Unexpected corporate failures in Australia through the decades: commonality of causes

Lane, Richard John (2016) Unexpected corporate failures in Australia through the decades: commonality of causes. PhD thesis, James Cook University.

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Abstract

Unexpected corporate failures have been happening ever since there have been companies and continue to happen notwithstanding that, at the present time, there is the strongest governance and corporate law ever. Although individual corporate failures have been analysed in the literature by academics and practitioners there is a lack of research identifying the fundamental causes of unexpected corporate failures over many decades and analysing the commonality of causes evident across the corporate failures. This research gap is addressed in this thesis.

The first aim of this thesis is to analyse the fundamental causes of unexpected corporate failures in Australia over the 50 year period ended 2010. The second aim is to identify whether commonality of causes exists across the collapses.

To achieve the first aim, the methodology for analysing the unexpected corporate failures across the decades is case study analysis, analysing major corporate failures from each decade. The case study methodology of analysis was chosen because it provides a consistent structured framework approach in the form of a template so that common factors across the case studies can be tabulated into a summary table of causes of each case study. This approach allows the researcher to consistently assess and evaluate information across five decades. The thesis includes discussion relating to the theory relevant to this research, agency theory. Agency theory has been used as a consistent lens through which to view and interpret each case study. The causes of the unexpected failure were determined from the results of investigations by court-appointed inspectors, receivers and managers, liquidators, administrators and also from the research and professional literature. At the end of each chapter including a case study, the causes are presented with brief detail and referencing.

The methodology used to achieve the second aim, was to amalgamate the summary of the common causes of all case studies in order to produce a master comparison list in the form of a matrix for analysis and evaluation.

The findings show that there is commonality of causes throughout the eight case studies. The matrix revealed nine common causes of unexpected corporate failure extracted from the eight case studies. Five of the nine main causes identified were common to all eight case studies covering the five decades thus clearly demonstrating that although legislation, regulation and standards strengthened over the 50 years covered by the case studies, the five main causes continued to occur.

From further analysis of the matrix, the causes were categorised into two groups. The first group includes causes which demonstrate a lack of strategy and management expertise. The second group includes causes which can be clearly identified as relating to one or more points of the fraud triangle.

Therefore, the principal conclusion of this thesis is that commonality of causes exists across the unexpected corporate failures analysed in this thesis. Notwithstanding amending legislation, changes to regulations, adoption of accounting and auditing standards that have the force of law, corporations continue to fail unexpectedly and the causes of the failures in many cases are unchanged.

This information will be useful to investors and regulators because it draws together the common threads underlying each corporate collapse analysed in the case studies to examine what factors are associated with unexpected corporate failure over time.

This thesis takes one step forward in providing an holistic approach to understanding the factors that led to unexpected corporate failures of the past so that they may, possibly, be prevented in the future.

Item ID: 46597
Item Type: Thesis (PhD)
Keywords: corporate collapse, causes of corporate collapse, corporate failure, causes of corporate failure, poor estimation, mismatched asset/borrowing strategy, corporate misbehaviour
Date Deposited: 12 Dec 2016 02:24
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1501 Accounting, Auditing and Accountability > 150102 Auditing and Accountability @ 50%
15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1501 Accounting, Auditing and Accountability > 150101 Accounting Theory and Standards @ 50%
SEO Codes: 97 EXPANDING KNOWLEDGE > 970115 Expanding Knowledge in Commerce, Management, Tourism and Services @ 80%
94 LAW, POLITICS AND COMMUNITY SERVICES > 9404 Justice and the Law > 940405 Law Reform @ 10%
94 LAW, POLITICS AND COMMUNITY SERVICES > 9404 Justice and the Law > 940406 Legal Processes @ 10%
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