Earnings management in response to the introduction of the Australian gold tax

Earnings from gold mining in Australia remained tax-exempt for almost seven decades until January 1, 1991. In the early 1980s, rapid economic prosperity induced by escalated gold prices brought the Australian gold-mining industry under intense political scrutiny. Using a variant of the modified Jones model, this paper provides evidence of significant downward earnings management by Australian gold-mining firms, which is consistent with their attempts to mitigate political costs during the period from June 1985 to May 1988. In contrast, test of earnings management over a similar period in a control sample of Canadian gold-mining firms produced insignificant results. Further, empirical results are robust to several sensitivity tests performed. During the period from June 1988 to December 1990, the Australian firms were found to have engaged in economic earnings management. This is consistent with the sample firms' incentive of maximizing economic earnings immediately prior to the introduction of income tax on gold mining. The findings of this study help to understand the impact of earnings management on the efficient resource allocation in an economy. They also contribute toward understanding the linkage between regulation of accounting for special purposes and general-purpose financial. reporting.

Long-run effects of unfunded social security with earnings-dependent benefits

This paper examines the effects of unfunded social security with bequests, fertility and human capital by considering a mix of earnings-dependent and universal social security benefits. We show that social security is more likely to promote growth by reducing fertility and increasing human capital investment if its benefits are more dependent on individuals' own earnings. Through simulations, we find that the differences in the effects of social security resulting from variations in the benefit formula can be too substantial to be ignored. We also investigate the welfare effect in calibrated economies. (C) 2003 Elsevier B.V. All rights reserved.

Capillary jet instability under the influence of gravity

The focus of this paper is on the effect of gravity stretching on disturbed capillary jet instability. Break-up and droplet formation under low flows are simulated using finite difference solution of a one-dimensional approximation of disturbed capillary jet instability chosen from the work by Eggers and Dupont (J. Fluid Mech. 155 (1994) 289). Experiments were conducted using water and aqueous glycerol solutions to compare with simulations. We use a gravity parameter, G, which quantifies gravity stretching by relating flow velocity, orifice size and acceleration and is the reciprocal of the Fronde number. The optimum disturbance frequency Omega(opt) was found to be inversely proportional to G. However, this relationship appears to be complex for the range of G's investigated. At low G, the relationship between Omega(opt) and G appears to be linear but takes on a weakly decaying like trend as G increases. As flows are lowered, the satellite-free regime decreases, although experimental observation found that merging of main and satellite drops sometimes offset this effect to result in monodispersed droplet trains post break-up. Viscosity did not significantly affect the relationship between the disturbance frequency and G, although satellite drops could be seen more clearly close to the upper limit for instability at high G's. It is possible to define regimes of satellite formation under low flows by considering local wavenumbers at the point of instability. (C) 2004 Elsevier Ltd. All rights reserved.

Impact of the Corporate Law Economic Reform Program Act 1999 on initial public offering prospectus earnings forecasts

Commencing 13 March 2000, the Corporate Law Economic Reform Program Act 1999 (Cth) introduced changes to the regulation of corporate fundraising in Australia. In particular, it effected a reduction in the litigation risk associated with initial public offering prospectus disclosure. We find that the change is associated with a reduction in forecast frequency and an increase in forecast value relevance, but not with forecast error or bias. These results confirm previous findings that changes in litigation risk affect the level but not the quality of disclosure. They also suggest that the reforms' objectives of reducing fundraising costs while improving investor protection, have been achieved.

Complete modulational-instability gain spectrum of nonlinear quasi-phase-matching gratings

We consider plane waves propagating in quadratic nonlinear slab waveguides with nonlinear quasi-phase-matching gratings. We predict analytically and verify numerically the complete gain spectrum for transverse modulational instability, including hitherto undescribed higher-order gain bands. (C) 2004 Optical Society of America.

Finite element analysis of fault bend influence on stick-slip instability along an intra-plate fault

Earthquakes have been recognized as resulting from stick-slip frictional instabilities along the faults between deformable rocks. A three-dimensional finite-element code for modeling the nonlinear frictional contact behaviors between deformable bodies with the node-to-point contact element strategy has been developed and applied here to investigate the fault geometry influence on the nucleation and development process of the stick-slip instability along an intra-plate fault through a typical fault bend model, which has a pre-cut fault that is artificially bent by an angle of 5.6degrees at the fault center. The numerical results demonstrate that the geometry of the fault significantly affects nucleation, termination and restart of the stick-slip instability along the intra-plate fault, and all these instability phenomena can be well simulated using the current finite-element algorithm.

Theoretical investigation of convective instability in inclined and fluid-saturated three-dimensional fault zones.

The convective instability of pore-fluid flow in inclined and fluid-saturated three-dimensional fault zones has been theoretically investigated in this paper. Due to the consideration of the inclined three-dimensional fault zone with any values of the inclined angle, it is impossible to use the conventional linear stability analysis method for deriving the critical condition (i.e., the critical Rayleigh number) which can be used to investigate the convective instability of the pore-fluid flow in an inclined three-dimensional fault zone system. To overcome this mathematical difficulty, a combination of the variable separation method and the integration elimination method has been used to derive the characteristic equation, which depends on the Rayleigh number and the inclined angle of the inclined three-dimensional fault zone. Using this characteristic equation, the critical Rayleigh number of the system can be numerically found as a function of the inclined angle of the three-dimensional fault zone. For a vertically oriented three-dimensional fault zone system, the critical Rayleigh number of the system can be explicitly derived from the characteristic equation. Comparison of the resulting critical Rayleigh number of the system with that previously derived in a vertically oriented three-dimensional fault zone has demonstrated that the characteristic equation of the Rayleigh number is correct and useful for investigating the convective instability of pore-fluid flow in the inclined three-dimensional fault zone system. The related numerical results from this investigation have indicated that: (1) the convective pore-fluid flow may take place in the inclined three-dimensional fault zone; (2) if the height of the fault zone is used as the characteristic length of the system, a decrease in the inclined angle of the inclined fault zone stabilizes the three-dimensional fundamental convective flow in the inclined three-dimensional fault zone system; (3) if the thickness of the stratum is used as the characteristic length of the system, a decrease in the inclined angle of the inclined fault zone destabilizes the three-dimensional fundamental convective flow in the inclined three-dimensional fault zone system; and that (4) the shape of the inclined three-dimensional fault zone may affect the convective instability of pore-fluid flow in the system. (C) 2004 Published by Elsevier B.V.

Relative accuracy and predictive ability of direct valuation methods, price to aggregate earnings method and a hybrid approach

In this paper, we assess the relative performance of the direct valuation method and industry multiplier models using 41 435 firm-quarter Value Line observations over an 11 year (1990–2000) period. Results from both pricingerror and return-prediction analyses indicate that direct valuation yields lower percentage pricing errors and greater return prediction ability than the forward price to aggregated forecasted earnings multiplier model. However, a simple hybrid combination of these two methods leads to more accurate intrinsic value estimates, compared to either method used in isolation. It would appear that fundamental analysis could benefit from using one approach as a check on the other.

Asset Price Instability and Policy Responses: The Legacy of Liberalization

The problem of asset price bubbles, and more generally of instability in the financial system, has been a matter of concern since the 1980s but has only recently moved to the center of the macroeconomic policy debate. The main concern with bubbles arises when they burst, imposing losses on investors holding the bubble assets and potentially on the financial institutions that have extended credit to them. Asset price volatility is an inevitable consequence of financial market liberalization and, in extreme cases, generates asset price bubbles, the bursting of which can impose substantial economic and social costs. Policy responses within the existing liberalized financial system face daunting levels of uncertainty and risk. Given the pattern of increasing asset market volatility over recent decades and the policy issues highlighted in this paper, the future looks uncertain. Another significant cycle of asset price movements, especially in one of the major economies, could see a fundamental revision of thinking about the costs and benefits of liberalized financial systems.

Low level microsatellite instability may be associated with reduced cancer specific survival in sporadic stage C colorectal carcinoma

Background: Colorectal cancers (CRCs) may be categorised according to the degree of microsatellite instability (MSI) exhibited, as MSI-high (MSI-H), MSI-low (MSI-L), or microsatellite stable (MSS). MSI-H status confers a survival advantage to patients with sporadic CRC. Aims: To determine if low levels of MSI are related to the clinicopathological features and prognosis of sporadic stage C CRC. Patients: A total of 255 patients who underwent resection for sporadic stage C CRC were studied. No patient received chemotherapy. Minimum follow up was five years. Methods: DNA extracted from archival malignant and non-malignant tissue was amplified by polymerase chain reaction using a panel of 11 microsatellites. MSI-H was defined as instability at greater than or equal to40% of markers, MSS as no instability, and MSI-L as instability at >0% but,40% of markers. Patients with MSI-H CRC were excluded from analysis as they have previously been shown to have better survival. Results: Thirty three MSI-L and 176 MSS CRCs were identified. There was no difference in biological characteristics or overall survival of MSI-L compared with MSS CRC but MSI-L was associated with poorer cancer specific survival (hazard ratio 2.0 (95% confidence interval 1.1-3.6)). Conclusions: Sporadic MSI-L and MSS CRCs have comparable clinicopathological features. Further studies are required to assess the impact of MSI-L on prognosis.