MCFS Annual Report 2020

MONASH CENTRE FOR FINANCIAL STUDIES

2020 Annual Report

ABOUT MCFS

The Monash Centre for Financial Studies (MCFS) conducts leading-edge research into Australian and global financial markets.

Our work is academically rigorous and practical, with an industry-relevant approach aimed at generating knowledge and insights for the benefit of Australian businesses, regulators, policymakers and other interested stakeholders.

A part of the Monash Business School, MCFS provides a vital hub for engagement between Monash University and the finance industry and its stakeholders – including executives, industry associations, regulators, policymakers and others. Through our collaborative research projects, we aim to facilitate a valuable two-way transfer of knowledge and expertise between academia and industry – including working directly with industry and governments to help solve their business problems and policy issues.

We are based in the Melbourne CBD – amid a large and vibrant financial community comprising headquarters and major offices of banks, pension and sovereign wealth funds, investment companies, consulting firms, regulators, policymakers, government departments and technology businesses. This central location assists our researchers and other faculty staff in interacting frequently and efficiently with the practitioner community.

MESSAGE FROM OUR DIRECTOR

I am proud to present the results of another highly productive year for the Monash Centre for Financial Studies – a year in which we generated an impressive catalogue of new ground-breaking research in the face of the unprecedented challenges presented by the onset of the COVID-19 pandemic in the early months of 2020.

On the research front, our team published multiple papers during 2020 on subjects of vital interest and potential utility to finance industry practitioners, policymakers and regulators (mentioned in the Highlights sections and outlined in this report).

In addition to their primary research activities, MCFS team members participated in various online webinars, forums and committees throughout 2020, exchanging valuable knowledge and ideas with other researchers and industry partners.

Amid extended lockdowns and work-from-home edicts in our home city of Melbourne, our talented and hard-working team managed to sustain high levels of quality research output and – thanks to the internet – maintain frequent engagement with finance industry partners to support the ongoing two-way exchange of knowledge and ideas that underpins our industry-relevant research philosophy.

I would like to thank all our researchers and our hard-working administrative support team for their exceptional work in the trying circumstance of 2020. They did brilliantly – and I look forward to reporting the results of more of their excellent work next year and beyond.

MCFS

HIGHLIGHTS

1Senior Research Fellow Ummul Ruthbah and Research Fellow Nga Pham completed the two research projects commissioned by the Federal Treasury on the superannuation system in Australia. These two projects are part of the fact-finding exercise the Retirement Income Review Panel has conducted this year.

2Nga also completed a ground-breaking investigation into shareholder activism in Japan.

3Research Fellow Bei Cui completed two projects (one in collaboration with Paul Docherty) examining the rising phenomenon of ESG (environment, social and governance) issues in global finance, focusing on how it influences investor behaviour and potentially undermines market efficiency.

4Professor Deep Kapur, Director of Monash Centre for Financial Studies, was appointed to the Board Investment Committee of REST – one of Australia’s most significant superannuation funds.

RESEARCH PROJECTS

THE RELATIONSHIP BETWEEN VOLUNTARY SAVINGS AND CHANGES TO THE SUPERANNUATION GUARANTEE

UMMUL RUTHBAH, NGA PHAM

This study examines how the compulsory employer superannuation system interacts with voluntary savings. The study focuses on the extent to which the existence of compulsory superannuation – and increases in the compulsory superannuation rate –might affect voluntary savings.

 View details

UMMUL RUTHBAH, NGA PHAM

This report examines empirical evidence about the impact of superannuation tax concessions on voluntary private savings in Australia. Overall, our results show that gains in household superannuation balances attributable to tax concessions do not come at the expense of other non-super wealth. However, the addition to overall household wealth resulting from super tax concessions and other incentives is marginal.

 View details

THE RETIREMENT PUZZLE

UMMUL RUTHBAH

The paper assesses the role of the Australian retirement system in supporting retirement spending, the distributional impact and the fiscal burden imposed by the existing system.

The current retirement system and the variations in opinions regarding its sustainability and efficacy are puzzling for practitioners and researchers in this industry, let alone for retirees, most of whom do not have adequate financial literacy.

 View details

HOW EFFECTIVE ARE SUPERANNUATION TAX CONCESSIONS IN ENCOURAGING ADDITIONAL SAVINGS?

STOCK PRICE OVERREACTION TO ESG CONTROVERSIES

BEI CUI, PAUL DOCHERTY

This paper investigates the possible downside of the trend towards ESG by examining how this approach to investing might affect market

SHAREHOLDER ACTIVISM:

efficiency. Consistent with salience theory, this over-emphasis on ESG results in the market overreacting to news about ESG controversies. Contrarian investors can likely profit from the unpopular strategy of buying stocks after bad ESG news is released.  View details

NGA PHAM

Shareholder activism is on the rise in Japan, with potential implications for the behaviour and performance of listed Japanese

ESG EVENTS AND GLOBAL STOCK PRICES

BEI CUI

companies. This paper examines the rise of shareholder activism in Japan and its impact on shareholder returns. It finds that Positive short-term abnormal returns occur around the announcement of activist campaigns and these returns are higher for M&A-related activism. However, firm size and sector have no impact on activism-related excess returns.  View details

This research brief examines the extent of the ESG culture globally. It tests and compares the impacts on stock prices when listed companies in various countries become the subject of environmental, social or governance news events.  View details

DOES SHAREHOLDER ACTIVISM CREATE VALUE? THE CASE OF JAPAN

ONGOING PROJECTS

AUSTRALIAN SELF-MANAGED SUPERANNUATION FUNDS

BEI CUI, NGA PHAM, UMMUL RUTHBAH

Self-managed superannuation funds (SMSFs) have been growing fast and comprise about a quarter of the total super funds in Australia. More than 1.1 million Australians self-manage their super funds. This study examines the investment strategies, trading behaviour and performance of SMSFs in Australia. This project is based on a unique database of the daily equity trading activities of SMSF investors provided by SelfWealth Limited.

THE ROLE OF INTERNET QUALITY ON MARKET LIQUIDITY AND TRADING COSTS

BEI CUI, PAUL RASCHKY

This project investigates the effects of internet speed differentials on stock market liquidity and gains from trading. Modern stock markets are characterised by competition on speed differential among traders to gain an advantage over other rivals. Consequently, internet quality may improve or hinder stock market liquidity and trading costs. Our empirical analysis will help to disentangle the theoretical predictions and contribute to the ongoing debates in the literature.

STATE ON BOARD!NAVIGATING CORPORATE GOVERNANCE IN EMERGING MARKET BUSINESS

NGA PHAM, KOKBOON OH

This book investigates the institutional characteristics of state-linked firms, both

SOE/SIE (State-owned enterprises/Stateinvested enterprises), in emerging markets. It uses Vietnam as a case study with a comparative analysis of China and selected ASEAN countries. It explains how the State, in a dynamic relationship with other shareholders, influence corporate governance and the performance of SIEs in emerging markets.

ENGAGEMENT

We also collaborated with our industry partners in facilitating industry-oriented research and advising on their investment strategies.

REST INVESTMENT COMMITTEE

Professor Deep Kapur serves as a member of the REST Super’s Board Investment Committee.

CFA INSTITUTE

JANUARY 2020, NEW ZEALAND

Dr Nga Pham was on the review panel for the CFA Exam questions and is a member of the CFA Institute’s Body of Practice and CFA Society –Melbourne University Engagement Committee.

GLOBAL PUBLIC INVESTOR 2020 ASIA LAUNCH (ORGANISED WITH THE SUPPORT OF MCFS)

29 JULY 2020

Professor Deep Kapur joined a webinar for the Global Public Investor 2020 Asia on pension funds’ role in post-COVID recovery. The Global Public Investor, now in its seventh year, is devoted to public sector asset ownership and management worldwide. Other speakers included Jane Hume (Australian Government), Agnes Belaisch (Barings), Dong Hun Jang (Public Officials Benefit Association South Korea), Srikanya Yathip (Thailand Government Pension Fund), Shahril Ridza Ridzuan (Khazanah Nasional Berhad), Leanne Taylor (Cbus superannuation), Natalie Black (UK Department for International Trade), Hani Kablawi (EMEA BNY Mellon), Frank Scheidig (DZ Bank) and Didier Borowski (Global Views Amundi).

 View details

Our senior researchers and leaders participated in webinars organised by Monash Business School and other online forums during 2020 to exchange knowledge and ideas with researchers and key industry partners.

VIRTUAL ROUND-TABLE: THE DIGITAL ECONOMY IN THE TIME OF COVID-19 AND BEYOND

6 AUGUST 2020

Professor Deep Kapur was on a panel of speakers discussing how COVID-19 is transforming the digital economy and how it is likely to come out of the pandemic. Other speakers: Professor Simon Wilkie (Monash Business School), Dr Stephen King (Productivity Commission), and Fraser Thompson (AlphaBeta).

CFA SOCIETY JAPAN ADVOCACY

4 SEPTEMBER 2020

Dr Nga Pham participated in this webinar discussing her research for MCFS into shareholder activism in Japan. She was joined by Mr Takeyuki Ishida, Head of Japan Research, ISS.

CAREERS IN FINANCE

7

SEPTEMBER 2020

Professor Deep Kapur (MCFS) was a speaker in this talk organised by the Banking and Finance Department for its undergraduate students and Li Ge from Monash Business School.

MERCER CFA INSTITUTE GLOBAL PENSION INDEX – PACIFIC LAUNCH

20 OCTOBER 2020

Professor Deep Kapur joined a panel discussion with other experts from the superannuation sector in Australia on the impact of COVID-19 on retirement pension systems around the world.

INTERNATIONAL CORPORATE GOVERNANCE NETWORK (ICGN)

The Monash Centre for Financial Studies has become a member of the Investor Group on Climate Change, a collaboration of Australian and New Zealand institutional investors focussed on the impact of climate change on investments. The MCFS membership of IGCC will help to strengthen the Business School’s research expertise to contemporary problems and challenges faced in the sector.

RESPONSIBLE INVESTMENT ASSOCIATION AUSTRALASIA

(RIAA)

Dr Nga Pham is a member of the Impact Management and Measurement Community of Practice. RIAA’s Impact Management and Measurement Community of Practice is an initiative for its members to facilitate the sharing of leading practice knowledge and resources for impact management and measurement.

RETIREMENT INCOME REVIEW SUBMISSIONS

UMMUL RUTHBAH, NGA PHAM

MCFS has a keen research interest in the retirement income system as we consider the area to be of national significance and in the best public interest. We recognise that to understand how the retirement income system operates and what it will be able to deliver in the future, a holistic approach is needed. In this submission, Dr Ummul Ruthbah and Dr Nga Pham have identified several areas mentioned in the Retirement Income Review consultation paper that are critical in establishing the fact base of the current system.  View details

EDUCATION

Through our internship program, MCFS helps Monash Business School students to expand their knowledge and networks and gives them valuable work experience to assist their future success.

WORKPLACE

INTEGRATED LEARNING (WIL) INTERNS, 2020

ZACHARY JAMES SHEPPARD 16.03.20 – 25.06.20, 20 DAYS

Worked on:

• A review of the top 20 popular journals in the industry

• A review of the largest Super Funds’ ESG investment strategy

SIDHANTH SANTOSH KADAM 10.08.20 – 29.10.20, 30 DAYS

Worked on:

• Correlation analysis of the macro-variables in advanced economies

• A summary of literature on carbon trading and investor behaviour

• A summary report on existing instruments to hedge climate change-related risk

NICHOLAS DREW

ELLIOT

11.08.20 – 22.10.20, 30 DAYS

Worked on:

• A summary of the book The Future of China’s Bond Market, published by IMF

• A summary of Insights on China’s Onshore Bond Market: A wealth of opportunity for foreign investors, by Osbert Tang

• A summary of journal articles on the Chinese bond market

• An overview of Chinese bond data available from WIND

DAVID HARRY WOLTHUIS

17.08.20 – 21.10.20, 30 DAYS

Worked on:

• A research brief on Shareholder Activism in Australia

• Data download for AXS 300 and tracking the ticker changes.

KAI OLIVER INGLIS 23.11.20 – 15.02.21, 20 DAYS

Worked on:

• Shareholder activism in Japan

• Analysis of Institutional Voting on NIKKEI225 Companies using data from ProxyInsight

CASSANDRA FRIEDMAN 24.11.20 – 11.02.21, 25 DAYS

Worked on:

• A review of how different pension systems in the world consider and support housing affordability and other housing matters.

• A summary of the literature on household finance and household asset allocation

• A PowerPoint presentation of the top 10 Australian Super Fund performance analysis

HUY NGUYEN 25.11.20 – 28.05.21, 50 DAYS

Worked on:

• A research brief on Applying NLP and Sentiment Analysis with ProxyInsight Data

• Modern slavery reporting quality index.

OUR PEOPLE

MCFS STAFF

PROFESSOR DEEP KAPUR

Director, Monash Centre for Financial Studies

DR UMMUL RUTHBAH Senior Research Fellow

DR NGA PHAM Research Fellow

AFFILIATED FACULTY MEMBERS

SIMON WILKIE

Head, Monash Business School Dean, Faculty of Business and Economics

PAUL RASCHKY

Associate Professor, Dept of Economics

KLAUS ACKERMANN

Lecturer, Department of Econometrics and Business Statistics

DR BEI CUI

Research Fellow

DR YOLANDA WANG Research Fellow

IOANNA ZOGRAFOU

Executive Assistant to Deep Kapur

SENIOR ADVISORS

SYD BONE

Chief Executive Officer, CP2 Limited

ROGER COHEN

Founder at C2Zero

SIMON ANGUS

Associate Professor

MARIANO PITOSH HEYDEN

Associate Professor, Department of Management

BONSOO KOO

Associate Professor, Department of Econometrics and Business Statistics

DAMIEN LAMBERT

Lecturer, Department of Accounting

RANJIT AJIT SINGH

Assistant Director, Monetary and Capital Markets Department, International Monetary Fund (IMF)

MONASH BUSINESS SCHOOL

Monash Centre for Financial Studies

Monash Business School

Monash University Level 13, 30 Collins Street Melbourne, VIC 3000 Australia

T: +61 3 9903 8315

E: mcfsinfo@monash.edu

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