “Little Old” Guugu Yimithirr man reconciling after a dispute over Cook’s refusal to share turtles.
While the murals are visually stunning, the rest of the exhibits are old and tired, and in much need of updating. Interactive displays and visitor activities are minimal. Accordingly, the Association is keen to use the funding to breathe new life into the exhibits and visitor experience.
The two project leaders, Dr Damien Jacobsen and A/Prof Karen Hughes are experts in visitor management, museum design and interpretation. They were recently approached to provide suggestions and guidance on the development of new exhibits and experiences that will attract and engage a wider audience. Dr Jacobsen has family connections to the Traditional Owners, and the advice is being provided on a pro bono basis. Central to the refurbishment is a vision that visitors to the museum will understand and appreciate that the historic encounter was one of friendship and healing. Thus, it is envisaged that the new museum will showcase reconciliation and healing, a point that is particularly pertinent given the 250th anniversary of Cook’s landing as well as the current Black Lives Matter movement.
The proposed project will be conducted in three stages as described below. It is envisaged that the student would support the project leaders in conducting these tasks, and that Dr Jacobsen and A/Prof Hughes will be responsible for all training and mentoring.
Stage One
Conduct an audit and content analysis of travel reviews (blogs, Trip Advisor) to ascertain what aspects of the current museum visitors like and dislike, as well as what they have learnt from their visit.
Stage Two
Analyse the exhibits and activities offered by Australian and international museums that focus on conflict and reconciliation. This will involve a content analysis of tourist reviews (similar to Stage One), together with an online audit of what is offered at each of the attractions. Particular attention will be paid to exhibits, activities and events that could be incorporated into the new museum in Cooktown
Stage Three
Develop and administer an online survey to ascertain what the public knows about this historic event, and what information, exhibits and activities would interest them. The survey will be distributed to the UQ community as well as travel clubs such as the Queensland 4X4 Club. The survey will also be hosted on the Cooktown Re-enactment Association’s Facebook page.
Analysis of responses will inform recommendations for refurbishment and development of tourist activities at the museum.
Expected outcomes and deliverables
By participating in this project, the scholar will learn how to:
- access and use data from travel reviews to gain insights into tourist issues
- systematically analyse large volumes of data to produce meaningful categories and themes
- conduct a desk audit of tourist attractions
- design and administer online surveys
- analyse responses to survey questions
The student will assist the project leaders on all aspects of the project, and will be closely supervised and mentored. Under guidance from supervisors, the scholar will gain understanding about producing diverse research impacts and working with community organisations. They will also have input into the final recommendations presented to the Association.
Weekly meetings will be a minimal requirement. Students may also be asked to produce a report or oral presentation at the end of their project.
Suitable for
This project is open to applications from undergraduate and post-graduate students with a background in tourism, cultural or museum studies. Students must have successfully completed their first year of study.
Further information
Using Social Media Analytics and Deep Learning to Uncover Public Response to Contact Tracing Mobile Apps in a Time of Pandemic
Supervisors
Dr Morteza Namvar and Dr Saeed Akhlaghpour
Project duration
10 weeks
Description
This research project investigates the critical phenomenon of the public acceptance and use of Contact Tracing Mobile Applications (CTMAs) in a time of the pandemic. By now, several countries, including Australia, India, and the United Kingdom, have rolled out official Contact Tracing Mobile Applications (CTMAs). There are also other countries, most notably Brazil and the USA, as well as several technology vendors, including Google and Apple in a joint effort, have expressed their intentions to release COVID-19 contact tracing technologies.
Using mobile technology for contact tracing is an unprecedented and new phenomenon that deserves rigorous scientific analysis. It represents a highly impactful use of technology that can literally save lives and assist with the recovery of economic activities. But the technology comes with its challenges. In particular, while the widespread adoption of this technology is critically important to its success, this is hindered by low adoption rates in countries that already provided a CTMA. For example, Singapore's contact tracing app was reportedly adopted by only 10%-20% of the population, and despite the initial enthusiasm and 40% download target, as of June 2020, COVIDSafe app was only adopted by around 25% of Australians. Low adoption rates will inevitably erode the value of the system.
In this project, we investigate public response in social media to the launch of a CTMA, COVIDSafe app in Australia. We apply deep-learning techniques as well as qualitative coding on social media data to uncover the concepts and their trends and relationships over time. Our social media data includes user reviews on COVIDSafe app, in addition to the electronic word of mouth in social media (e.g., Twitter). In addition to the user-generated content, our analysis includes texts that are developed by the authorities through relevant announcements and legislation, i.e., the Privacy Amendment (Public Health Contact Information) Act to support the COVIDSafe app.
A greater understanding of the public perceptions and attitudes towards a CTMA and the underlying mechanisms that affect the adoption of CTMAs can inform policy and guidelines and thus improve adoption rates leading to a significant impact upon the health and economic outcomes of societies during COVID-19 and inevitable future pandemics.
Expected outcomes and deliverables
The selected applicant will improve her/his technical and data analytics skills and can use the outcomes of this project as evidence of successful teamwork in an impactful research project.
In collaboration with the selected applicant, we aim to publish the results of this multidisciplinary study in IS or health-informatics journals. The student will work closely with the supervisors in conducting deep-learning analysis and topic modeling of social media and will contribute to writing parts of the publication.
To ensure research impact, and to communicate the outcomes to a broader audience, including health executives and administrators, we plan to publish the results of this research in practitioner-oriented outlets, such as “The Conversation”.
Suitable for
This project is open to applications from students with a background in business and analytics.
We are looking for 3rd – 4th year students only who can apply machine learning on social media data in Python, RStudio or similar environments (to the extent that machine learning and its tools are taught in the Business School)
Further information
Students can contact Morteza via m.namvar@business.uq.edu.au or Saeed via s.akhlaghpour@business.uq.edu.au
The impact of COVID-19 health crisis on employee workspaces, productivity and wellbeing
Supervisor
Associate Professor Remi Ayoko in Management, University of Queensland Business School.
Project duration
This is a continuation of the summer research program on open-plan office. An estimate of 6-10 weeks for data collection and data analysis and possible write-up.
Description
Project pverview and significance of study
In this project, I extend my work in the area of Physical Work Environment (see Ayoko & Ashkanasy, 2020; Monaghan & Ayoko, 2019; Irving, Ayoko & Ashkanasy, 2019; Ayoko & Ashkanasy (Eds), 2019; Ayoko, Ashkanasy, & Jehn, 2014; Ashkanasy, Ayoko, & Jehn, 2014) to investigate the impact of COVID-19 health crisis on employees’ virtual and physical work spaces (e.g. open-plan offices) productivity and wellbeing.
So far, scholarly findings on open-plan office are mixed. For example, empirical studies suggest that open-plan office promotes communication between employees (Kim & de Dear, 2013) while others demonstrate that open plan offices are linked with reduced employee satisfaction, a loss of privacy, and increased cognitive workload (De Croon, Sluiter, Kuijer, & Frings-Dresen, 2005). These findings are paradoxical (Ayoko, Ashkanasy & Jehn, 2014) and warrant further research. Thus, the current study moves the research in this area forward by qualitatively investigating employees’ experience of working in virtual and physical spaces (i.e. at home and at the office at work) in the context of a health crisis. Outcomes of the project will inform managerial guidelines and policies on how to manage the intersection between virtual and physical workspaces (both at home and at work) in the future.
This project is critical for two reasons. First, the unprecedented COVID-19 crisis has changed the way we work especially considering the need for involuntarily working from home (i.e. working virtually), with its attendant challenges of managing work-life balance, productivity, stress and physical/mental wellbeing. The current study aims at investigating how employees navigated the challenges of involuntary working from home during the lockdown period of the COVID-19 pandemic in Australia. Secondly, there are suggestions that the transition back to the office for many employees may be equally traumatic. This is because the open-plan offices by design do not generally lend themselves to the social distancing rule. In fact, we anticipate that given social-distancing and increased virtual work that is driven by COVID-19, office workspaces (e.g. open plan office) might be changed for ever. The question then is, what should the open plan office of the future look like based on employees’ recent health crisis and how can we transition back safely to the office if there was another health crisis?
The current project aims at identifying qualitatively the employees’ perceptions of health crisis (e.g. COVID-19) and its impact on working involuntarily from home. Especially, the project will compare employees’ experience of their home office with their experience of working in the open-plan office at work before COVID-19 lockdown. It will also explore how the combined issues of COVID-19, virtual work (including the use of technology), work life balance and how these issues might impact employees’ productivity and wellbeing, while shaping their behaviours upon their return to offices at work.
The above culminates into 2 Research Questions: (1) What is the impact of COVID-19 crisis on employees’ virtual work, home and office physical workspaces, involuntary working from home, work processes and outcomes (e.g. productivity and wellbeing?), (2) How does the employees’ experience of COVID-19 shape their behaviours and interactions in their physical work environment (e.g. open plan office) upon return to work and after the COVID lockdown. Answers to the above questions should provide directions for managers and organisational leaders on how to manage the virtual and physical workspaces induced by a health crisis.
Approach & methodology
Researchers have often employed quantitative approach to the study of open-plan offices (Ayoko et al., 2014). The current study departs from this practice by employing a qualitative approach to answer the research questions. In particular, the project will be conducted in two studies and will be anchored in grounded theory. This approach has been used by researchers (e.g. Robertson, Hershenfield, Grace & Stewart, 2004; Rambaldini, Wilson, Rath, Lin, Gold, Kapral & Straus, 2005) studying a similar health crisis- Severe Acute Respiratory Syndrome (SARS).
Study 1 (Stage 1) Data for Study 1 will be from social media posts and this will be done in 2 phases. In Phase 1, we will collect all posts in LinkedIn, Twitter and Facebook/Instagram related to COVID during the lockdown in Australia in the period between March and July, 2020 when the restrictions are largely improved. Then in phase 2, we will refine the data by focusing on online posts that are related to our constructs such as involuntary working from home, virtual working (e.g. telework with technology), workspaces at home employee productivity and wellbeing as well as the transition to work after COVID-19 lockdown. In study 2, and to complement the secondary data collected in Study 1, we will collect primary data using in-depth interview questions. Sample interview questions include:
- Please describe your experience of working from home during the C-19 lockdown
- Describe the process of getting started and nominating a physical workspace at home to continue to work.
- What were the main challenges you encountered in the early days of working at home? How did you overcome these challenges?
- How did you navigate the boundaries of working from home, work processes and particularly connecting with other team members?
- Please tell us how you think the crisis has impacted your work, productivity and wellbeing
- How would you like your office workspaces (e.g. open plan) to looklike upon you return to work?
Sample:
Data for Study 1 (Phases 1 and 2) will be about 250 conversation/comment points. We expect these points to yield about 20, 000 corpus. Data for Study 1 will be collected within a period of 2 weeks. Social media posts are secondary data. No consent will be needed given that these posts (i.e. comments and conversations) are already in public domain.
Data for Study 2 will be collected from 50 participants. This category of participants will be sourced from various organisation levels (Executives, middle level managers, and employees) and from a range of employees in a variety of industries including Higher Education, Healthcare and Financial /Consultancies in Australia. Additionally, while the interview questions are about the workplace, we are not going through organisations to collect the data for this study. The participants for interviews are going to be sourced through advertisement on social platforms and anyone who is willing to participate will be recruited. We will use the snowballing strategy to collect data. Participants will be between age 18-65 years and sample size will comprise of 50% male and 50% female and must have worked from home for more than 50% of the time during the COVID-19 lockdown. Once identified, the participants for Study 2 will be provided an information sheet about the study, and a consent form to sign. Also, once consent is obtained, the participants will be slated for interview based on their availability. Interviews will take place virtually using zoom. Each interview will take an average of about 30-40 minutes to complete. Interview data will be collected within a period of 6-8 weeks. All the interviews are expected to be collected within 2 weeks after the completion of Study 1. We expect that data will have reached saturation by the time we collect 30-50 interviews. An ethics application for our preliminary research in this area has already been approved.
Data analysis: Leximancer® analyses textual corpora of any size using an automatic concept selection process, most often used by researchers as a starting point for focusing their research question. Researchers usually customize the automatic analysis using three linguistic strategies (McKenna & Waddell, 2007). We will adopt a similar approach to analyse our data for Study 1. Additionally, we will employ Nvivo further to reveal the nuances in the online conversation posts and interview data around C-19, working from home, virtual work, work life balance, employee productivity and wellbeing that Leximancer may have missed.
Results, outcomes and future plans
We expect to publish immediate outcomes of the study in community media outlets such as Newspaper, Conversation, Radio and TV talks and accessible from public domains. In the long run, our outcomes will be published as articles in academic journals (e.g. Organization Studies- ABDC A*). This will provide insight into the latest influence of COVID-19 on employee productivity and wellbeing, and inform polices and guidelines on the management of future health crises especially on how to design and manage the open plan offices of the future to buffer health crises. We plan to follow up on the current project by investigating leadership and leading through a health crisis such as COVID-19.
Expected outcomes and deliverables
By participating in the project, scholars can expect to gain/learn skills related to:
- Literature review skills– scholar will be involved in reviewing the recent literature in the area of open-plan office, physical and virtual environment of work, work life balance and wellbeing
- Development and refinement of interview questions for the study
- Development of interview skills and qualitative data collection approaches
- Qualitative analytical skills (i.e. the use of Leximancer and Nvivo)
- Possible opportunity to be involved in drafting and collaborating on a paper for presentation and publication.
Outcomes and deliverables
- Succinct review of recent literature in the area of Literature Review – e.g. of recent literature in the area of open-plan office, physical and virtual environment of work, work life balance and wellbeing
- Refinement of in-depth interview questions for data collection
- Secondary data collection from social media platforms (e.g. LinkedIn)
- Primary data collection involving interviews with about 50 participants on their Covid-19 experience and how this may have impacted their virtual working, work life balance and mental/physical wellbeing.
- Contributions to data analysis and write up of results targeting a quality conference and or journal publication. A short paper will be written for presentation in EGOS 2021 conference in Amsterdam (Netherland).
- Reflection report by the scholar on what has been gained while working on the project
- Contributions to a paper developed from this study for Organization Studies (ABDC A*)
Suitable for
This project is open to application from UQ Students ONLY such as third year undergraduate, honours, masters, and PhD students enrolled in the faculty of Business, Law and Economics (BEL). Applicants must also have some basic interviewing skills and some familiarity with qualitative approach to data analysis.
Further information
Contact supervisor on r.ayoko@business.uq.edu.au for more clarifications if need be.
Determining Tourism Industry Training & Skills Needs Post-COVID-19
Supervisors
Co-supervisors Associate Professor David Solnet and Associate Professor Richard Robinson
Project duration
Approximately 8 weeks
Description
Queensland Tourism Industry Council (QTIC) have a database of over 1500 questionnaires which sought information from tourism practitioners on what skills they / their businesses will require for a post-COVID-19 future. QTIC have asked to partner with UQ Tourism to develop a taxonomy of these skills so as to inform future development of training programs / micro-credentials.
Expected outcomes and deliverables
The Summer Scholar will be working across the QTIC office and UQ, under the supervision of QTIC’s Workforce Development Manager and their UQ supervisors. The project will use the Microsoft Power BI system to analyse the questionnaires, with full training provided. The summer scholar will lead the production of a professional report to QTIC which will form the basis of various communications to industry, the media, professional publications and QTIC funding applications to government to support the development of the relevant training programs / micro-credentials.
Suitable for
Ideally for honours or high achieving undergraduate or master students who can present professionally in a corporate environment. Applicants should be comfortable working with numbers and analysis and have strong oral, aural and written communication skills. There will be the possibility of maturing the research into an academic publication.
Further information
Applicants can contact Associate Professor David Solnet with any questions (d.solnet@uq.edu.au).
Are Australian Companies Really Telling the Truth About their Risk?
Supervisors
Dr Mark Wallis (with Associate Professor Kath Herbohn)
Project duration
8-10 weeks. Specifically, it is expected run from November 2020 (after exams finish) to mid-February 2021.
Description
Australian companies must provide information in their annual reports about the material business risks that they face. These business risks may arise from issues such as climate change, cyber security attacks and the rapid pace of technological change. The required information is provided to help shareholders understand the risk of investing in the company. Interestingly, Australian companies have considerable discretion about how they make these disclosures, which leads to the question of whether companies really tell the truth about their material business risk exposure. That is, are the risk disclosure useful for investors or are they ‘meaningless’ as alleged by some commentators? This research project seeks to answer this question.
Motivation/Overview
Since 2013, Australian companies have been required to discuss material business risks in their directors' reports under ASIC Regulatory Guide 247 (RG 247). The Australian Securities and Investment Commission (ASIC) had hoped this would improve the informativeness of risk disclosures, but practitioners are very sceptical (Chioatto, 2014). Theoretically, it is unclear whether managers will try to obfuscate risks or will make meaningful risk disclosures. Although there is evidence for US firms that qualitative risk disclosures are useful to investors (e.g. Campbell et al., 2014), there has been no empirical investigation of the information content of Australian companies' qualitative risk disclosures.
In the light of the importance of properly informed capital markets, this project investigates the usefulness of qualitative risk disclosures resulting from ASIC’s RG 247 in Australia. As part of this investigation, we extend the broader literature by investigating the informativeness of a unique aspect of the Australian requirements - disclosure of risk mitigation plans. For example, is the risk premium required to invest in a company with the material risk of technological obsolescence reduced if the company discloses its research and development investments?
Since ASIC allows companies greater potential discretion in formulating risk disclosures, the role of corporate governance is key. We propose to test the effects of corporate governance quality on the quality of risk disclosures. There is very limited past research on this issue (e.g. Elshandidy and Neri, 2015) and certainly none from an Australia setting.
Method
Collection and analysis of risk disclosures
- We are interested in the ‘quality’ of risk disclosures and risk mitigation plan disclosures made by Australian companies. To examine this, we will first need to collect these disclosures from annual reports and analyse features of the text.
- The text of material business risk disclosures will be hand-collected from a large sample of annual reports released by Australian listed companies. Both risks and risk mitigation plans will be collected.
- Disclosures will be collected from annual reports released before and after ASIC introduced RG 247 in 2013 so as evaluate how companies changed disclosure in response to ASIC guidance.
- We will examine numerous features of the text, including: the number of risks disclosed; the number of words; the types of risks disclosed; whether the company discloses similar risks to its peers; the tone (positive/negative) of the risk text; the complexity (reading level) of the risk text; and the specificity of the risk text. This will involve the use of natural language processing tools, such as Python packages.
Testing for informativeness of risk disclosures
- We will test for whether risk disclosures are informative to investors by examining whether changes in risk disclosures are associated with proxies for investors’ perception of risk and proxies for information asymmetry. For example, if a company discloses more risks after RG 247, does this lead to an increase in perceived risk? This method will largely follow Campbell et al. (2014) and Hope et al. (2016), who look at US firms.
- We will look at multiple measures of risk, such as volatility of returns and CAPM beta.
- We will look at multiple measures of information asymmetry, such as bid-ask spreads and equity analyst forecast dispersion.
- This analysis will involve the use of stock price data from the database SIRCA and control variable data from DatAnalysis or Compustat Global, and database programming techniques (e.g. SAS, Stata or Python).
Testing for informativeness of risk mitigation disclosures
- Australian companies are required under RG 247 to discuss risk mitigation strategies, in addition to discussing material risks. This is not required in major overseas markets, such as the US, and therefore provides a unique opportunity to study how investors use this information.
- We will test whether features of a company’s risk mitigation strategy disclosures are associated with the risk and information asymmetry proxies discussed above. For example, if we find that lengthier risk disclosures are associated with an increase in investors’ perception of risk (similar to Campbell et al., 2014), is this result weaker if the company also provides a high-quality discussion of risk mitigation strategies?
Testing the moderating effect of corporate governance
- How do a company’s risk disclosures come about? Corporate management almost certainly plays a large role in deciding what risks to disclose and how to discuss them. Do managers try to hide business risks form investors? Do they try to ‘spin’ risk disclosures? Past research suggests that companies with stronger corporate governance (e.g. a higher quality board of directors) are more likely to provide useful and high-quality disclosures to investors. But this past research largely relates to forms of disclosures other than risk disclosures. There is almost no research that looks at risk disclosures (except Elshandidy and Neri, 2015) and no research at all for Australian companies.
Contribution
The study will be valuable for three audiences:
- It will contribute to the relatively underdeveloped academic literature on qualitative risk disclosures by providing novel Australian evidence and by exploiting unique aspects of the Australian setting.
- It will inform the regulator ASIC about compliance with its RG 247 rules. ASIC has recently (in 2019) expanded RG 247 to specifically require climate change risk disclosures. This will only be effective if companies are already meaningfully complying with RG 247.
- It will inform analysts and investors about the usefulness of risk disclosures. The findings could assist these groups in deciding how much reliance they should place on companies’ risk disclosures.
References
ASIC Regulatory Guidance 247, Effective disclosure in an operating and financial review, accessible at:
https://download.asic.gov.au/media/5230063/rg247-published-12-august-2019.pdf
Campbell, J. L., Chen, H., Dhaliwal, D. S., Lu, H. M., & Steele, L. B. (2014). The information content of mandatory risk factor disclosures in corporate filings. Review of Accounting Studies, 19(1), 396-455.
Chioatto, U. (2014). Meaningless disclosure: Assessing the response to RG 247. Governance Directions, 66(5), 269-273.
Elshandidy, T., & Neri, L. (2015). Corporate governance, risk disclosure practices, and market liquidity: Comparative evidence from the UK and Italy. Corporate Governance: An International Review, 23(4), 331-356.
Hope, O. K., Hu, D., & Lu, H. (2016). The benefits of specific risk-factor disclosures. Review of Accounting Studies, 21(4), 1005-1045.
Expected outcomes and deliverables
The applicant will gain skills in data collection, as well as data management. Specifically, the following data will be collected:
- Share price data (SIRCA database)
- Material business risk disclosures (annual reports)
- Financial accounting data (DatAnalysis/Compustat Global databases)
The applicant will also be able to develop skills in content analysis of public documents to identify textual features.
Additionally, the applicant will participate in the development of a research project from an initial idea through to the start of a working paper.
Finally, the applicant will learn about Australian disclosure regulations and about an important disclosure used by investors (risk disclosures). This could be useful for students intending to enter a career in accounting or finance.
Suitable for
This project is open to applications from students with a background in Commerce or Economics (e.g. undergraduate enrolled in Bachelor of Commerce; or a postgraduate enrolled in a Masters of Commerce).
The applicant should have a natural curiosity about the economic consequences of different types of voluntary disclosures made by business; as well as a good command of English since there is data collection and analysis required around public disclosures.
Further information
If you would like additional information on this project, please contact Mark Wallis (m.wallis@business.uq.edu.au).
Inquiries prior to submitting an application are encouraged.