Earnings management and audit adjustments: An empirical study of IBEX 35 constituents

Doubts about the reliability of a company's qualitative financial disclosure increase market participant expectations from the auditor's report. The auditing process is supposed to serve as a monitoring device that reduces management incentives to manipulate reported earnings. Empirical research confirms that it could be an efficient device under some circumstancesand recognizes that our estimates of the informativeness of audit reports are unavoidably biased (e.g., because of a client's anticipation of the auditing process). This empirical study supports the significant role of auditors in the financial market, in particular in the prevention of earnings management practice. We focus on earnings misstatements, which auditors correct with anadjustment, using a sample of past and current constituents of the benchmark market index in Spain, IBEX 35, and manually collected audit adjustments reported over the 1997-2004 period (42 companies, 336 annual reports, 75 earnings misstatements). Our findings confirm that companies more often overstate than understate their earnings. An investor may foresee earningsmisreporting, as manipulators have a similar profile (e.g., more leveraged and with lower sales). However, he may receive valuable information from the audit adjustment on the size of earnings misstatement, which can be significantly large (i.e., material in almost all cases). We suggest that the magnitude of an audit adjustment depends, other things constant, on annual revenues and free cash levels. We also examine how the audit adjustment relates to the observed market price, trading volume and stock returns. Our findings are that earnings manipulators have a lower price and larger trading volume compared to their rivals. Their returns are positively associated with the magnitude of earnings misreporting, which is not consistent with the possible pricing of audit information.

Brittle to ductile transition in a fiber bundle with strong heterogeneity

We analyze the failure process of a two-component system with widely different fracture strength in the framework of a fiber bundle model with localized load sharing. A fraction 0≤α≤1 of the bundle is strong and it is represented by unbreakable fibers, while fibers of the weak component have randomly distributed failure strength. Computer simulations revealed that there exists a critical composition αc which separates two qualitatively different behaviors: Below the critical point, the failure of the bundle is brittle, characterized by an abrupt damage growth within the breakable part of the system. Above αc, however, the macroscopic response becomes ductile, providing stability during the entire breaking process. The transition occurs at an astonishingly low fraction of strong fibers which can have importance for applications. We show that in the ductile phase, the size distribution of breaking bursts has a power law functional form with an exponent μ=2 followed by an exponential cutoff. In the brittle phase, the power law also prevails but with a higher exponent μ=92. The transition between the two phases shows analogies to continuous phase transitions. Analyzing the microstructure of the damage, it was found that at the beginning of the fracture process cracks nucleate randomly, while later on growth and coalescence of cracks dominate, which give rise to power law distributed crack sizes.

Block structured dynamics and neuronal coding

When certain control parameters of nervous cell models are varied, complex bifurcation structures develop in which the dynamical behaviors available appear classified in blocks, according to criteria of dynamical likelihood. This block structured dynamics may be a clue to understand how activated neurons encode information by firing spike trains of their action potentials.

Comparative study of two needle models in terms of deflection during inferior alveolar nerve block

Objectives: The purpose of this study is to determine the possible differences in deflection between two needles of same length and external gauge but with different internal gauges during truncal block of the inferior alveolar nerve. The initial working hypothesis was that greater deflection may be expected with larger internal gauge needles. Study design: Four clinicians subjected 346 patients to inferior alveolar nerve block and infiltrating anesthesia of the buccal nerve trajectory for the surgical or conventional extraction of the lower third molar. A nonautoaspirating syringe system with 2 types of needle was used: a standard 27-gauge x 35-mm needle with an internal gauge of 0.215 mm or an XL Monoprotect® 27-gauge x 35-mm needle with an internal gauge of 0.265 mm. The following information was systematically recorded for each patient: needle type, gender, anesthetic technique (direct or indirect truncal block) and the number of bone contacts during the procedure, the patient-extraction side, the practitioner performing the technique, and blood aspiration (either positive or negative). Results: 346 needles were used in total. 190 were standard needles (27-gauge x 35-mm needle with an internal gauge of 0.215 mm) and 156 were XL Monoprotect®. Incidence of deflection was observed in 49.1% of cases (170 needles) where 94 were standard needles and 76 XL Monoprotect®. Needle torsion ranged from 0º and 6º. Conclusions: No significant differences were recorded in terms of deflection and internal gauge, operator, patient-extraction side, the anesthetic technique involved and the number of bone contacts during the procedure

Myelin-associated proteins block the migration of olfactory ensheathing cells: an in vitro study using single cell tracking and traction force microscopy

Newly generated olfactory receptor axons grow from the peripheral to the central nervous system aided by olfactory ensheathing cells (OECs). Thus, OEC transplantation has emerged as a promising therapy for spinal cord injuries and for other neural diseases. However, these cells do not present a uniform population, but, instead, a functionally heterogeneous population that exhibits a variety of responses including adhesion, repulsion and crossover during cell-cell and cell-matrix interactions. Some studies report that the migratory properties of OECs are compromised by inhibitory molecules and potentiated by chemical gradients. Here, we demonstrated that rodent OECs express all the components of the Nogo Receptor complex and that their migration is blocked by Myelin. Next, we used cell tracking and traction force microscopy to analyze OEC migration and its mechanical properties over Myelin. Our data relate the absence of traction force of OEC with lower migratory capacity, which correlates with changes in the F-Actin cytoskeleton and focal adhesion distribution. Lastly, OEC traction force and migratory capacity is enhanced after cell incubation with the Nogo Receptor inhibitor NEP1-40.

Phase behavior and rheological analysis of reverse liquid crystals and W/I2, W/H2 gel emulsions using an amphiphilic block copolymer.

This article reports the phase behavior determi- nation of a system forming reverse liquid crystals and the formation of novel disperse systems in the two-phase region. The studied system is formed by water, cyclohexane, and Pluronic L-121, an amphiphilic block copolymer considered of special interest due to its aggregation and structural proper- ties. This system forms reverse cubic (I2) and reverse hexagonal (H2) phases at high polymer concentrations. These reverse phases are of particular interest since in the two-phase region, stable high internal phase reverse emulsions can be formed. The characterization of the I2 and H2 phases and of the derived gel emulsions was performed with small-angle X-ray scattering (SAXS) and rheometry, and the influence of temperature and water content was studied. TheH2 phase experimented a thermal transition to an I2 phase when temperature was increased, which presented an Fd3m structure. All samples showed a strong shear thinning behavior from low shear rates. The elasticmodulus (G0) in the I2 phase was around 1 order of magnitude higher than in theH2 phase. G0 was predominantly higher than the viscousmodulus (G00). In the gel emulsions,G0 was nearly frequency-independent, indicating their gel type nature. Contrarily to water-in-oil (W/O) normal emulsions, in W/I2 and W/H2 gel emulsions, G0, the complex viscosity (|η*|), and the yield stress (τ0) decreased with increasing water content, since the highly viscous microstructure of the con- tinuous phase was responsible for the high viscosity and elastic behavior of the emulsions, instead of the volumefraction of dispersed phase and droplet size. A rheological analysis, in which the cooperative flow theory, the soft glass rheology model, and the slip plane model were analyzed and compared, was performed to obtain one single model that could describe the non-Maxwellian behavior of both reverse phases and highly concentrated emulsions and to characterize their microstructure with the rheological properties.