Quantification issues in corporate valuation, the cost of capital, and optimal capital structure. An estimate of the firm's cost of capital is probably the most important calculation required in corporate finance. It is used as the discount rate in valuation and capital budgeting decisions and forms the basis of pricing structures for many regulated industries. Corporate finance theory has identified the key inputs used to calculate the cost of capital, but the current literature falls short o ....Quantification issues in corporate valuation, the cost of capital, and optimal capital structure. An estimate of the firm's cost of capital is probably the most important calculation required in corporate finance. It is used as the discount rate in valuation and capital budgeting decisions and forms the basis of pricing structures for many regulated industries. Corporate finance theory has identified the key inputs used to calculate the cost of capital, but the current literature falls short of precisely quantifying and measuring many of these inputs. The outcomes from this project will be a framework to quantify three key aspects of the cost of capital - the value of dividend imputation tax credits, the assessment of the optimal capital structure for the firm (in particular, the quantification of bankruptcy and agency costs associated with debt financing), and the estimation of the firm's marginal tax rate.Read moreRead less
Information and market price manipulation in trade. As we can see from the financial crisis, speculative trading in financial markets can have real world effects. Inside traders can exploit their information for more profits. At this stage, we do not fully understand the role of diverse information in the financial system and we need better ways to model price manipulation and information in a dynamic setting. This proposal seeks to supply a reference framework for analyzing price manipulatio ....Information and market price manipulation in trade. As we can see from the financial crisis, speculative trading in financial markets can have real world effects. Inside traders can exploit their information for more profits. At this stage, we do not fully understand the role of diverse information in the financial system and we need better ways to model price manipulation and information in a dynamic setting. This proposal seeks to supply a reference framework for analyzing price manipulation. Recently, there has been an increasing interest in the informed trader's dynamic strategy. By strengthening this research area, this project will give new momentum to Australian economic theory.Read moreRead less
State-contingent analysis of productivity, efficiency and innovation. Productivity growth is a fundamental precondition for sustainable improvements in living standards. The main drivers of productivity growth are technological innovation and improvements in the efficiency of resource use. Effective public policy in this area requires identification of these components. This project develops improved productivity measurement methods that are applicable in economic environments characterised b ....State-contingent analysis of productivity, efficiency and innovation. Productivity growth is a fundamental precondition for sustainable improvements in living standards. The main drivers of productivity growth are technological innovation and improvements in the efficiency of resource use. Effective public policy in this area requires identification of these components. This project develops improved productivity measurement methods that are applicable in economic environments characterised by production and/or demand uncertainty. The methods will be used to obtain improved estimates of rates of innovation and changes in the relative efficiency of selected Australian enterprises. The empirical results will inform National Competition Policy and the process of microeconomic reform.Read moreRead less
Robust Productivity Measurement: An Econometric Distance Function Approach. Accurate measures of productivity are required in a range of economic analyses. For example, in the assessment of the success of microeconomic reforms, or in price-cap regulation of utility and transport infrastructure firms. In this project we investigate the use of econometric distance functions as a means of obtaining improved productivity measures. This new approach addresses the main criticisms of alternative ap ....Robust Productivity Measurement: An Econometric Distance Function Approach. Accurate measures of productivity are required in a range of economic analyses. For example, in the assessment of the success of microeconomic reforms, or in price-cap regulation of utility and transport infrastructure firms. In this project we investigate the use of econometric distance functions as a means of obtaining improved productivity measures. This new approach addresses the main criticisms of alternative approaches, such as the single output restriction in the production function approach, the optimisation assumptions embedded in both the value dual approach and the Törnqvist index approach, and the statistical noise criticism of the data envelopment analysis approach.Read moreRead less
The Consistency of Price Regulation of Infrastructure Businesses across Australian Jurisdictions. The spread of regulation across the majority of the economy necessitates that regulatory policy should be consistent across jurisdictions and industries. This project would offer policy and regulatory institutions quantitative analysis of the consistency of regulatory decisions across Australia. This research would develop a new database that would maintain and supply details on regulatory decision ....The Consistency of Price Regulation of Infrastructure Businesses across Australian Jurisdictions. The spread of regulation across the majority of the economy necessitates that regulatory policy should be consistent across jurisdictions and industries. This project would offer policy and regulatory institutions quantitative analysis of the consistency of regulatory decisions across Australia. This research would develop a new database that would maintain and supply details on regulatory decisions across jurisdictions and industries. This project would enable the new Australian Centre of Regulatory Economics (ACORE) to supply independent database and quantitative analysis from an open, fully documented, scholarly environment to Australia's policy and regulatory agencies and its regulated firms.Read moreRead less