The measure of risk utilised in this study was beta a measure of the

The measure of risk utilised in this study was beta a

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The measure of risk utilised in this study was beta, a measure of the sensitivity of a company’s rate of return to the rate of return of a market index (Risk Measurement Service, 1998). Beta values, obtained from the Risk Measurement Service (1989), were only available for 28 of the sample companies. Thus, tests of hypotheses relating to this variable use this reduced sample of companies. The final proxy for political sensitivity used in this study was membership of a politically sensitive industry. Industry membership was initially determined based on Standard Industrial Classification 19
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(SIC) codes, obtained from the Key Business Directory of Australia for 1988. For those companies in the sample not listed, industry was determined by reference to Jobson’s Yearbook of Public Companies , and by direct reference to the company’s annual report. Companies in the mining industry were regarded as members of a politically sensitive industry, due to the environmental and social concerns surrounding mining. Also, in 1989 income derived from gold mining in Australia was still exempt from tax, while exploration expenditures were also afforded concessional treatment for tax purposes. This suggests that the mining industry is politically sensitive and that abnormal profits could lead to intervention affecting the concessions received. 10 5. Results 5.1 Data Properties Descriptive statistics were calculated to provide information about the distributional properties of the data to be used in testing the hypotheses developed in Section 3. Erring on the side of conservatism, only those variables satisfying the Kurtosis, Skewness and Kolmogorov-Smirnov one sample tests of normality are regarded as being normally distributed. On this basis the results of these tests indicate that only the variable BETA can be regarded as being normally distributed. This suggests that nonparametric rather than parametric methods are most appropriate to the data utilised in the study. As such, statistical methods were confined to nonparametric tests of association. 11 5 .2 Hypothesis Testing The degree of association between the dependent variables and all the independent variables, excluding membership of a politically sensitive industry, are examined using Spearman Rank Correlation Coefficients. The results of these tests are provided in Table 4. Panel A provides the correlations with the dependent variables concerned with the issue of capitalisation of identifiable 10 The tax free status of income from gold mining and sales was removed from 1 January 1991. 11 In the hope of allowing parametric methods to also be used, all other variables were transformed in an attempt to bring them closer to normality. Neither the natural logarithmic, square root nor fourth root transformations were successful in significantly improving normality of the data. Specifically, only one measure of the dependent variable could be brought to normality by transformation, and only four independent variables were able to be made normal in this way.
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