Rare region effects at classical, quantum, and non-equilibrium phase transitions

Rare regions, i.e., rare large spatial disorder fluctuations, can dramatically change the properties of a phase transition in a quenched disordered system. In generic classical equilibrium systems, they lead to an essential singularity, the so-called Griffiths singularity, of the free energy in the vicinity of the phase transition. Stronger effects can be observed at zero-temperature quantum phase transitions, at nonequilibrium phase transitions, and in systems with correlated disorder. In some cases, rare regions can actually completely destroy the sharp phase transition by smearing. This topical review presents a unifying framework for rare region effects at weakly disordered classical, quantum, and nonequilibrium phase transitions based on the effective dimensionality of the rare regions. Explicit examples include disordered classical Ising and Heisenberg models, insulating and metallic random quantum magnets, and the disordered contact process.Comment: Topical review, 68 pages, 14 figures, final version as publishe

Where do firms manage earnings?

Despite decades of research on how, why, and when companies manage earnings, there is a paucity of evidence about the geographic location of earnings management within multinational firms. In this study, we examine where companies manage earnings using a sample of 2,067 U.S. multinational firms from 1994 to 2009. We predict and find that firms with extensive foreign operations in weak rule of law countries have more foreign earnings management than companies with subsidiaries in locations where the rule of law is strong. We also find some evidence that profitable firms with extensive tax haven subsidiaries manage earnings more than other firms and that the earnings management is concentrated in foreign income. Apart from these results, we find that most earnings management takes place in domestic income, not foreign income.Arthur Andersen (Firm) (Arthur Andersen Faculty Fund

CEO Profile and Earnings Quality

This paper introduces the PSCORE, which aggregates nine personal characteristics of chief executive officers (CEOs), to signal the quality of earnings. The PSCORE is a composite score based on publicly available data on CEOs. The study reports strong positive relationships between the PSCORE and two different proxies for earnings quality, (i) discretionary accruals and (ii) financial statement errors, measured by deviations of the first digits of figures reported in financial statements from those expected by Benford’s Law. Further analyses indicate that the relationships between the PSCORE and the proxies for earnings quality become more pronounced when CEOs have high equity-based compensation incentives. The findings have some implications for practitioners

Portfolio manager ownership and mutual fund performance

This paper examines the association between a mutual fund manager's personal fund investment and mutual fund performance. Newly-released managerial ownership disclosures reveal that fund ownership varies across mutual fund managers and, in many instances, is quite large. I find that mutual fund returns are increasing in the level of managerial fund investment, consistent with managerial ownership realigning decision-maker and shareholder interests. Also consistent with the reduction of agency costs, I find that managerial ownership is inversely related to fund turnover, which could affect both tax and trading costs. However, I do not find any association between portfolio manager ownership and a mutual fund's tax burden