The growth companies puzzle: can growth opportunities measures predict firm growth?

While numerous empirical studies include proxies for growth opportunities in their analyses, there is limited evidence as to the validity of the various growth proxies used. Based on a sample of 1942 firm-years for listed UK companies over the 1990-2004 period, we assess the performance of eight growth opportunities measures. Our results show that while all the growth measures show some ability to predict growth in company sales, total assets, or equity, there are substantial differences between the various models. In particular, Tobin's Q performs poorly while dividend-based measures generally perform best. However, none of the measures has any success in predicting earnings per share growth, even when controlling for mean reversion and other time-series patterns in earnings. We term this the 'growth companies puzzle'. Growth companies do grow, but they do not grow in the key dimension (earnings) theory predicts. Whether the failure of 'growth companies' to deliver superior earnings growth is attributable to increased competition, poor investments, or behavioural biases, it is still a puzzle why growth companies on average fail to deliver superior earnings growth

Testing for inconsistencies in the estimation of UK capital structure determinants

This article analyses the determinants of the capital structure of 1054 UK companies from 1991 to 1997, and the extent to which the influence of these determinants are affected by time-invariant firm-specific heterogeneity. Comparing the results of pooled OLS and fixed effects panel estimation, significant differences in the results are found. While the OLS results are generally consistent with prior literature, the results of our fixed effects panel estimation contradict many of the traditional theories of the determinants of corporate financial structure. This suggests that results of traditional studies may be biased owing to a failure to control for firm-specific, time-invariant heterogeneity. The results of the fixed effects panel estimation find larger companies to have higher levels of both long-term and short-term debt than do smaller firms, profitability to be negatively correlated with the level of gearing, although profitable firms tend to have more short-term bank borrowing than less profitable firms, and tangibility to positively influence the level of short-term bank borrowing, as well as all long-term debt elements. However, the level of growth opportunities appears to have little influence on the level of gearing, other than short-term bank borrowing, where a significant negative relationship is observed

The oral microbiota of wild bears in Sweden reflects the history of antibiotic use by humans

Following the advent of industrial-scale antibiotic production in the 1940s,1 antimicrobial resistance (AMR) has been on the rise and now poses a major global health threat in terms of mortality, morbidity, and economic burden.2,3 Because AMR can be exchanged between humans, livestock, and wildlife, wild animals can be used as indicators of human-associated AMR contamination of the environment.4 However, AMR is a normal function of natural environments and is present in host-associated microbiomes, which makes it challenging to distinguish between anthropogenic and natural sources.4,5 One way to overcome this difficulty is to use historical samples that span the period from before the mass production of antibiotics to today. We used shotgun metagenomic sequencing of dental calculus, the calcified form of the oral microbial biofilm, to determine the abundance and repertoire of AMR genes in the oral microbiome of Swedish brown bears collected over the last 180 years. Our temporal metagenomics approach allowed us to establish a baseline of natural AMR in the pre-antibiotics era and to quantify a significant increase in total AMR load and diversity of AMR genes that is consistent with patterns of national human antibiotic use. We also demonstrated a significant decrease in total AMR load in bears in the last two decades, which coincides with Swedish strategies to mitigate AMR. Our study suggests that public health policies can be effective in limiting human-associated AMR contamination of the environment and wildlife

Who violates expectations when? How firms’ growth and dividend reputations affect investors’ reactions to acquisitions

Research summary: We investigate the role of a firm’s dividend and growth reputations in shaping investors’ interpretations of acquisitions as a negative or positive expectation violation. While our findings reveal that both an acquiring firm’s dividend and growth reputations trigger positive investor reactions, they also show that investors react negatively to an acquisition of a target firm with a strong growth reputation when the acquiring firm has a strong dividend reputation. We also find that investors are inclined to give managers “the benefit of the doubt” to the extent that an acquiring firm strategically frames an acquisition announcement in such a way that it provides assurance to investors that the acquisition is meant to exceed investors’ expectations about shareholder value creation. Managerial summary: We study why investors respond to some acquisitions positively and others negatively. We find that the way acquiring and target firms have created shareholder value in the past, and the information conveyed in the acquisition announcements are important determinants of investors’ differential reactions to acquisitions. Our findings show that while investors generally react positively to acquisitions by firms known for creating value either through dividends or growth, their reactions become negative when a firm known for value creation through dividends acquires a target known for value creation through growth. We further find that managers can favorably influence investor reactions by making it salient in the acquisition announcement how the acquisition is intended to exceed investors’ value creation expectations from the acquiring firm

Capital structure and its determinants in the United Kingdom – a decompositional analysis

Prior research on capital structure by Rajan and Zingales (1995) suggests that the level of gearing in UK companies is positively related to size and tangibility, and negatively correlated with profitability and the level of growth opportunities. However, as argued by Harris and Raviv (1991), 'The interpretation of results must be tempered by an awareness of the difficulties involved in measuring both leverage and the explanatory variables of interest'. In this study the focus is on the difficulties of measuring gearing, and the sensitivity of Rajan and Zingales' results to variations in gearing measures are tested. Based on an analysis of the capital structure of 822 UK companies, Rajan and Zingales' results are found to be highly definitional-dependent. The determinants of gearing appear to vary significantly, depending upon which component of debt is being analysed. In particular, significant differences are found in the determinants of long- and short-term forms of debt. Given that trade credit and equivalent, on average, accounts for more than 62% of total debt, the results are particularly sensitive to whether such debt is included in the gearing measure. It is argued, therefore, that analysis of capital structure is incomplete without a detailed examination of all forms of corporate debt

Ecology, not host phylogeny, shapes the oral microbiome in closely related species

Host-associated microbiomes are essential for a multitude of biological processes. Placed at the contact zone between external and internal environments, the little-studied oral microbiome has important roles in host physiology and health. Here, we investigate the roles of host evolutionary relationships and ecology in shaping the oral microbiome in three closely related gorilla subspecies (mountain, Grauer's, and western lowland gorillas) using shotgun metagenomics of 46 museum-preserved dental calculus samples. We find that the oral microbiomes of mountain gorillas are functionally and taxonomically distinct from the other two subspecies, despite close evolutionary relationships and geographic proximity with Grauer's gorillas. Grauer's gorillas show intermediate bacterial taxonomic and functional, and dietary profiles. Altitudinal differences in gorilla subspecies ranges appear to explain these patterns, suggesting a close connection between dental calculus microbiomes and the environment, likely mediated through diet. This is further supported by the presence of gorilla subspecies-specific phyllosphere/rhizosphere taxa in the oral microbiome. Mountain gorillas show a high abundance of nitrate-reducing oral taxa, which may promote adaptation to a high-altitude lifestyle by modulating blood pressure. Our results suggest that ecology, rather than evolutionary relationships and geographic distribution, shape the oral microbiome in these closely related species

Funding issues in a major strategic project: A case of investment appraisal

This paper describes and allows interaction with the issues involved in a major investment decision. In the summer of 1997, UKH faced major decisions concerning the purchase and funding of new plant and equipment. The authors were given excellent access to the company and were able to document key steps in the decision process. The issues are set out in a case study format that allows the reader to retrace the analyses carried out within UKH. A number of tasks are suggested that should test, develop and enhance a range of analytical, social and negotiation skills. The case can be handled in a variety of ways and most of the suggested tasks can be undertaken or omitted depending on the pedagogical objectives of the course/ instructor

Evidence for chemokine synergy during neutrophil migration in ARDS.

BACKGROUND: Acute respiratory distress syndrome (ARDS) is a life-threatening condition characterised by pulmonary oedema, respiratory failure and severe inflammation. ARDS is further characterised by the recruitment of neutrophils into the lung interstitium and alveolar space. OBJECTIVES: The factors that regulate neutrophil infiltration into the inflamed lung and our understanding of the pathomechanisms in ARDS remain incomplete. This study aimed at determining the role of the chemokine (C-C motif) ligand (CCL)2 and CCL7 in ARDS. METHODS: CCL2 and CCL7 protein levels were measured in bronchoalveolar lavage (BAL) fluid obtained from lipopolysaccharide(LPS)-challenged human volunteers and two separate cohorts of patients with ARDS. Neutrophil chemotaxis to ARDS BAL fluid was evaluated and the contribution of each was assessed and compared with chemokine (C-X-C motif) ligand 8 (CXCL8). Chemokine receptor expression on neutrophils from blood or BAL fluid of patients with ARDS was analysed by flow cytometry. RESULTS: CCL2 and CCL7 were significantly elevated in BAL fluid recovered from LPS-challenged volunteers and patients with ARDS. BAL fluid from patients with ARDS was highly chemotactic for human neutrophils and neutralising either CCL2 or CCL7 attenuated the neutrophil chemotactic response. Moreover, CCL2 and CCL7 synergised with CXCL8 to promote neutrophil migration. Furthermore, neutrophils isolated from the blood or BAL fluid differentially regulated the cell surface expression of chemokine (C-X-C motif) receptor 1 and C-C chemokine receptor type 2 during ARDS. CONCLUSION: This study highlights important inflammatory chemokines involved in regulating neutrophil migration, which may have potential value as therapeutic targets for the treatment of ARDS

Once-Daily Triple Therapy in Patients with COPD: Patient-Reported Symptoms and Quality of Life.

INTRODUCTION: Directly recorded patient experience of symptoms and health-related quality of life (HRQoL) can complement lung function and exacerbation rate data in chronic obstructive pulmonary disease (COPD) clinical studies. The FULFIL study recorded daily symptoms and activity limitation together with additional patient-reported outcomes of dyspnea and HRQoL, as part of the prespecified analyses. FULFIL co-primary endpoint data have been previously reported. METHODS: FULFIL was a phase III, 24-week, randomized, double-blind, double-dummy, multicenter study comparing once-daily single inhaler triple therapy [fluticasone furoate/umeclidinium/vilanterol (FF/UMEC/VI)] 100 µg/62.5 µg/25 µg with twice-daily inhaled corticosteroid/long-acting β2-agonist therapy [budesonide/formoterol (BUD/FOR)] 400 µg/12 µg in patients with symptomatic COPD at risk of exacerbations. A subset participated for 52 weeks. Patient-reported assessments were: Evaluating Respiratory Symptoms in COPD™ (E-RS: COPD), St George's Respiratory Questionnaire (SGRQ) for COPD, COPD Assessment Test (CAT), baseline and transitional dyspnea indices (TDI) and daily and global anchor questions for activity limitation. RESULTS: FF/UMEC/VI showed greater reductions from baseline in 4-weekly mean E-RS: COPD total and all subscale scores compared with BUD/FOR; differences were statistically significant (P < 0.05) at each time period. FF/UMEC/VI also demonstrated greater improvements from baseline at weeks 4 and 24 in SGRQ domain scores and TDI focal score compared with BUD/FOR. At weeks 4 and 24, improvements greater than the minimal clinically important difference from baseline were observed in CAT score with FF/UMEC/VI, but not BUD/FOR; differences were statistically significant (P ≤ 0.003). CONCLUSION: These findings demonstrate sustained daily symptom and HRQoL benefits of FF/UMEC/VI versus BUD/FOR. The inclusion of the CAT may provide data that are readily generalizable to everyday clinical practice. TRIAL REGISTRATION: ClinicalTrials.gov number: NCT02345161. FUNDING: GSK