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Availability of Capital

Industry Commission inquiry report

This report was signed by the Commissioners on 9 December 1991 and subsequently released by the Commonwealth Government. The report contains the findings of the Industry Commission's public inquiry.

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Contents

Preliminaries
Cover, Copyright, Signing Page, Contents, Abbreviations, Overview, Summary of Findings and Recommendations

1 Introduction
1.1 Some key concepts
1.2 The role of capital markets
1.3 How are capital markets assessed in this report?
1.4 Central issues
1.5 The inquiry in context
1.6 The report structure

2 The Economic Environment
2.1 Macroeconomic developments
2.2 Deregulation of the financial system

3 Availability of Capital in Aggregate
3.1 The gap between investment and savings
3.2 Effects of reliance on foreign capital
3.3 Superannuation
3.4 Incentives to incest in owner-occupied housing
3.5 The availability of foreign capital
3.6 Possible regulatory and taxation impediment to capital inflow
3.7 The cost of capital

4 Capital Flows and Intermediation
4.1 Introduction
4.2 What do intermediaries do?
4.3 Developments in financial intermediation
4.4 The impact of regulation
4.5 Implications of regulation

5 Debt Versus Equity
5.1 The choice between debt and equity
5.2 Debt-equity ratios in Australian firms
5.3 Taxation

6 Allocation of Debt Finance
6.1 Debt finance and the banking sector
6.2 Issues for this inquiry
6.3 The role of banks
6.4 Bank lending procedures
6.5 Credit assessment, risk and the role of information
6.6 Collateral vs cash flow
6.7 Availability of long-term finance
6.8 Impact of prudential regulation on bank lending

7 Small Business Access to Debt Finance
7.1 Current concerns
7.2 Sources of debt finance for small business
7.3 Interest rates on smaller loans
7.4 Administrative practices for small loans

8 Competition in the Debt Market
8.1 The importance of banks
8.2 Performance of banks
8.3 The range of financial products
8.4 Markets for the long-term and short-term loans
8.5 Foreign banks

9 The Allocation of Equity Finance
9.1 Introduction
9.2 How are claim about equity markets to be assessed?
9.3 Sources of equity capital
9.4 The Australian Stock exchange
9.5 Prospectus requirements
9.6 Underwriting
9.7 The tax system and equity capital
9.8 Short-termism

10 Availability of Equity Finance for Smaller Enterprises
10.1 Which enterprises?
10.2 The quest for capital
10.3 The large institutional investors
10.4 Specialist intermediaries
10.5 Adequacy of the 'market place'
10.6 Other regulatory and taxation issues
10.7 Concluding remarks

11 Government-owned Financial Intermediaries
11.1 Tests for government ownership
11.2 Government-owned banks
11.3 Specialist financial institutions
11.4 Government development corporations and assistance programs
11.5 Concluding remarks

A Conduct of the inquiry

B Previous reports dealing with availability of capital to small business

C Economy-wide effects of reducing tax disparities favouring owner occupiers

D Foreign capital supply

E Recent changes in financial regulation

F Significance of small business and previous studies about their funding

G Companies and securities law

H Equity exchanges in Australia and overseas

I Long-term savings incentives in other countries

Bibliography

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