Value relevance of troubled debt restructurings and policy implications

This paper investigates the beneficial economic consequences and market and accounting based valuation effects of troubled debt restructurings (TDR) in financially distressed debtor firms. Relying on the implications of prior research and extant valuation theories, some empirical evidence on the beneficial outcomes and informativeness of TDR is first provided: significantly positive restructuring interval excess returns and higher excess returns to subsequently consummated restructurings and subsequent survivors. The market reaction to “full-settlement” and “modification of terms” types of TDR are also measured to evaluate the consistency of the FASB's binary classification and recognition criteria with the market participants' assessments. Finally, a valuation model conditional on book values and earnings is used to test the value relevance of the reported financial statement bottom lines and TDR related disclosure. The findings suggest that modifications are at least as beneficial and informative as full settlements. Hence, the recognition of the reduction in the liability and the related gain in the financial statements of firms that undertake modifications would be more congruent with the valuation effects assessed by market participants. Key words: Private workouts, Financial distress, Debt restructuring, Valuation, Capital markets, SFAS No.15. JEL: G14, G33, G38, M4

Improvement in transparency and disclosure in the ISE: Did IFRS adoption and corporate governance principles make a difference

The purpose of this study is to investigate if the transparency and disclosure level of a sample of Istanbul Stock Exchange firms is enhanced by the promulgation of a set of local Corporate Governance (CG) Principles and by the voluntary adoption of the International Financial Reporting Standards (IFRS), an international best-practice. The Capital Market Board’s CG principles are promulgated on a “comply or explain” basis and have been effective since the fiscal year 2004. Fırst, the year 2003 Transparency & Disclosure (TD) index previously created in collaboration with Standard and Poor’s is replicated for the fiscal year 2004. Using this short panel data of transparency and disclosure scores for our sample of 52 large and liquid Istanbul Stock Exchange firms, the improvement in the scores over the two years is measured. Second, with appropriate control variables in the model, we analyze the determinants of the significant improvement. We use the voluntary adoption of IFRS as an indicator of and commitment to TD, and find that the scores and their relationship with performance are higher in early adaptors. We then create a parsimonious 3-attribute Commitment-to-Better-Disclosure Index and observe a high correlation between the two indices. Finally, using a matched pairs design and controlling for IFRS adoption, we are able to attribute the improvement in the TD scores to the CG principles. The paper finally scores the sample firms’ Compliance Report and presents some preliminary statistics on the first year compliance level of ISE firms with these local CG principles. The study should be of interest to researchers, managers, analysts, boards, policy makers and regulators at a time when debate on convergence to IFRS and the impact of local CG guidelines has become intense

Nuclear spin squeezing via electric quadrupole interaction

Control over nuclear spin fluctuations is essential for processes that rely on preserving the quantum state of an embedded system. For this purpose, squeezing is a viable alternative, so far that has not been properly exploited for the nuclear spins. Of particular relevance in solids is the electric quadrupole interaction (QI), which operates on nuclei having spin higher than 1/2. In its general form, QI involves an electric field gradient (EFG) biaxiality term. Here, we show that as this EFG biaxiality increases, it enables continuous tuning of single-particle squeezing from the one-axis twisting to the two-axis countertwisting limits. A detailed analysis of QI squeezing is provided, exhibiting the intricate consequences of EFG biaxiality. The initial states over the Bloch sphere are mapped out to identify those favorable for fast initial squeezing, or for prolonged squeezings. Furthermore, the evolution of squeezing in the presence of a phase-damping channel and an external magnetic field are investigated. We observe that dephasing drives toward an anti-squeezed terminal state, the degree of which increases with the spin angular momentum. Finally, QI squeezing in the limiting case of a two-dimensional EFG with a perpendicular magnetic field is discussed, which is of importance for two-dimensional materials, and the associated beat patterns in squeezing are revealed.Comment: Published version in contents, 10 pages, 9 figure