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Professor Zoltan Matolcsy

Core Member, Centre for Corporate Governance

BA (Macquarie), PhD (UNSW)

Fellow, CPA Australia
Fellow, Institute of Chartered Accountants Australia
Associate, FINSIA - Financial Services Institute of Australasia

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Email: Zoltan.Matolcsy@uts.edu.au
Phone: +61 2 9514 3564
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Room: CB05D.03.59A (map)
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Biography

Zoltan Matolcsy teaches primarily at the postgraduate level, specialising in empirical research in the areas of accounting for managerial decisions, capital markets and contracting theory. His research has been published in leading accounting journals nationally and internationally, including the Journal of Accounting Research, Contemporary Accounting Research, Journal of Banking and Finance, Journal of Business Finance and Accounting and Accounting and Finance. Zoltan was a pioneer in Australian financial studies modelling corporate failures, takeovers and mergers, investment and portfolio management, and risk assessment. His recent research has addressed current issues in corporate disclosure, corporate governance and valuations.

Before his academic career, Zoltan was Chief Investment Analyst at the Australian Stock Exchange. He has undertaken consulting assignments for a wide range of firms, from large public companies to small privately owned entities, government business enterprises and public instrumentalities. His recent consultancies include GIO Australia, Johnson & Johnson, and Optus.

Teaching areas

Accounting for managerial decision; capital markets based accounting; contracting theory; PhD supervision

Research

Research interests

Valuations; issues in corporate governance, such as changes in management compensation; board composition and accounting reporting; optimal compensation contracts; post earnings announcement drifts.

Research supervision: Yes


Supervised Student(s)



Greg Pazmandy - PhD student, proposed topic: Corporate governance in the public sector



Paul Thambar - PhD student, proposed topic: MCS configuration and broader organisational performance



Samir Ghannam - PhD student, proposed topic: Careers of outside directors

Publications

Refereed journal articles

Brown, P.J., Matolcsy, Z.P. & Wells, P.A. 2014, 'Group versus individual compensation schemes for senior executives and firm performance: Some evidence based on archival data', Journal of Contemporary Accounting and Economics, vol. 10, no. 2, pp. 100-114.
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The objectives of this paper are (i) to provide evidence on the association between the choice of group versus individual compensation schemes for senior executives and firm characteristics, and (ii) to provide evidence on the economic consequences of adopting a particular compensation scheme. Our key findings based on 2517 firm years for the period of 2001+2010 show that on average, the choice between group or individual compensation schemes for senior executive compensation schemes are consistent with a firm+s economic characteristics and on average, the choice of compensation schemes does not affect subsequent firm performance. However, we find some evidence that firms that adopt compensation schemes inconsistent with their economic characteristics have lower subsequent performance. Our findings are robust to a number of sensitivity tests.

Christy, J.A., Matolcsy, Z.P., Wright, A.P. & Wyatt, A. 2013, 'Do board characteristics influence the shareholders' assessment of risk for small and large firms?', Abacus, vol. 49, no. 2, pp. 161-196.
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This paper investigates the association between board characteristics and shareholders' assessment of their exposure to economic and agency risks as reflected in the volatility of stock returns. Our hypotheses incorporate prior evidence that small and la

Bugeja, M., Matolcsy, Z.P. & Spiropoulos, H. 2012, 'Is there a gender gap in CEO compensation?', Journal of Corporate Finance, vol. 18, no. 4, pp. 849-859.
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The gender pay gap generates significant political and social debate. This study contributes to this discussion by examining if a gender pay gap exists at the highest level of corporate management, the CEOs. While previous studies have documented a gender pay gap for most levels of executives the findings with respect to CEOs are conflicting. In this paper we focus only on CEO's as it is the most homogenous of executive roles and does not require us to assume that executives with similar titles undertake identical roles. Our evidence is based on 291 US firm-years for the period of 1998-2010. We do not find any association between CEO pay and gender using both the total sample and a sample matched using propensity scores to control for firm characteristics. These insignificant results hold for total pay, salary and bonuses, and for different matching procedures and econometric specifications. Our results therefore indicate that women who rise through the "glass ceiling" to the level of CEO are remunerated at similar levels to their male counterparts.

Matolcsy, Z.P., Tyler, J.V. & Wells, P.A. 2012, 'Is continuous disclosure associated with board independence?', Australian Journal of Management, vol. 37, no. 1, pp. 99-123.
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This study provides evidence on the association between board composition and different types of continuous disclosure. Our sample is based on a sample of 450 firms for the period 2006-2007. Our experimental design uses both ordinary least-squares (OLS) regressions and two-stage least-squares regressions (2SLS), although the Durbin-Wu-Hausman chi(2) test indicates that the OLS results alone would be appropriate. We include the 2SLS results in order to be able to compare the results against previous findings. Our key findings are that there is no association between board composition and different types of continuous disclosure. Our results are robust with respect to alternative variable definitions.

Matolcsy, Z.P., Shan, Y. & Seethamraju, V.C. 2012, 'The timing of changes in CEO compensation from cash bonus to equity-based compensation: Determinants and performance consequences', Journal of Contemporary Accounting and Economics, vol. 8, pp. 78-91.
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This study examines the determinants and performance consequences of changes in CEO compensation structure. The study uses the unique setting when Australian companies have changed from cash bonus to equity-based compensation. While most US CEOs receive some form of equity-based compensation, Australian CEOs have not always been paid equity-based compensation. According to efficient contracting theories, we argue that the change to equity-based compensation is driven by changes in firm characteristics and by the occurrence of CEO turnover, the latter of which provides a less costly opportunity for such change. Our results are consistent with the above arguments. We also document a significant negative association between changes in compensation structure and subsequent firm performance in the following year, even after controlling for CEO turnover and poor governance environments. Overall, our results suggest that the initial change to equity-based compensation is part of an error learning process made by firms that leads them towards efficient CEO compensation contracts.

Matolcsy, Z.P. & Wright, A.P. 2011, 'CEO compensation structure and firm performance', Accounting & Finance, vol. 51, no. 3, pp. 745-763.
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The objectives of our study are to estimate a model of `efficient+ compensation structure based on firm characteristics and test the performance consequences of deviation from the efficient compensation structure. Our results are based on 3503 firm years for the period from 1999 to 2005. The results suggest that firms whose CEOs receive compensation inconsistent with their firm characteristics have a lower performance compared to those firms whose CEOs+ compensation is consistent with their firms+ characteristics. Our measure of performance is based on both accounting and market-based performance measures. Overall, our study provides some important new insights into the links between CEO compensation structure and firm performanc

Matolcsy, Z.P., Tyler, J.V. & Wells, P.A. 2011, 'The Impact of Quasi-Regulatory Reforms on Boards and their Committees during the Period 2001-2007', Australian Accounting Review, vol. 21, no. 4, pp. 352-364.
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This study investigates the cumulative impact of quasi-regulatory and regulatory reforms, and political pressure on board composition and sub-committees of boards over the period 2001 to 2007. Based on a sample of 450 firms listed on the Australian Stock Exchange, we find that most firms complied with the Principles of Good Corporate Governance and Best Practice by 2007. In particular, 85% of firms had an independent board and there was a significant increase in majority independent committees (audit, remuneration and nomination). While there was an increase in majority board independence, the increase in the mean level of board independence to 71% was modest. The level of compliance was highest for large firms, but the impact was largest on small firms, which changed their board composition the most. The relation between firm characteristics and board composition declined between 2001 and 2007, and changes in board composition were not able to be explained by changes in firm characteristics. If it is assumed that firms on average select their board to reflect their economic needs, this suggests that the changes in board composition may have been costly for firms.

Matolcsy, Z.P., Riddell, S.J. & Wright, A.P. 2009, 'Alternative explanations for the association between market values and stock-based compensation expenditure', Journal of Contemporary Accounting and Economics, vol. 5, no. 2, pp. 95-107.
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The relation between stock-based compensation and market values has been tested previously in the literature, but the empirical findings are inconsistent; as both negative and positive relations have been documented. The objective of this study is to provide an explanation for why both negative and positive relations between stock-based compensation expenditure and market values can be consistent with rational markets. We argue that stock-based compensation can be used either as a reward for past performance or as an incentive for future performance. We predict that there is a negative relation to market values when stock-based compensation is granted primarily as a reward to chief executives for past performance, while there is a positive relation when stock-based compensation is used to provide incentives for enhanced future performance. This prediction is tested on a sample of 259 firm-year observations for the period 1999-2004 using an instrumental variables approach, where the sample is classified into the 'reward' and 'incentive' groups on the basis of prior period performance and option characteristics. The key findings confirm the proposition. In particular, there is a significant negative association between stock-based compensation expenditure and market values for the 'reward group'. A number of sensitivity tests confirm the main findings.

Matolcsy, Z.P. & Wyatt, A. 2008, 'The association between technological conditions and the market value of equity', The Accounting Review, vol. 83, no. 2, pp. 479-518.
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The objective of this study is to provide evidence on how technological innovation conditions underlying the firm's investments drive earnings growth and, hence, market value of equity. Technologies develop and flourish or die out through the combined investment decisions of those firms doing the inventing, and those firms that adopt those inventions, and thereby help to spread (or diffuse) the innovations into wider use. Hence, technology is important for the investment decisions of all firms, regardless of whether they patent. We focus on three aggregate measures of technological innovation conditions: the success rate of past technological investments, technology complexity, and the technology development period. We use the interactions between each of these three conditions with earnings to capture the combined effect on market value of a firm's technological innovation environment. Our sample comprises 12,594 U.S. firm years for the period 1990+2000 including firms actively producing new technologies and firms that adopt technologies for their processes and products.

Lim, S., Matolcsy, Z.P. & Chow, D. 2007, 'The Association Between Board Composition And Different Types Of Voluntary Disclosure', European Accounting Review, vol. 16, no. 3, pp. 555-583.
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This study examines the association between board composition and voluntary disclosure in annual reports. In particular, it addresses the incentives within the agency theory framework for both inside and independent directors to disclosure additional inf

Matolcsy, Z.P. & Wright, A.P. 2007, 'Australian CEO compensation: The descriptive evidence', Australian Accounting Review, vol. 17, no. 3, pp. 47-59.
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CEO compensation has been well documented in the US in the academic and professional literature. However, despite widespread attention by the Australian business community and the federal government to this issue, descriptive evidence on Australian CEOs' compensation contracts is very sparse. Using a sample of large Australian firms for three years, this study provides the first detailed descriptive evidence on both the levels and structures of Australian CEO compensation. The study compares these findings with those from the US and reveals significant variations in CEO compensation contracts between the Australian and US markets.

Matolcsy, Z.P. & Wright, A.P. 2006, 'Are we paying our CEOs too much?', JASSA, vol. Summer, no. 4, pp. 27-31.
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Matolcsy, Z.P. & Wyatt, A. 2006, 'Capitalized intangibles and financial analysts', Accounting and Finance, vol. 46, no. 3, pp. 457-479.
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We examine whether firms that capitalize a higher proportion of their underlying intangible assets have higher analyst following, lower dispersion of analysts+ earnings forecasts and more accurate earnings forecasts relative to firms that capitalize a lower proportion. Under Australian generally accepted accounting principles, capitalization of intangible assets has become increasingly `routine+ since the late 1980s. It is predicted that this experience leads Australian analysts to expect firms with relatively more certain intangible investments to signal this fact by capitalizing intangible assets. Our results are consistent with this. We find that capitalization of intangible assets is associated with higher analyst following and lower absolute earnings forecast error for firms with a stock of underlying intangible assets. Our tests suggest a weaker association between capitalization and lower earnings forecast dispersion. We conclude that there are benefits for analysts, for management to have the option to capitalize intangible assets. These findings suggest that IAS 38 Intangible Assets and AASB 138 Intangible Assets reduce the usefulness of financial statements.

Matolcsy, Z.P., Wells, P.A. & Lee, G. 2006, 'Pecuniary and non-pecuniary compensation and firm performance: some evidence from Chinese state dominated and non-state dominated enterprises', Journal of Contemporary Accounting and Economics, vol. 2, no. 2, pp. 86-100.
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Wieder, B., Booth, P.J., Matolcsy, Z.P. & Ossimitz, M. 2006, 'The impact of ERP systems on firm and business process performance', Journal of Enterprise Information Management, vol. 19, no. 1, pp. 13-29.
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Purpose + The purpose of this article is to provide further insights into the adoption of enterprise resource planning (ERP) systems and the impacts on organisational performance. It aims at challenging existing claims of ERP vendors with regard to the benefits of their products and at providing evidence of the benefits of bundling ERPS with supply chain management systems. Design/methodology/approach + A survey was conducted to collect data on several aspects of organisational performance in companies that adopted ERPS and/or SCMS and the respective control groups. Financial key performance indicators were used to measure overall firm performance and the supply-chain operations reference model to operationalise performance at the business process (supply chain) level. Findings + The key results contradict the claims of ERPS vendors insofar as no significant performance differences were found between ERPS adopters and non-adopters, either at the business process level, or at the overall firm level. While it could be confirmed that the longer the experience of firms with ERPS, the higher their overall performance, no evidence was found of a similar effect on business process (supply chain) performance. Only those ERPS adopters that also adopted SCMS achieved significantly higher performance at the business process level.

Matolcsy, Z.P., Booth, P.J. & Wieder, B. 2005, 'Economic benefits of enterprise resource planning systems: some empirical evidence', Accounting and Finance, vol. 45, no. 3, pp. 439-456.
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Ferguson, A.C. & Matolcsy, Z.P. 2004, 'Audit quality and post earnings announcement drift', Asia-Pacific Journal of Accounting and Economics, vol. 11, no. 2, pp. 121-137.
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This study examines the value of audit quality in the capital markets setting. We argue that higher quality auditors are associated with lower post-earnings announcement drift (PEAD). Results show that clients of brand name auditors exhibit lower PEAD than small auditors, but only weak auditor industry specialist effects are identified. PEAD also differs for clients of individual Big 6/5 auditors, with clients of the smaller Arthur Andersen and Deloittes exhibiting greater PEAD, consistent with the DeAngelo (1981) size hypothesis. Finally, PWC exhibits higher PEAD in 1998, suggesting market uncertainty about quality implications of audit market structural change.

Linden, P. & Matolcsy, Z.P. 2004, 'Corporate governance scoring systems: what do they tell us?', Australian Accounting Review, vol. 14, no. 1, pp. 9-16.
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Matolcsy, Z.P., Stokes, D. & Wright, A.P. 2004, 'Do independent directors add value?', Australian accounting Review, vol. 14, no. 1, pp. 33-40.
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Matolcsy, Z.P., Stokes, D. & Wells, P.A. 2002, 'Valuing intangible assets provides new challenges', Journal of the Securities Institute of Australia JASSA, vol. 1, no. 1, pp. 1-7.
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Matolcsy, Z.P. & Petty, J.D. 2001, 'Internal report of derivatives: some Australian evidence', Australian Accounting Review, vol. 11, no. 1 issue 23, pp. 26-33.
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Wyatt, A., Matolcsy, Z.P. & Stokes, D. 2001, 'Capitalisation and Intangibles: a Review of Current Practice and the Regulatory Framework', Australian Accounting Review, vol. 11, no. 2, pp. 22-38.
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Booth, P.J., Matolcsy, Z.P. & Wieder, B. 2000, 'The impacts of enterprise resources planning systems on accounting practice - the Australian experience', Australian Accounting Review, vol. 10, no. 3, pp. 4-18.

Matolcsy, Z.P. 2000, 'Executive cash compensation and corporate performance during different economic cycles', Contemporary Accounting Research, vol. 17, no. 4, pp. 671-692.

Lim, S. & Matolcsy, Z.P. 1999, 'Earnings management of firms subjected to product price controls', Accounting & Finance, vol. 39, no. 2, pp. 131-150.

Matolcsy, Z.P. 1995, 'Are independent experts worth the cost?', JASSA, vol. 1, no. March, pp. 2-6.

Matolcsy, Z.P. & Pazmandy, G.P. 1995, 'Predicting half-yearly accounting income numbers with statistical models', Australian Accounting Review, vol. 5, no. 2, pp. 56-63.
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Prediction of half-yearly accounting income numbers has an important role in investment analysis, credit ratings, budgeting, auditing and other areas of the accounting and finance profession. This study provides the Australian evidence on two issues: the statistical relationship between half-yearly accounting income numbers such as earnings per share, net profit and sales; and the ability of statistical models to predict these numbers. The study finds that the best way to predict the next period's half-yearly accounting income numbers is to use the immediately preceding half-yearly income number, and for inflation-adjusted sales the corresponding previous half-yearly figures, or to use a statistical model based on the immediately preceding half-yearly figure adjusted by a statistically based "smoothing constant".

Matolcsy, Z.P. & Lianto, T. 1995, 'The incremental information content of bond rating revisions: The Australian evidence', Journal of Banking and Finance, vol. 19, no. 5, pp. 891-902.
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The objective of this study is to provide evidence on the information content of bond revisions by controlling for the information content of concurrent annual accounting income numbers and testing the incremental information content of bond rating revis

Matolcsy, Z.P. & Schultz, J. 1994, 'Errors in financial journalism', Australian Studies in Journalism, vol. 3, pp. 335-355.

Castagna, A. & Matolcsy, Z.P. 1989, 'The marginal information content of selected items in financial statements', Journal of Business Finance & Accounting, vol. 16, no. 3, pp. 317-333.

Graham, R.G. & Matolcsy, Z.P. 1987, 'Dividends by computer: Imputation questions answered', JASSA, vol. 2, no. July, pp. 27-29.

Matolcsy, Z.P. 1986, 'The distributive nominal and real micro effects of inflation on security returns: Some Australian evidence', Journal of Banking and Finance, vol. 10, no. 3, pp. 361-376.
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Castagna, A. & Matolcsy, Z.P. 1985, 'Accounting ratios and models of takeover target screens: Some empirical evidence', Australian Journal of Management, vol. 10, no. 1, pp. 1-15.

Castagna, A., Greenwood, L.H. & Matolcsy, Z.P. 1984, 'An evaluation of alternative methods for estimating systematic risk', Australian Journal of Management, vol. 9, no. 2, pp. 1-13.

Matolcsy, Z.P. 1984, 'Evidence on the joint and marginal information content of inflation-adjusted accounting income numbers', Journal of Accounting Research, vol. 22, no. 2, pp. 555-569.
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Matolcsy, Z.P. 1984, 'The micro effects of inflation on corporate taxation and profitability: Some empirical evidence for seventeen industry groups', The Economic Record, vol. 60, no. 171, pp. 356-365.
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Castagna, A. & Matolcsy, Z.P. 1983, 'The evaluation of traded options pricing models in Australia', Journal of Business Finance & Accounting, vol. 10, no. 2, pp. 225-233.

Castagna, A. & Matolcsy, Z.P. 1982, 'A two stage experimental design to test the efficiency of the market for traded stock options and the Australian evidence', Journal of Banking and Finance, vol. 6, no. 4, pp. 521-532.
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Castagna, A. & Matolcsy, Z.P. 1981, 'The market characteristics of failed companies: Extensions and further evidence', Journal of Business Finance & Accounting, vol. 8, no. 4, pp. 467-483.
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This article presents an analysis of the market characteristics of failed companies. The analysis includes an identification of their systematic characteristics, examination of the characteristics and timing of their continuous price adjustment prior to failure, comparison of the characteristics and timing of their continuous price adjustment during an economic upswing and downswing and a contrast of the characteristics and timing of the continuous price adjustment of mining companies and industrial companies. A description of the experimental design is also presented in the study. The major findings of the study are: failed companies have a higher systematic risk, than the a-priori value of one and that the market on average adjusts the prices of failed companies approximately thirty months prior to failure. Finally, the results suggest that mining companies have a shorter price adjustment period than industrial companies.

Castagna, A. & Matolcsy, Z.P. 1981, 'The prediction of corporate failure: Testing the Australian experience', Australian Journal of Management, vol. 6, no. 1, pp. 23-50.
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The purpose of this paper is to address some of the methodological issues which have evolved from the literature on corporate failures, and to report the results of an empirical investigation on the usefulness of financial models for the prediction of corporate failures. The experimental design is based on the 21 listed public companies that failed in Australia during the period 1963 to 1977, inclusive, and which met with minimum data requirements. It examines the performance of linear versus quadratic classification rules; temporal versus atemporal models; equal versus unequal priors of failure, variable dimension reduction, and a validation test proposed by Lachenbruch (1967). The results of the study suggest that it is difficult to identify a unique model to predict corporate failures, without specifying the utility preference of the user. Utility preference in this context refers to the minimization of either Type I, Type II, or the overall error rate of a failure model.

Matolcsy, Z.P. 1981, 'A quantitative data base to evaluate the performance of the corporate sector from 1963 to 1978', Accounting & Finance, vol. 21, no. 1, pp. 57-74.
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Currently, there is not an adequate data base which would cover the performance of the corporate sector at the industry level. The Australian Financial Systems Inquiry has initiated the development of such a data base, which includes both financial and market variables to quantify the performance of the different industry groups for the period of 1963+1978. This data base can assist both the academic researcher and the financial practitioner in their work. The objective of this paper is to describe the content of this data base.

Castagna, A. & Matolcsy, Z.P. 1979, 'Risk assessment and accounting ratios', JASSA, vol. 1, no. March, pp. 11-14.

Castagna, A. & Matolcsy, Z.P. 1978, 'The relationship between accounting variables and systematic risk and the prediction of systematic risk', Australian Journal of Management, vol. 3, no. 2, pp. 113-126.
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This paper conducts several tests of association between accounting information and the systematic risks of firm's equities. It also evaluates several models of the prediction of systematic risk from past rate-of-return information

Castagna, A. & Matolcsy, Z.P. 1977, 'The prediction of corporate failure', JASSA, vol. 1, pp. 9-11.

Castagna, A. & Matolcsy, Z.P. 1976, 'Financial ratios as predictors of company acquisitions', JASSA, vol. 4, pp. 6-10.

Refereed conference papers

Lambert, D., Matolcsy, Z.P. & Wyatt, A. 2009, 'How do analysts forecast earnings?', Accounting and Finance Association of Australia and New Zealand Conference, Adelaide, Australia, July 2009 in 2009 AFAANZ Conference, ed Faff, R, AFAANZ, Australia, pp. 1-56.
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This paper examines the question of how analysts forecast earnings. We examine the determinants of analysts+ forecasts of both short and long run earnings. The paper is motivated by the importance of analyst forecasts as proxies for expected earnings, which is accompanied by a large literature on the properties of analysts+ forecast errors but limited evidence on the first order effect+how analysts produce the earnings forecasts. There is an implicit assumption permeating the analyst forecast literature that analysts use the fundamental analysis based forecasting frameworks laid out in the leading business valuation texts. These forecasting frameworks evaluate a firm+s future prospects in terms of sets of factors relating to the firm+s industry, strategy, and financial information. Prior studies generally assume the analysts use this business analysis framework for forecasting. The contribution of this study is to explicitly test this proposition. For 28,261, 21,051 and 25,053 US firm-year observations for analysts+ 1 and 2 year ahead forecasts and long run EPS forecasts, our key findings suggest that analysts anchor on historical EPS to forecast short and long run EPS consistent with the recommendations in the business analysis frameworks. However, inconsistent with the recommended fundamental analysis frameworks, our results suggest that analysts use the forecasting framework only in the long run, to obtain a long-run growth rate to apply to the historical EPS reported by management. Overall, the results suggest that analysts believe their best EPS forecast is the current historical EPS reported by management.

Matolcsy, Z.P., Tyler, J.V. & Wells, P.A. 2009, 'Determinants of board composition in Australia and the impact of corporate governance regulation', British Accounting Association Annual Conference, Dundee, Scotland, April 2009 in BAA Annual Conference 2009 Website, ed Marriott, N, British Accounting Association (BAA), United Kingdom, pp. 1-36.
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This study investigates the relation between firm characteristics and board composition in Australia for a sample of the same 432 listed firms in 2001 and 2007 and the impact of the Principles of Good Corporate Governance and Best Practice issued by the Australian Stock Exchange in 2003. Two feature of this regulation were (a) it recommended independent boards for all firms, without regard to firm characteristics (an approach commonly described as `one size fits all+) and (b) it allowed non-compliance through `if not why not+ reporting. Using various designations of independence and firm size subsamples we find for `Top 100+ firms in 2001 up to 49% (Adjusted R2 48.8) of variation in board independence may be explained by firm characteristics, but generally the explanatory power was much lower. Evidence is provided that although more firms had majority independent boards the relation between board composition and firm characteristics may have weakened over the period. This highlights a potential concern that the regulation has imposed unnecessary costs or inappropriate governance mechanisms on Australian firms.

Wright, A.P., Matolcsy, Z.P. & Wallace, A. 2008, 'The relation between private equity takeovers and takeover premiums', Annual Congress of European Accounting Association, Rotterdam, Netherlands, April 2008 in 31st Annual Congress European Accounting Association Conference Website Papers, ed Hartmann, F.G.H., European Accounting Association (EAA), Europe, pp. 1-23.
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The relation between acquisitions and takeover premiums has been extensively documented in the academic literature to date, but these studies have focused on settings whereby the takeover or merger is initiated by a market place competitor. Few studies have extensively focused on private equity takeovers, a unique phenomenon that institutional markets are currently experiencing, and which provides a new setting to understand the composition and structure of takeover premiums. The objective of this study is to provide detailed evidence on the takeover premium offered by private equity in terms of the costs of corporate governance and costs of internal compliance [especially in the light of the implementation of the Sarbanes-Oxley Act (2002)], the role of leverage to increase returns and reduce free cash flow wastage, as well as changes in the senior management team of the target firm. Using a sample of 110 private equity transactions in the United States for the period 2003 + 2007, the key findings are that certain public firms exhibit greater costs of compliance, indicating that the implementation of SOX imposes significant net costs that can be removed through a firm+s privatisation by private equity. The findings also demonstrate that excessive managerial remuneration plays an important role in dictating the magnitude of the takeover premiums offered. Finally, this study also provides support to prior literature by illustrating that benefits can be gained by acquiring firms with low levels of debt.

Brown, P.J., Matolcsy, Z.P. & Wells, P.A. 2007, 'Economic determinants of group versus individual compensation schemes for senior executives', Accounting and Finance Association of Australia and New Zealand Conference, Gold Coast, Australia, July 2007 in 2007 AFAANZ Conference, ed Stewart, J; Hay, D, AFAANZ, Gold Coast, Australia, pp. 1-66.
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This paper investigates firm characteristics associated with the choice of individual versus group compensation schemes for senior executives below the CEO level. We define individual compensation schemes where senior executives are compensated independently from other senior executives, where incentive compensation is linked to individual performance. In contrast, group compensation schemes are defined where senior executive compensation is jointly determined with other senior executives, with compensation linked to common incentives. This paper is motivated by limited evidence on compensation schemes for senior executives+ beyond the CEO, limiting critical evaluation of senior executives+ compensation. Preliminary evidence using Australian data provides support that individual compensation schemes are adopted by firms where individual senior executive inputs (effort) and outputs are separable and observable. We also find support that group compensation schemes are adopted where there are efficiencies from senior executive co-operation and interdependencies between executives, such as in integrated firms. The empirical evidence suggest that there are important differences between how firms set changes in total compensation as apposed to the mix of long and short term incentive components. The findings contribute to the ongoing debate surrounding the determination of appropriate corporate governance mechanisms in the presence of agency conflicts, and especially executive compensation schemes.

Sivabalan, P., Malmi, T., Brown, D.A. & Matolcsy, Z.P. 2005, 'An exploratory study of Australian operations budget practice', Accounting and Finance Association of Australia and New Zealand Conference, Melbourne, Australia, July 2005 in 2005 AFAANZ Conference Proceedings, ed Faff, R, AFAANZ, Melbourne, Australia, pp. 1-26.
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