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The reasonable investor test has developed in Australia both in the law of misleading and deceptive conduct in relation to securities and in the enquiry into the materiality of information in the stock market context. The former involves the question of whether a reasonable investor would have been influenced by misleading conduct, whereas the latter involves the question of whether a reasonable investor or person would expect that information would have caused investors to trade or otherwise act (the two issues can clearly be related). The test raises various issues including how it applies to a diverse class and whether it is interchangeable with a market test (the writer argues it is not). The test also exists in the United States and has been raised, but then specifically rejected, by the courts in Ireland. The development of behavioural law and economics leads to the question of whether the test can, or should, be modified in view of the allegedly non-rational attributes of investors or does the test have sufficient flexibility to accommodate such attributes in appropriate cases.
Researcher: Michael Duffy
This project has produced the following publication:
This research investigates the key factors shaping corporate governance in China and presents a sophisticated study of corporate governance in China from a comparative and historical perspective. Drawing on extensive corporate governance literature, the research articulates why path dependence theory is the most effective framework for interpreting the development path of Chinese corporate governance. The researcher reviews the historical role of government in commercial development and regulation in dynastic China and in early corporate law-making, followed by an account of China’s legal and economic development over the last three decades. This historical inquiry identifies government control as the key feature of economic and market regulation in China. In particular, this research canvasses the evolution of governance of State-Owned Enterprises and listed companies, major corporate governance problems, regulatory challenges posed by China’s increasing participation in economic globalization, and enforcement difficulties particularly in relation to investor protection, directors’ duties and accountability.
Researcher: Chenxia Shi
This project has produced the following publication:
Agricultural managed investment schemes, ran into difficulty in the early 2000s as changes in tax deductibility, the Global Financial Crisis and other factors saw a number of prominent collapses (such as Timbercorp Limited and Great Southern Limited) and the drying up of new investment. The collapses inevitably raised issues about financial disclosure to investors who include shareholders of responsible entities and unit or interest holders in the schemes themselves. They have also highlighted complexities in the insolvencies of such schemes and particularly the conflicting demands placed on responsible entities and their liquidators. They also give pause for an analysis of the responsible entity concept which is a merger of the formerly separate roles of manager and trustee set out under the old “prescribed interests” law. After fourteen years of operation it is questionable whether the merger has been a significant improvement on the former position, at least from the point of view of interest holders in such schemes.
Researcher: Michael Duffy
This project has produced the following publication:
This research is concerned with calculated motivations for compliance and in particular the deterrent effect of the introduction of new sanctions and/or the use of those sanctions by a regulator. It is concerned with normative and social motivations for compliance and examines the impact of the introduction and use of new sanctions on the perceptions and behaviour of corporate compliance officers. These questions are addressed in the context of the continuous disclosure requirements imposed on Australian listed corporations.
This research has produced the following publication:
This research proposes a public enforcement model for the fiduciary duties of corporate directors. Under the dominant model of corporate governance, the principal function of the board of directors is to oversee the conduct of senior corporate officials. When directors fail to provide proper oversight, the consequences can be severe for shareholders, creditors, employees, and society at large. The research explores several possibilities for incorporating public enforcement into the U.S. corporate governance system. It considers SEC enforcement of fiduciary duties and enforcement by states’ attorneys general. It also considers empowering state judges to impose bars on future service, as an alternative to tort-based damages awards. Regardless of the exact model of public enforcement, the reforms advanced here would help provide for greater director accountability and thus better motivate directors to perform their duties responsibly. This research has produced the following publication.