Detecting Earnings Management Using Neural Networks

Detecting Earnings Management Using Neural Networks. Trying to balance between relevant and reliable accounting data, generally accepted accounting principles (GAAP) allow, to some extent, the company management to use their judgment and to make subjective assessments when preparing financial statements. The opportunistic use of the discretion in financial reporting is called earnings management. There have been a considerable number of suggestions of methods for detecting accrual based earnings management. A majority of these methods are based on linear regression. The problem with using linear regression is that a linear relationship between the dependent variable and the independent variables must be assumed. However, previous research has shown that the relationship between accruals and some of the explanatory variables, such as company performance, is non-linear. An alternative to linear regression, which can handle non-linear relationships, is neural networks. The type of neural network used in this study is the feed-forward back-propagation neural network. Three neural network-based models are compared with four commonly used linear regression-based earnings management detection models. All seven models are based on the earnings management detection model presented by Jones (1991). The performance of the models is assessed in three steps. First, a random data set of companies is used. Second, the discretionary accruals from the random data set are ranked according to six different variables. The discretionary accruals in the highest and lowest quartiles for these six variables are then compared. Third, a data set containing simulated earnings management is used. Both expense and revenue manipulation ranging between -5% and 5% of lagged total assets is simulated. Furthermore, two neural network-based models and two linear regression-based models are used with a data set containing financial statement data from 110 failed companies. Overall, the results show that the linear regression-based models, except for the model using a piecewise linear approach, produce biased estimates of discretionary accruals. The neural network-based model with the original Jones model variables and the neural network-based model augmented with ROA as an independent variable, however, perform well in all three steps. Especially in the second step, where the highest and lowest quartiles of ranked discretionary accruals are examined, the neural network-based model augmented with ROA as an independent variable outperforms the other models.

Inference on Cointegration in Vector Autoregressive Models (summary section only)

In the thesis we consider inference for cointegration in vector autoregressive (VAR) models. The thesis consists of an introduction and four papers. The first paper proposes a new test for cointegration in VAR models that is directly based on the eigenvalues of the least squares (LS) estimate of the autoregressive matrix. In the second paper we compare a small sample correction for the likelihood ratio (LR) test of cointegrating rank and the bootstrap. The simulation experiments show that the bootstrap works very well in practice and dominates the correction factor. The tests are applied to international stock prices data, and the .nite sample performance of the tests are investigated by simulating the data. The third paper studies the demand for money in Sweden 1970—2000 using the I(2) model. In the fourth paper we re-examine the evidence of cointegration between international stock prices. The paper shows that some of the previous empirical results can be explained by the small-sample bias and size distortion of Johansen’s LR tests for cointegration. In all papers we work with two data sets. The first data set is a Swedish money demand data set with observations on the money stock, the consumer price index, gross domestic product (GDP), the short-term interest rate and the long-term interest rate. The data are quarterly and the sample period is 1970(1)—2000(1). The second data set consists of month-end stock market index observations for Finland, France, Germany, Sweden, the United Kingdom and the United States from 1980(1) to 1997(2). Both data sets are typical of the sample sizes encountered in economic data, and the applications illustrate the usefulness of the models and tests discussed in the thesis.

A Model for Creating Strategic Alliances. A Study of Inter-firm Cooperation in the North European ICT Sector

In this study, it is argued that the view on alliance creation presented in the current academic literature is limited, and that using a learning approach helps to explain the dynamic nature of alliance creation. The cases in this study suggest that a wealth of inefficiency elements can be found in alliance creation. These elements can further be divided into categories, which help explain the dynamics of alliance creation. The categories –combined with two models brought forward by the study– suggest that inefficiency can be avoided through learning during the creation process. Some elements are especially central to this argumentation. First, the elements related to the clarity and acceptance of the strategy of the company, the potential lack of an alliance strategy and the elements related to changes in the strategic context. Second, the elements related to the length of the alliance creation processes and the problems a long process entails. It is further suggested that the different inefficiency elements may create a situation, where the alliance creation process is –sequentially and successfully– followed to the end, but where the different inefficiencies create a situation where the results are not aligned with the strategic intent. The proposed solution is to monitor and assess the risk for inefficiency elements during the alliance creation process. The learning, which occurs during the alliance creation process as a result of the monitoring, can then lead to realignments in the process. This study proposes a model to mitigate the risk related to the inefficiencies. The model emphasizes creating an understanding of the other alliance partner’s business, creating a shared vision, using pilot cooperation and building trust within the process. An analytical approach to assessing the benefits of trust is also central in this view. The alliance creation approach suggested by this study, which emphasizes trust and pilot cooperation, is further critically reviewed against contracting as a way to create alliances.

Systematic bias in MODIS dust aerosol retrieval at Kanpur (AERONET), Indo-Gangetic Basin - art.no.640816

We have compared the spectral aerosol optical depth (AOD) and aerosol fine mode fraction (AFMF) derived from Moderate Resolution Imaging Spectroradiometer (MODIS) with those of Aerosol Robotic Network (AERONET) at Kanpur (26.45N, 80.35E), northern India for the pre-monsoon season (March to June, 2001-2005). We found that MODIS systematically overestimates AOD during pre-monsoon season (known to be influenced by dust transport from north-west of India). The errors in AOD were correlated with the MODIS top-of-atmosphere apparent surface reflectance in 2.1 mu m channel (rho*(2.1)). MODIS aerosol algorithm uses p*(2.1) to derive the surface reflectance in visible channels (rho(0.47), rho(0.66)) using an empirical mid IR-visible correlation (rho(0.47) = rho(2.1)/4, rho(0.66) = rho(2.1)/2). The large uncertainty in estimating surface reflectance in visible channels (Delta rho(0.66)+/- 0.04, Delta rho(0.47)+/- 0.02) at higher values of p*(2.1) (p*(2.1) > 0.18) leads to higher aerosol contribution in the total reflected radiance at top-of atmosphere to compensate for the reduced surface reflectance in visible channels and thus leads to overestimation of AOD. This was also reflected in the very low values of AFMF during pre-monsoon whose accuracy depends on the aerosol path radiance in 0.47 and 0.66 mu m channels and aerosol models. The errors in AOD were also high in the scattering angle range 110 degrees-140 degrees, where the effect of dust non-spherity on its optical properties is significant. The direct measurements of spectral surface reflectance are required over the Indo-Gangetic basin in order to validate the mid IR-visible relationship. MODIS aerosol models should also be modified to incorporate the effect of non-spherity of dust aerosols.

Suppression of charge order, disappearance of antiferromagnetism, and emergence of ferromagnetism in Nd0.5Ca0.5MnO3 nanoparticles

Nd0.5Ca0.5MnO3 nanoparticles (average diameter similar to 20 and 40 nm) are synthesized by the polymeric precursor sol-gel method and characterized by various physico-chemical techniques. Quite strikingly, in the 20 nm particles, the charge-ordered (CO) and the antiferromagnetic phases observed in the bulk below 250 K and 160 K, respectively, are completely absent. Instead, a ferromagnetic (FM) transition is observed at 95 K followed by an insulator-to-metal transition at 75 K. The 40 nm particles show a residual CO phase but a transition to the FM state also occurs, at a slightly higher temperature of 110 K.

Anti-amyloidogenic property of leaf aqueous extract of Caesalpinia crista

Amyloid beta (A beta) is the major etiological factor implicated in Alzheimer's disease (AD). A beta(42) self-assembles to form oligomers and fibrils via multiple aggregation process. The recent studies aimed to decrease A beta levels or prevention of A beta aggregation which are the major targets for therapeutic intervention. Natural products as alternatives for AD drug discovery are a current trend. We evidenced that Caesalpinia crista leaf aqueous extract has anti-amyloidogenic potential. The studies on pharmacological properties of C. crista are very limited. Our study focused on ability of C. crista leaf aqueous extract on the prevention of (i) the formation of oligomers and aggregates from monomers (Phase I: A beta(42) + extract co-incubation); (ii) the formation of fibrils from oligomers (Phase II: extract added after oligomers formation); and (iii) dis-aggregation of pre-formedfibrils (Phase III: aqueous extract added to matured fibrils and incubated for 9 days). The aggregation kinetics was monitored using thioflavin-T assay and transmission electron microscopy (TEM). The results showed that C. crista aqueous extract could able to inhibit the A beta(42) aggregation from monomers and oligomers and also able todis-aggregate the pre-formed fibrils. The study provides an insight on finding new natural products for AD therapeutics. (C) 2010 Elsevier Ireland Ltd. All rights reserved.

Asymmetry in structural and thermo-mechanical behavior of intermetallic NiAl nanowire under tensile/compressive loading: A molecular dynamics study

The asymmetric stress strain behavior under tension/compression in an initial < 100 > B-2-NiAl nanowire is investigated considering two different surface configurations i.e., < 100 >/(0 1 0) (0 0 1) and < 100 >/(0 1 1) (0 - 1 1). This behavior is attributed to two different deformation mechanisms namely a slip dominated deformation under compression and a known twinning dominated deformation under tension. It is also shown that B2 -> BCT (body-centered-tetragonal) phase transformation under tensile loading is independent of the surface configurations for an initial < 100 > oriented NiAl nanowire. Under tensile loading, the nanowire undergoes a stress-induced martensiticphase transformation from an initial B2 phase to BCT phase via twinning along {110} plane with failure strain of similar to 0.30. On the other hand, a compressive loading causes failure of these nanowires via brittle fracture after compressive yielding, with a maximum failure strain of similar to-0.12. Such brittle fracture under compressive loading occurs via slip along {110} plane without any phase transformations. Softening/hardening behavior is also reported for the first time in these nanowires under tensile/compressive loadings, which cause asymmetry in their yield strength behavior in the stress strain space. Result shows that a sharp increase in energy with increasing strain under compressive loading causes hardening of the nanowire, and hence, gives improved yield strength as compared to tensile loading. (C) 2010 Elsevier Ltd. All rights reserved.

Purification and properties of β-glucosidase from a thermophilic fungus Humicola lanuginosa (Griffon and Maublanc) Bunce

An extracellular β-glucosidase (EC 3.2.1.21) has been purified to homogeneity from the culture filtrate of a thermophilic fungus, Humicola lanuginosa (Griffon and Maublanc) Bunce, using duplicating paper as the carbon source. The enzyme was purified 82-fold with a 43% yield by ion-exchange chromatography and gel filtration. The molecular weight of the protein was estimated to be 135,000 by gel filtration and 110,000 by electrophoresis. The sedimentation coefficient was 10.5 S. It was an acidic protein containing high amounts of acidic amino acid residues. It was poor in sulphur-containing amino acids. It also contained 9% carbohydrate. The enzyme activity was optimum at pH 4.5 and at 60°C. The enzyme was stable in the pH range 6–9 for 24 h at 25°C. The enzyme had similar affinities towards cellobiose and p-nitrophenyl-β-d-glucoside with Km values of 0.44 mM and 0.50 mM, respectively. The enzyme was capable of hydrolysing larchwood xylan, xylobiose and p-nitrophenyl-β-d-xyloside, though to a lesser extent. The enzyme was specific for the β-configuration and glucose moiety in the substrate.

Growth and characterization of germanium nanowires by electron beam evaporation

Germanium nanowires were grown on Au coated Si substrates at 380 degrees C in a high vacuum (5 x 10(-5) Torr) by e-beam evaporation of Germanium (Ge). The morphology observation by a field emission scanning electron microscope (FESEM) shows that the grown nanowires are randomly oriented with an average length and diameter of 600 nm and 120 nm respectively for a deposition time of 60 min. The nanowire growth ratewas measured to be similar to 10 nm/min. Transmission electron microscope (TEM) studies revealed that the Ge nanowires were single crystalline in nature and further energy dispersive X-ray analysis(EDAX) has shown that the tip of the grown nanowires was capped with Au nanoparticles, this shows that the growth of the Ge nanowires occurs by the vapour liquid solid (VLS) mechanism. HRTEM studies on the grown Ge nanowire show that they are single crystalline in nature and the growth direction was identified to be along [110]. (C) 2010 Elsevier B.V. All rights reserved.

Ecology of the Asian Elephant in Southern India. I. Movement and Habitat Utilization Patterns

The movement and habitat utilization patterns were studied in an Asian elephant population during 1981-83 within a 1130 km2 area in southern India (110 30' N to 120 0' N and 760 50' E to 770 15' E). The study area encompasses a diversity of vegetation types from dry thorn forest (250-400 m) through deciduous forest (400-1400 m) to stunted evergreen shola forest and grassland (1400-1800 m). Home range sizes of some identified elephants were between 105 and 320 km2. Based on the dry season distribution, five different elephant clans, each consisting of between 50 and 200 individuals and having overlapping home ranges, could be defined within the study area. Seaso- nal habitat preferences were related to the availability of water and the palatability of food plants. During the dry months (January-April) elephants congregated at high densities of up to five individuals kM-2 in river valleys where browse plants had a much higher protein content than the coarse tall grasses on hill slopes. With the onset of rains of the first wet season (May- August) they dispersed over a wider area at lower densities, largely into the tall grass forests, to feed on the fresh grasses, which then had a high protein value. During the second wet season (September-December), when the tall grasses became fibrous, they moved into lower elevation short grass open forests. The normal movement pattern could be upset during years of adverse environmental con- ditions. However, the movement pattern of elephants in this region has not basically changed for over a century, as inferred from descriptions recorded during the nineteenth century.

Three-Dimensional Unsteady Flow With Heat and Mass Transfer Over a Continuous Stretching Surface

A numerical solution of the unsteady boundary layer equations under similarity assumptions is obtained. The solution represents the three-dimensional unsteady fluid motion caused by the time-dependent stretching of a flat boundary. It has been shown that a self-similar solution exists when either the rate of stretching is decreasing with time or it is constant. Three different numerical techniques are applied and a comparison is made among them as well as with earlier results. Analysis is made for various situations like deceleration in stretching of the boundary, mass transfer at the surface, saddle and nodal point flows, and the effect of a magnetic field. Both the constant temperature and constant heat flux conditions at the wall have been studied.

Modelling of void initiation and breaking phenomena in a packed bed

Void breaking and formation in a packed bed are important phenomena in stabilising and optimising the performance of reactors such as the blast furnace, spouted bed and catalytic regenerator. These phenomena have been studied using a mathematical model. The model is based on a previously published force balance approach to predict the cavity size. Limited numbers of experiments, at room temperature, have been carried out in order to compare the experimental results with theory. A good agreement has been found between the experimental and theoretical results. In addition, the predictions have been compared with published data, which give reasonable agreement. The role of various forces (friction, pressure and bed weight) on void initiation and breaking has been investigated. The effect of bed height, particle diameter and density, void fraction, as well as gas flow rate on void formation and breaking has also been studied.

Competing magnetic interactions in a dinuclear Ni(II) complex: Antiferromagnetic O-H center dot center dot center dot O moiety and ferromagnetic N-3(-) ligand

Synthesis, structural characteristics, magnetic studies and DFT calculations in Ni(II) dinuclear complexes containing two bridging N-3(-) and an O-(HO)-O-... linkage reveal the existence of ferromagnetic interactions between Ni(II) centers via N-3(-) ligands and antiferromagnetic interactions through the H-bonded moiety. The overall magnetic behavior of the system depends on the delicate balance between these two competing interactions.