Carlin, Tyrone M; Ford, Guy --- "Editorial" [2003] JlLawFinMgmt 1; (2003) 2(1) Journal of Law and Financial Management 6

EDITORIAL

Welcome to the second edition of the Journal of Law and Financial Management. In the opening remarks we penned in introduction to the first edition of this journal, published in November 2002, we wrote that the motivation for the creation of an outlet for publication such as this was based on our perception of the existence of an inextricable relationship between the disciplines of law and financial management.

Further, we argued that the institutions and structures of law and financial management existed in a state of ongoing change, with a tendency towards increasing complexity. Nothing that we have observed over the past twelve months has shaken our belief in these views. Indeed, we are more firmly disposed to this viewpoint today, than when we espoused it in the first edition.

One form of empirical evidence which has come to light during the year in confirmation of our views relating to the importance of maintaining a careful interdisciplinary watch on events relates to unprecedented reported levels of defaults by issuers of rated debt instruments, both in number and value of defaults.

Though the extreme difficulties faced by certain emerging economies, but especially Argentina, have received considerable attention, the facts disclose that the vast majority of default activity, both in number and value of defaults has been concentrated in the developed world, and in particular, the United States.

Given the sometimes glacial pace and adversarial manner with which Chapter 11 workouts proceed, there is considerable interest in many corners as to the extent to which existing legal and financial institutions will cope under the pressure. The experience of the next few years in the United States will be a salutary lesson for Australia, where considerable interest has been expressed in modifying domestic corporate insolvency arrangements to render them more Chapter 11 like.

In amidst the continuing CLERP program, one issue of corporate governance which continues to attract considerable attention is the question of executive pay arrangements. In this context, the first two articles of this edition of the journal explore issues relating to the use and financial reporting of executive options, matters which in our opinion, are deservedly contentious at present.

The third article in this edition examines an evergreen question in financial management, that is, the cost of equity capital. The final article in this edition concentrates on the important question of risk profiling in the context of financial planning. Given the significant demographic transformation Australia looks set to undergo over coming decades, it seems certain that financial planning, in terms of its theory, practice and regulation will become an ever increasing matter of concern, and a field calling out for rigorous investigation and analysis.

In conclusion, we once again extend sincere thanks to the members of the editorial board for continuing to lend their vital support during the year. Thank you also to Carla Mollica for her design assistance.

Tyrone M Carlin and Guy Ford, Sydney, November 2003.