The big end of town meets the local council: the investment habitus of four sets of Australian councils during the GFC

Article

Jones, Greg, Beattie, Claire, Bowrey, Graham and Smark, Ciorstan. 2016. "The big end of town meets the local council: the investment habitus of four sets of Australian councils during the GFC ." Australian Journal of Public Administration. 75 (4), pp. 441-456. https://doi.org/10.1111/1467-8500.12212
Article Title

The big end of town meets the local council: the investment habitus of four sets of Australian councils during the GFC

ERA Journal ID18732
Article CategoryArticle
AuthorsJones, Greg (Author), Beattie, Claire (Author), Bowrey, Graham (Author) and Smark, Ciorstan (Author)
Journal TitleAustralian Journal of Public Administration
Journal Citation75 (4), pp. 441-456
Number of Pages16
Year2016
Place of PublicationAustralia
ISSN0313-6647
1467-8500
Digital Object Identifier (DOI)https://doi.org/10.1111/1467-8500.12212
Web Address (URL)http://onlinelibrary.wiley.com/doi/10.1111/1467-8500.12212/abstract?
Abstract

The Global Financial Crisis of 2008 led to a substantial write-down in the value of investments such as collateralised debt obligations (CDOs) with one class of investors being NSW Local councils. This article analyses interviews with four different investor types (or sets) of
local councils, each of which took a substantially different approach to CDO investment. This categorisation into sets was based on interviews of 28 individuals working within 14 local councils as well as commentaries on legal cases involving a class action of local councils suing Lehman Brothers Australia as well as Grange Securities over losses in their investments. This article adopts Bourdieu’s Theory of Practice to describe and explain behaviour regarding decisions to invest (or not) in CDOs. Interesting themes arise regarding differing views on the appropriate role of local councils, and on the degree and form of
‘capital’ (which includes knowledge, competencies, skills, and economic resources) that a council should have before investing in sophisticated financial products. This article
explores the role that field, habitus, and capital played in moderating and influencing council investment making decisions. The analysis shows that these Bourdieuian concepts can be utilised to help explain individual behaviour. This case study shows that excessive capital left in the hands of individuals may result in suboptimal decision making. Local councils may need to consider ways of implementing policies and procedures that can be used to moderate individual action.

KeywordsBourdieu; decision making; habitus; investment policy; local government investment
ANZSRC Field of Research 2020350208. Investment and risk management
350799. Strategy, management and organisational behaviour not elsewhere classified
350102. Auditing and accountability
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Byline AffiliationsSchool of Commerce
University of Wollongong
Institution of OriginUniversity of Southern Queensland
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