2017 Winter research projects
Productivity in the physical environment of work : The role of territoriality, norms, organisational culture and climate
Associate Professor Remi Ayoko
This is a continuation of the summer research program. An estimate of 4-6 weeks for data collection and data analysis and possible write-up.
Senior managers in contemporary organisations are optimising space usage in a creative and cost effective manner. While office design has evolved since the 20th century, contemporary workspaces have seen a shift from the traditional cellular offices to open plan offices (Mylonas & Carstairs, 2007). Studies suggest that this significant shift many be advantageous by promoting interaction and communication between employees (Kim & de Dear, 2013; Mylonas & Carstairs, 2007). However, other studies have also shown that open plan offices are linked with a reduction in employee satisfaction, a loss of privacy, and increased cognitive workload (De Croon, Sluiter, Kuijer, & Frings-Dresen, 2005). In sum, results of the studies in the area of open-plan offices are mixed and paradoxical (Ayoko, Ashkanasy & Jehn, 2014). Additionally, while research in the area of open-plan offices have burgeoned in other disciplines (e.g. Built Environment), research in the area of Organizational Behavior (OB) isolating the variables critical for the detrimental and beneficial impact of open-plan offices on employees, their wellbeing and productivity is scarce.
The present project contributes to the advancement of research in the physical environment of work and especially open-plan offices by qualitatively documenting the role of territoriality, norms, organisational culture and climate in the optimization of productivity in open-plan offices. By studying the above named variables, I aim to contribute to the resolution of the paradoxical role of the open-plan office on productivity and wellbeing. In particular, an initial study in this area suggests that there is much rhetoric around the open plan office. In this respect, management’s position on open-plan office is positive but employees have negative views on their open-plan workspaces (Ayoko, Ashkanasy, Waddell, 2014). Similarly, Ayoko and colleagues (e.g. Connelly & Ayoko, 2013; Monaghan and Ayoko, 2015) indicate that there is a relationship between territoriality, conflict and climate in the context of open-plan office. The current study will be a follow-up on the previous studies to disentangle the paradoxical nature of the construct of open-plan office. In doing this, the current research draws on the theory of psychological ownership (Pierce, Kostova, & Dirks, 2001; Dyne & Pierce, 2004; Pierce & Jussila, 2010; Brown, Lawrence & Robinson, 2005) and streams of literature on organisational climate and culture to explain how employee territoriality may drive employee behaviours, attitudes and norms in the presence organisational climate and culture for productivity in open-plan offices.
Significance of the project
Majority of employees in the industrialized economies now work in office environments. In this regard, extant literature demonstrates that over seventy percent of the working population in the USA in 1994 was office-based (Donald, 1994). Furthermore, McCoy (2005) reports that the workplace physical environment constitutes the second largest financial overhead (after human resources) for most organizations. Specifically, organizations spend millions of dollars in designing and redesigning work space. For example, Australia spends about AU$3.6 billion per annum on redesigning and reconstructing the physical environment of work (FMA, 2002) that includes internal relocation, furniture, cabling, complete redesign refit, and relocation to new premises.
Yet, we are aware that organizations incur more millions in damage as a result of the need to manage conflict, negative emotions, and counterproductive behaviours that are related to workplace territoriality, and are exacerbated in open-plan office layouts (Ayoko & Härtel, 2003). In this regard, research in OB on the connection between office space, feelings, attitudes, and actions are just emerging (Ashkanasy et al., 2014). Outcomes of the current research should unpack the role of territoriality, norms, organisational culture and climate in shaping employees’ productivity and wellbeing in open-plan offices. This should, in turn, assist Australian managers and leaders to effectively manage interactions of workers in open-plan office to minimise the detriment but maximise the benefit of open-plan office to achieve increased productivity and wellbeing. Outcomes of the current study should also inform organisational policies on spatial allocation at work while the findings should inform architects and designs about best practice designs that may promote productivity and employee wellbeing.
Aims & Research Questions
The present study aims to answer two specific Research Questions: 1) What is the connection between the physical environment of work (e.g. open-plan office) and territoriality, norms, organisational climate/culture and 2) What is the impact of the critical drivers of interactions (e.g. territoriality, norms, organisational climate/culture) on employees’ productivity and wellbeing in the open-plan office. Beyond the rhetoric, the answer to these questions will deepen our understanding of the impact of open-plan office on productivity. A deeper understanding of how the physical environment impact employee productivity and wellbeing will, in turn, better inform policy makers on the physical workspaces, while informing architects and designers in the way they design that is not just aesthetically pleasing to the eye but takes into consideration how design can improve employee performance. Additionally, new theories are expected to be generated about open-plan offices and how they shape employee productivity, wellbeing and performance. Thus far, the summer research scholar has been able to review important literature core to this research. The questions for in-depth interviews have also been crafted.
Approach & methodology
Researchers have often employed quantitative approach to the study of open-plan offices and territoriality (Ayoko et al., 2014). The current study departs from this practice by qualitatively examining the connection between the physical environment (i.e. open plan office), climate/culture, norms, territoriality and the employee productivity. Specifically, the study will adopt a grounded theory approach to data collection and analysis. Data collected
through the qualitative approach will assist in answering the two main research questions core to this research.
Sample: A sample of 50-60 employees in an open-plan office will be interviewed using in-depth interview questions. We have now been granted access to a building that hosts employees from all works of life in several open-plan offices across many levels of the building. Specifically, the gatekeeper has now signed a gatekeeper approval form to collect data from this building.
Data Analysis: Data will be analysed using NVIVO software. Altogether, a qualitative approach will assist in getting a deeper insight into the experience of the workers in open plan offices and how territoriality, norms, climate, and culture, shape their interactions for productivity and wellbeing. An expedite ethics application for the research has already been submitted and we are awaiting its final approval
Expected outcomes and deliverables
By participating in the project, scholars can expect to gain/learn skills related to:
- Literature Review – e.g. of recent literature in the area of open-plan office and physical environment of work
- Development of interview questions for data collection
- Data collection
- Qualitative analysis of data
- Opportunity to be involved in drafting and collaborating on a paper for presentation and publication.
Outcomes and Deliverables: Progress so far
- Succinct review of literature – e.g. of recent literature in the area of open-plan office and physical environment of work (so far, several papers important for this research have been reviewed)
- In-depth interview questions for data collection (First draft of in-depth interview questions for the research is completed)
- Data collection (pilot or possible main data collection) (Gatekeepers approval to collect data has been obtained)
- Possible data analysis (yet to be done)
- Contributions to write up of results targeting a quality conference and or journal publication (our short paper for the EGOS 2017 conference in Copenhagen and based on the literature review for this research has been accepted).
This project is open to application from UQ Students only such as Honours and Masters students with a background in Organization Behaviour, Psychology or Sociology and Anthropology. Applicants must also have some familiarity with qualitative approach to data collection and analysis.
Associate Professor Remi Ayoko firstname.lastname@example.org
Developing Entrepreneurial Expertise through deliberate practice
Dr Anna Jenkins
This project requires the analysis of qualitative data, a literature review on deliberate practice and a literature review on entrepreneurial education.
Expected outcomes and deliverables
- Applicants will get exposure and gain skills in the analysis and presentation of qualitative data.
- Develop skills in how to select relevant literature
- Have the possibility to join a publication based on the project.
The project is suitable for applicants with a strong interest in qualitative methods and entrepreneurial education
Dr Anna Jenkins email@example.com
Consumers Evaluation of Overlapping Brands Experiment
This project should take approximately 4 weeks.
This research will investigate how consumers evaluate and choose overlapping brands in a brand portfolio. More specifically, this research will investigate when brand overlap has a positive or negative effect on consumers’ brand evaluations. The study will look at this issue in the context of the launch of a new product and consider the interaction of effects of type of overlap and corporate versus product brand dominance on consumers’ evaluations of this new product. This context was chosen because, when a firm adds a product to its brand portfolio, it faces decisions about marketing promotions, including the relative dominance of the corporate brand (e.g., Nestle) versus the product brand (e.g., KitKat) in these communications.
The project involves the design and data collection of an experiment, as well as analysis of the results using quantitative techniques. Results will then need to be interpreted and written up in a non-technical managerial publication. The results will provide insights to managers with evidence for choosing which combination of type of overlap and brand dominance will be the most successful driver of consumer attitudes and purchase intention toward a newly launched product.
Expected outcomes and deliverables
The student who undertakes the project will be guided through the process of designing an experiment and programming online questionnaires in Qualtrics. Further, the student will gain valuable experience in the screening, analysis and reporting of quantitative data. Data will be analysed using a statistical software package such as SPSS; the student will be guided through the data analysis process and learn technical skills as a result.
Working with data to create insights for management is an important and valuable skill set. The student will work with and be guided by quantitative researcher with a consulting background. It is expected that the analysis and written work would contribute significantly to a future industry publication (co-authorship offered) and academic publication.
Ideally the applicant would come from a degree with research and data analysis courses. Preferably someone who is in the 3rd or 4th year of their degree and has completed RBUS2900 or similar. Skills in visual design/Photoshop are desirable. The main criteria are an interest in experimental research and data analysis, and an inquisitive problem-solving mind set.
Applicants should feel free to contact me at any stage for further details or explanation of the project. I am happy to answer question prior to students applying.
Mrs Ann Wallin
Lecturer in Research Methods
Room 39-309 Email: firstname.lastname@example.org
Social media engagement among Australian travellers in health risk communication: effects of information form, source, and message strategy on preventive measures
Dr Jie Wang
26 Jun – 21 Jul 2017, 4 weeks
Australians make 6.8 million short-term international departures each year, with over 3 million of these to Asia, where the rabies disease is an endemic. Many travellers therefore are exposed to the risk of rabies. Australia is free of rabies (except Australian bat lyssavirus causes a rabies-like illness) which leads to a low awareness of rabies.
This study aims to raise the awareness of rabies as a neglected disease by Australian travellers who plan to travel to Southeast Asia (especially Indonesia, Thailand and Vietnam), and to identify the best message to communicate with Australian travellers regarding preventive measures against rabies. Previous studies have identified the main segment of rabies exposure in Australian travellers is the age group between 20 and 29 (Mills et al., 2011), who therefore will become the target of this study.
Travelers obtaining pre-travel health advice have been found to have better understanding and accurate risk perceptions towards infectious disease as well as a higher level of intended risk-reducing behaviours (Lopez‐Velez and Bayas 2007; Piyaphanee, et al., 2009; Provost and Soto, 2002; Ropers, et al., 2008). However, studies have shown that many travellers do not consult a health professional prior to travel (Heywood, et. al., 2012, Hamer & Connor, 2004). Effective risk communication is essential to limiting morbidity and mortality caused by communicable diseases, in addition to minimising the damage that communicable diseases can cause to national economies and public health infrastructure. There is an important need for evaluation research to better understand the effectiveness of health risk communication for travellers. Therefore, this study has several research objectives:
- Explore young Australian travelers’ knowledge, risk perception, and preventive behavior in relation to rabies and international travel
- Test the effects of information source, form (social vs. traditional media), format and message strategy (humorous vs. non-humorous) on young Australian’s health behavior regarding rabies and international travel
- Identify major factors that may drive young Australian travelers’ health behavior regarding rabies and international travel
This study will employ both qualitative and quantitative methods and use the eye-tracking method (lab experiments) to refine message elements.
The student may have an opportunity to work with an industry partner (travel clinics) to develop the study.
Expected outcomes and deliverables
The student may gain skills in developing a literature review, communication campaign design (via social media), data collection, and communication evaluation.
The student is asked to learn state of the art eye tracking software and produce a written report at the end of the project.
This project is open to applications from students with a background in communication (especially health communication, or risk communication), 3rd-4th year undergraduate, honours, or masters by coursework students, UQ enrolled students only.
Students can contact the supervisor prior to submitting an application.
Dr. Jie Wang, UQ Business School, email@example.com
Sustaining Employment for Disadvantaged Youth in Hospitality Organisations
Dr Richard Robinson
The project is for a minimum of 6 weeks, and candidates are expected to commit no less than 20 hours per week.
This project folds into the supervisor’s three-year UQ Development Fellowship research program, to investigate “Enabling exits from disadvantage for youth via gaining and sustaining meaningful hospitality employment”.
Australian youth unemployment is twice that of the general population - far higher among disadvantaged. Unemployment damages self-esteem, health, wellbeing and risks disaffection. The Deep and Persistent Disadvantage report concluded, “Employment is the route out of disadvantage for most people of working age” (McLachlan et al., 2013, p.2). Hospitality, ‘the young person’s industry’, is the context for this investigation of the employment of disadvantaged youth.
This research will develop an integrated model, considering youth and their hospitality industry employers, peak and welfare association perspectives via an ethnographic study set in the emergent social enterprise cafe sector. The model will identify the measures to gain and sustain meaningful employment for disadvantaged youth. These measures will reveal actions necessary to overcome problems associated with disadvantage. Capacity building will be achieved via developing research partnerships in the primary hospitality/tourism labour market and welfare sector.
Expected outcomes and deliverables
Winter scholars will choose one of three groups prone to disadvantage; 1) social multi-generational, 2) disability or 3) Indigenous. Working within this focus scholars will undertake some literature review work, some data collection and analysis (qualitative most likely), and report writing. A key deliverable will be contributing (with co-authorship) towards a conference publication in the focal area. Opportunities exist for working this up to a journal publication post the scholarship period.
This project is open to applications from students with a background in hospitality and tourism management, year 3-4 undergraduate students or 2nd year masters students. Preference will be given to students genuinely aspiring to undertake honours or PhD programs.
Summer focus on “iTEMPLATES” – innovation in Teaching and Enhanced Mentoring of Pitch Learning Across Tertiary Education Spectra
Professor Robert Faff
4 weeks commencing 26 June
This project seeks to build on the success of the “pitching research” concept developed by Faff (2015), who provides a simple 2-page template tool, SO THAT a novice researcher can confidently and succinctly convey all the essential elements of a new research proposal to an academic expert. The tool is both methodical and succinct in its design.
Notable landmarks to date, in developing this tool:
- In 2015, a small grant ($2000) was received from Accounting Association of Australia and New Zealand (AFAANZ) to build a web portal for creating pitches. See: PitchMyResearch.com
- The pitching template is being used as the basis for AFAANZ Research Grants (2015 & 2016: > $1.5million dispersed since 2003) and the “PMR” web portal is currently being modified to accept 2016 applications
- “Pitching Research” has engaged with novice researchers across many disciplines including: accounting, finance, management, marketing, strategy, international business, tourism, medicine, public health, food science, engineering, pharmacy, philosophy, ethics, education, business information systems and psychology
- Substantial investment in supplementary resources: online library with worked pitch examples across > 70 different areas; various YouTube videos, etc
- Substantial investment in pitching workshops/talks: presented at 29 Australian universities, and 16 different countries.
As a consequence of the above, “pitching research” recently received an accolade from the accreditation body AACSB
Primarily using the newly created web portal, PitchMyResearch.com, this project seeks to:
- Further expand the worked examples available to help guide novice researchers how to use the template tool.
- Provide pilot examples of pitches that leverage off the “Research Skill Development” framework [see Faff (2016)]
- Collect student based feedback on how best to develop the web portal resource into a more useful T&L tool right across UQ.
- Make progress on a “pitch rating” system.
By enhancing an already established tool for starting research, this project will help lay the foundation for a larger technology-driven initiative to pilot test the research template tool across all faculties at UQ.
- Faff, R., (2015), “A Simple Template for Pitching Research”, Accounting and Finance 55, 311-336.
- Working papers (highlighting prior Winter/Summer scholars work)**
- Faff, R.., (2016a), “Pitching Research”, Available at SSRN: http://ssrn.com/abstract=2462059 or http://dx.doi.org/10.2139/ssrn.2462059
- Faff, R., (2016c), “The "Pitching Research" Concept: 2015, a Year in Review”, Available at SSRN: http://ssrn.com/abstract=2721528 or http://dx.doi.org/10.2139/ssrn.2721528
- Faff, R., (2016b), “Mapping “Pitching Research” Tasks into the RSD7 Framework: A Pedagogic Perspective”. Available at SSRN: http://ssrn.com/abstract=2724451
- Faff, R. and Godfrey, K. and Teng, J., (2016), Pitching Research Evolution: An Illustrative Example on the Topic of 'Innovation and Financial Dependence' (May 7, 2016). Available at SSRN: http://ssrn.com/abstract=2776959 or http://dx.doi.org/10.2139/ssrn.2776959
- Faff, R., Ali, S., Atif, M., Brenner, M., Chowdhury, H., Crudas, L., Joubet, A., Malik, I., Nagar, V., Mi, L., Pullen, T., Siegrist, M., Smythe, S., Stephenson, J., Zhang, B., and Zhang, K., (2016), “Fantasy Pitching”, Available at SSRN: http://ssrn.com/abstract=2782778 or http://dx.doi.org/10.2139/ssrn.2782778
- Faff, Robert W. and Kastelle, Tim, (2016), “Pitching Research for Engagement and Impact” (July 22, 2016). Available at SSRN: http://ssrn.com/abstract=2813096 or http://dx.doi.org/10.2139/ssrn.2813096
- Faff, Robert W. and Li, Ya and Nguyen, Bao Hoang and Ye, Qiaozhi, (2016), “Pitching Research: A Pilot Experiment with UQ Winter Scholars” (July 30, 2016). Available at SSRN: http://ssrn.com/abstract= 2816233 **
- Faff, Robert; Ann Wallin; Mark Brosnan; Naiara Carrillo; Dhani Darmawan; Alana Dorris; Martin Groen; Nurlia Listiani; Victor Maxwell; Felix Orole; Anh Pham; Imam Salehudin; Matt Simons; Duy To; Jemaine Tsoi; Charlane Wong; Keegan Woods; Nirma Yossa; Kate Zhaunerchyk, (2016), “Fantasy Pitching II: Star Wars vs. Pokemon vs. R&D vs. Uber” (August 22, 2016). Available at SSRN: http://ssrn.com/abstract=2827425
- Faff, Robert W., (2016d), Learning from 'Pitching Research' Competition Winners: Insights and Reflections (December 30, 2016). Available at SSRN: https://ssrn.com/abstract=2891650
- Faff, Robert W. and Lay, Janine and Smith, Marita, (2017), “PoW! Using Social Media to Leverage Research Visibility – “Pitch of the Week” Posts in LinkedIn” (January 4, 2017). Available at SSRN: https://ssrn.com/abstract= 2894069
- Faff, Robert W. and Carrick, Robin and Chen, Angel and Dallest, Kathy and Escobar, Marisol and Foley, Gabe and Gill, Chelsea and Khong, Bo Xuan Matthew and Liu, Maggie and McCullough, Jon and Ndugwa, Zina and Nguyen, Bao Hoang and O'Brien, Shari and Orole, Felix and Qureshi, Asma and Rad, Hossein and Rekker, Saphira and Shahzad, Syed Khuram and Smith, Marita and Tunny, William and Wallin, Ann, (2017), “Motivating Postgrad Research Students to Pitch Their Ideas: What Have We Learned from “Pitching Research” Competitions at UQ?” (January 15, 2017). Available at SSRN: https://ssrn.com/abstract= 2899942 **
- Faff, Robert W. and Carrick, Robin and Chen, Angel and Escobar, Marisol and Khong, Bo Xuan Matthew and Nguyen, Bao Hoang and Tunny, William, (2017) “Pitching Research: A Reverse-Engineer “Sparring” Experiment with UQ Summer Research Scholars” (January 23, 2017). Available at SSRN: https://ssrn.com/abstract=2903811 **
- Teng, Jie and Faff, Robert W., A “Snowballing” Pedagogic Strategy for Pitching Research: An Illustrative Example in Finance (January 25, 2017). Available at SSRN: https://ssrn.com/abstract=2906127]
- Faff, Robert W., Carrick, Robin, Chen, Angel, Escobar, Marisol, Khong, Bo Xuan Matthew, Nguyen, Bao Hoang and Tunny, William, (2017b), “Fantasy Pitching III: UQ Summer Research Scholars – the Role of “Money” in the 21st Century” (January 26, 2017). Available at SSRN: https://ssrn.com/abstract=2906617 **
- Nguyen, Bao Hoang, Faff, Robert W. and Haq, Mamiza, (2017), “Pitching Research Lite: A Reverse-Engineering Strategy for Finding a New Research Direction” (February 1, 2017). Available at SSRN: https://ssrn.com/abstract=2909549 **
Expected outcomes and deliverables
The successful scholar will, with close guidance from the supervisor:
- Be exposed to a simple tool designed to kick start research, with a role of helping to gather feedback on its enhanced web development
- Get first-hand experience of the challenges in starting research on topics relevant to their academic interests, either as a prospective Honours student or a current research student
- Create several reverse-engineered examples of completed research pitches relevant to their research interests
- Help pilot test a “beta” version of a pitch ratings framework
This project is suitable for very high achieving students who are enrolled in their final year of undergraduate study (and seriously thinking of Honours enrolment) or Coursework Masters students.
Robert Faff, firstname.lastname@example.org
Distributed ledger technology, its current state, its emerging applications, and its implications for the accounting, information systems, legal, and audit professions.
Dr Alastair Robb and Associate Professor Jac Birt
The project should take approximately 5 weeks
Distributed ledger technology (DLT) has garnered significant interest in the information systems and accounting domains over the past two years, however, it now seems to have passed the “peak of inflated expectations” on Gartner’s Hype Cycle. Participants at the 2016 XBRL International Conference were told that 2017 will be the year of solidification and standardization for DLT. The aim of this research project is to gather information on current and likely future applications of DLT (Blockchain is a particular type of DLT).
We want to know what types of applications are best suited to DLT, i.e., low value/high frequency transactions vs. high value/ low frequency transactions. For example, music streams vs. confirmation of payments for bulk agricultural commodities. Further, DLT based smart contracts are said to be capable of adding efficiency, certainty, and resilience to payments and deliveries between parties. For example, real estate contracts.
Potential researchers should be able to undertake a comprehensive assessment of both current and projected DLT applications and be able to categorise those applications on a number of bases.
Expected outcomes and deliverables
First, applicants will gain skills in identifying appropriate DLT applications, both existing and projected. Second applicants will gain skills in categorising DLT applications. Third, there will be opportunities to identify implications arising from these applications, particularly as they might apply to the accounting, information systems, legal, and audit professions. Applicants considering undertaking a research higher degree may find this project potentially reveals current and compelling matters surrounding DLT that require deeper investigation.
Applicants should be able, in consultation with the supervisors, to: 1. Correctly identify current and projected DLT applications; 2. Provide examples of the applications’ existence or evidence of backers/sponsors for projected applications; 3. categorise those applications in a systematic and logical manner; 4. Identify possible practical implications of the DLT for the accounting, information systems, legal, and audit professions; 5. Pursue emerging developments relative to DLT, and 6. Present the findings in an appropriate file.
This project would suit a final year undergrad or post grad student who is reliable, motivated, enquiring, and organised.
Dr Alastair Robb email@example.com
Big Data and Visualising Liquidity
Dr Sophie Cockcroft In collaboration with Karen Alpert of the UQ business school, Silvia Gottschalk of Middlesex University Business School and William Wong of the Interaction Design Centre Middlesex University UK
This project will involve designing a prototype for visualising data on liquidity and value of specific contracts in credit risk modelling. Using Brammertz’s (2013) ideas of liquidity in context of financial systemic risk, the project will create a “simple” visualisation that would capture the essential variables for monitoring systemic risk, and to use this visualisation, and the data itself, to provide a viewer with the information that allows them to track and anticipate possible market behaviours.
The early part of the project would involve data management and cleansing activities to get the data into a format that could be used by data analytics software. The proposed data set is weekly data on debt to equity ratios for EU firms between 1995 and 2014 for 1000 firms per country per year resulting in a very large dataset (Gottschalk 2016).
Modelling would involve computing proxies for liquidity by firm using analytics software (including R and SAS) and classification methods including Neural Nets.
The final stage of the project would be visualisation of these proxies using an adapted version of the dots program (Flood, et al 2016). Visual analytics is the emerging science of analytical reasoning facilitated by interactive interfaces. It combines automated analysis with dynamic interaction with the data
Brammertz, W (2013) The office of financial research and operations risk. In Financial and Risk management (pp 47-71)
Flood, Mark D., et al. "The application of visual analytics to financial stability monitoring." Journal of Financial Stability (2016).
Gottschalk, Sylvia. "Entropy and credit risk in highly correlated markets."arXiv preprint arXiv:1604.07042 (2016).
Expected outcomes and deliverables
Involvement in this project will allow participants to gain data science skills including data management, analysis and visualisation. You will be part of an international collaboration that will result in opportunities for publication.
Students with a finance and IT background. Ideally with some experience in using R. and who:
- are currently enrolled at UQ at the time of application;
- have completed at least one year of study at the time of application;
- are studying for a degree relevant to the research discipline;
- have a high level of academic achievement during their undergraduate degree;
- have the potential to and an interest in undertaking postgraduate study (masters or PhD);
Dr Sophie Cockcroft Sophie@business.uq.edu.au
Bye Bye Off-Balance Sheet Lease Financing…
Dr Tracy Artiach
There is no doubt that leasing is big business! The White Clarke Group Global Leasing Report (2016) reports that “the top 50 countries reported 6.83% growth in the value of new contracts closed in 2014, from $883.96bn in 2013 to $944.31bn [USD].” (pp 4).
Accounting for leases has long been a controversial area facilitating off-balance sheet financing. In 2005, the U.S. Securities and Exchange Commission estimated that U.S. public companies may have approximately US$1.25 trillion of off balance sheet leases. Standard setters have argued that ‘current standards are no longer considered fit for purposes' (IASB 2016).
Following extensive international consultation and significant deliberation and re-deliberation, in February 2016, the IASB issued IASB 16 Leases, the long-awaited new leasing standard. IASB Chairman, Hans Hoogervorst, commented that the "new accounting requirements bring lease accounting into the 21st century, ending the guesswork involved when calculating a company’s often-substantial lease obligations. The new Standard will provide much-needed transparency on companies’ lease assets and liabilities, meaning that off balance sheet lease financing is no longer lurking in the shadows. It will also improve comparability between companies that lease and those that borrow to buy.” (IASB, 2016)
The IASB reported that “the significance of the information missing from the balance sheet varied by industry and region and between companies. However, for many companies, the effect on reported financial leverage is expected to be substantial.” The IASB provide the following estimates of “the understated long-term liabilities of heaviest users of off balance sheet leases:
22% North America
32% Asia / Pacific
45% Latin America
27% Africa / Middle East”
(IASB 16 Effects Analysis, 2016, pp 23)
Chair of the AASB, Kris Peach, commented that: "... When analysts are routinely making adjustments for operating leases it’s a reliable indicator that accounting has not been fully reflecting the economics of leasing transactions. Capturing more detailed information about operating leases on the balance sheet may also lead to better decision making from management, as has occurred in other circumstances such as share based payments and defined benefit funds. Whilst the effective date of 1 January 2019 seems a long way off, preparers should not underestimate the systems changes that may be required to capture operating leases effectively.” AASB, 2016)
Whilst there are minimal changes to lessor accounting, IFRS 16 adopts a new approach with significant changes to lessee accounting bringing effectively all leases on balance sheet with few exceptions. The new leasing approach has the potential to affect key performance indicators, tax, bonus targets and executive remuneration schemes, debt covenants, ability to pay dividends, regulatory capital requirements and contingent considerations in business combinations. As such, this change in accounting standard is substantial and is very likely to have a real effect on business decisions. (See also, for example, Wong & Joshi, 2015 and IFRS 16 Leases Effects Analysis, 2016 for the likely significant impact the amendments will have on financial ratios).
One of the first challenges will be the extent of preparedness of entities leading into the transition period, given that the extent to which entities do prepare is likely to mitigate the impact of the transition to the new leasing standard. This provides us with a useful setting to explore the preparedness of entities to significant changes in regulation and the consequences of this significant regulatory change.
Given the significant impact the reclassification of leases will have and the prevalence of leasing, the aim of this project is to examine the impact of the new standards, AASB 16 Leases, on the business decisions and financial reporting of ASX 300 companies, over three periods: pre-transition, transition year and post-transition.
Stage One of the project examines the preparedness of ASX 300 companies to the new standard asking the following research questions:
Do financial statement preparers provide information in relation to the potential impact of the new leasing standard prior to transition given the requirement in AASB 108:30-31 to disclose the potential impacts of new accounting standards which have been issued but not yet effective?
Is there evidence of real business effects (balance sheet restructuring) in the lead-up to the transitional year?
This project will examine the level and nature of the pre-transitional disclosures and the characteristics influencing the preparedness of entities that provide pre-transitional information (auditors, existing operating leases commitments, leverage, ROA, size etc.)
Data: Archival secondary data to be collected from annual reports, ASX announcements, and databases.
- IFRS, ‘IASB shines light on leases by bringing them onto the balance sheet’, Press Release issued on 13 January 2016. Available online: http://www.ifrs.org/Alerts/PressRelease/Pages/IASB-shines-light-on-lease...
- AASB, ‘Long awaited transparency for lease obligations’, Press Release issued on 14 January 2016. Available online: http://www.aasb.gov.au/Media-Releases/Long-awaited-transparency-for-leas...
- The White Clarke Group Global Leasing Report (2016) Available online: http://www.whiteclarkegroup.com/downloads/479/wcg_2016_global_leasing_re...
- Wong, K and M. Joshi, (2015) ‘The Impact of Lease Capitalisation on Financial Statements and Key Ratios: Evidence from Australia, Australasian Accounting, Business and Finance Journal, 9(3), pp 27-44.
- IASB Leases project website: http://www.ifrs.org/current-projects/iasb-projects/leases/Pages/leases.aspx
- IASB Effects Analysis: Available online at: http://www.ifrs.org/Current-Projects/IASB-Projects/Leases/Documents/IFRS...
Expected outcomes and deliverables
The scholar is likely to gain the following skills:
- Data collection skills;
- Increased discipline knowledge through exposure to the implementation of a new accounting standard and the resulting impact accounting policy choice and disclosure decisions;
- Increased real world business knowledge through the examination of the real impact of the accounting standard change on business decisions; and
- Basic report writing skills in the preparation of the report of results.
Resources and Databases:
- Annual Reports in the Connect 4 database
- ASX Announcements website
UQ enrolled B Com student
Strongly recommend that student must either be enrolled in or have completed ACCT3102, but have at least completed ACCT2101.
If you would like further information regarding the proposed project, please contact Dr Tracy Artiach; UQ Business School, +61734433203, firstname.lastname@example.org