Corporate governance and financial constraints on strategic turnarounds

The paper extends the Robbins and Pearce (1992) two-stage turnaround response model to include governance factors. In addition to the retrenchment and recovery, the paper proposes the addition of a realignment stage, referring specifically to the re-alignment of expectations of principal and agent groups. The realignment stage imposes a threshold that must be crossed before the retrenchment and hence recovery stage can be entered. Crossing this threshold is problematic to the extent that the interests of governance-stakeholder groups diverge in a crisis situation. The severity of the crisis impacts on the bases of strategy contingent asset valuation leading to the fragmentation of stakeholder interests. In some cases the consequence may be that management are prevented from carrying out turnarounds by governance constraints. The paper uses a case study to illustrate these dynamics, and like the Robbins and Pearce study, it focuses on the textile industry. A longitudinal approach is used to show the impact of the removal of governance constraints. The empirical evidence suggests that such financial constraints become less serious to the extent that there is a functioning market for corporate control. Building on governance research and turnaround literature, the paper also outlines the general case necessary and sufficient conditions for successful turnarounds

MPLW515L Is a Novel Somatic Activating Mutation in Myelofibrosis with Myeloid Metaplasia

BACKGROUND: The JAK2V617F allele has recently been identified in patients with polycythemia vera (PV), essential thrombocytosis (ET), and myelofibrosis with myeloid metaplasia (MF). Subsequent analysis has shown that constitutive activation of the JAK-STAT signal transduction pathway is an important pathogenetic event in these patients, and that enzymatic inhibition of JAK2V617F may be of therapeutic benefit in this context. However, a significant proportion of patients with ET or MF are JAK2V617F-negative. We hypothesized that activation of the JAK-STAT pathway might also occur as a consequence of activating mutations in certain hematopoietic-specific cytokine receptors, including the erythropoietin receptor (EPOR), the thrombopoietin receptor (MPL), or the granulocyte-colony stimulating factor receptor (GCSFR). METHODS AND FINDINGS: DNA sequence analysis of the exons encoding the transmembrane and juxtamembrane domains of EPOR, MPL, and GCSFR, and comparison with germline DNA derived from buccal swabs, identified a somatic activating mutation in the transmembrane domain of MPL (W515L) in 9% (4/45) of JAKV617F-negative MF. Expression of MPLW515L in 32D, UT7, or Ba/F3 cells conferred cytokine-independent growth and thrombopoietin hypersensitivity, and resulted in constitutive phosphorylation of JAK2, STAT3, STAT5, AKT, and ERK. Furthermore, a small molecule JAK kinase inhibitor inhibited MPLW515L-mediated proliferation and JAK-STAT signaling in vitro. In a murine bone marrow transplant assay, expression of MPLW515L, but not wild-type MPL, resulted in a fully penetrant myeloproliferative disorder characterized by marked thrombocytosis (Plt count 1.9–4.0 × 10 (12)/L), marked splenomegaly due to extramedullary hematopoiesis, and increased reticulin fibrosis. CONCLUSIONS: Activation of JAK-STAT signaling via MPLW515L is an important pathogenetic event in patients with JAK2V617F-negative MF. The bone marrow transplant model of MPLW515L-mediated myeloproliferative disorders (MPD) exhibits certain features of human MF, including extramedullary hematopoiesis, splenomegaly, and megakaryocytic proliferation. Further analysis of positive and negative regulators of the JAK-STAT pathway is warranted in JAK2V617F-negative MPD

A phase 1b/2b multicenter study of oral panobinostat plus azacitidine in adults with MDS, CMML or AML with less than or equal to 30% blasts

Treatment with azacitidine (AZA), a demethylating agent, prolonged overall survival (OS) vs conventional care in patients with higher-risk myelodysplastic syndromes (MDS). As median survival with monotherapy is <2 years, novel agents are needed to improve outcomes. This phase 1b/2b trial (n=113) was designed to determine the maximum tolerated dose (MTD) or recommended phase 2 dose (RP2D) of panobinostat (PAN)+AZA (phase 1b) and evaluate the early efficacy and safety of PAN+AZA vs AZA monotherapy (phase 2b) in patients with higher-risk MDS, chronic myelomonocytic leukemia or oligoblastic acute myeloid leukemia with <30% blasts. The MTD was not reached; the RP2D was PAN 30 mg plus AZA 75 mg/m2. More patients receiving PAN+AZA achieved a composite complete response ([CR)+morphologic CR with incomplete blood count+bone marrow CR (27.5% (95% CI, 14.6–43.9%)) vs AZA (14.3% (5.4–28.5%)). However, no significant difference was observed in the 1-year OS rate (PAN+AZA, 60% (50–80%); AZA, 70% (50–80%)) or time to progression (PAN+AZA, 70% (40–90%); AZA, 70% (40–80%)). More grade 3/4 adverse events (97.4 vs 81.0%) and on-treatment deaths (13.2 vs 4.8%) occurred with PAN+AZA. Further dose or schedule optimization may improve the risk/benefit profile of this regimen

Earnings management and audit quality:stakeholders’ perceptions

This paper examines the perceptions of Libyan Commercial Banks’ (LCBs) stakeholders regarding the role of the external auditor in relation to earnings management (EM). A total of 28 semi-structured interviews were carried out with a range of LCB stakeholders comprising preparers of financial statements, users, regulators and academics. A questionnaire survey of stakeholders which yielded 102 Responses (response rate 53%) was also carried out. A variety of views were held which varied to some extent according to stakeholder group. A widely held perception amongst interviewees was that the auditor has the ability to detect EM practices but may not be able to prevent it. However questionnaire respondents were, in aggregate, more confident of the auditor’s ability to deter EM due to the influence of the audit report. The paper provides insights into stakeholders’ perceptions of the quality of bank audits. The findings are of particular relevance to regulators, and specifically, the Central Bank of Libya. Perceptions of audit quality raise questions about its guidance and regulations especially in connection with audit firm rotation. Perceptions of audit quality, and therefore, of the credibility of financial statements should be of interest to all stakeholders. The importance of the banking sector for society has been amply demonstrated in recent years. A well-functioning audit function is a key component of its regulation. To the best of our knowledge, this paper is the first to examine issues related to banks’ audit quality and audit firm rotation in Libya

Efficacy and safety of avapritinib in advanced systemic mastocytosis:interim analysis of the phase 2 PATHFINDER trial

Advanced systemic mastocytosis (AdvSM) is a rare, KIT D816V-driven hematologic neoplasm characterized by mast cell infiltration and shortened survival. We report the results of a prespecified interim analysis of an ongoing pivotal single-arm phase 2 trial (no. NCT03580655) of avapritinib, a potent, selective KIT D816V inhibitor administered primarily at a once-daily starting dose of 200 mg in patients with AdvSM (n = 62). The primary endpoint was overall response rate (ORR). Secondary endpoints included mean baseline change in AdvSM–Symptom Assessment Form Total Symptom Score and quality of life, time to response, duration of response, progression-free survival, overall survival, changes in measures of disease burden and safety. The primary endpoint was successfully met (P = 1.6 × 10(-9)), with an ORR of 75% (95% confidence interval 57–89) in 32 response-evaluable patients with AdvSM who had sufficient follow-up for response assessment, including 19% with complete remission with full or partial hematologic recovery. Reductions of ≥50% from baseline in serum tryptase (93%), bone marrow mast cells (88%) and KIT D816V variant allele fraction (60%) were observed. The most frequent grade ≥3 adverse events were neutropenia (24%), thrombocytopenia (16%) and anemia (16%). Avapritinib demonstrated a high rate of clinical, morphological and molecular responses and was generally well tolerated in patients with AdvSM

Debt Maturity Choices, Multi-stage Investments and Financing Constraints

We develop a dynamic investment options framework with optimal capital structure and analyze the effect of debt maturity. We find that in the absence of financing constraints short-term debt maximizes firm value. In contrast with most literature results, in the absence of constraints, higher volatility may increase initial debt for firms with low initial revenues, issuing long term debt that expires after the investment option maturity. This effect, which is due to the option value of receiving the value of assets and remaining tax savings, does not hold for short term debt and firms with high profitability, where an increase in volatility reduces the firm value. The importance of short-term debt is reduced in the presence of non-negative equity net worth or debt financing constraints and firms behave more conservatively in the use of initial debt. With non-negative equity net worth, higher volatility has adverse effects on the firm value, while with debt financing constraints higher volatility may enhance firm value for firms with relatively low revenue that have out-of-the-money investment options

The Impact of Error-Management Climate, Error Type and Error Originator on Auditors’ Reporting Errors Discovered on Audit Work Papers

We examine factors affecting the auditor’s willingness to report their own or their peers’ self-discovered errors in working papers subsequent to detailed working paper review. Prior research has shown that errors in working papers are detected in the review process; however, such detection rates only rarely exceed 50% of the seeded errors. Hence, measures that encourage auditors to be alert to their own (or their peers’) potential errors any time they revisit the audit working papers may be valuable in detecting such residual errors and potentially correcting them before damage occurs to the audit firm or its client. We hypothesize that three factors affect the auditor’s willingness to report post detailed review discovered errors: the local office error-management climate (open versus blame), the type of error (mechanical versus conceptual) and who committed the error (the individual who committed the error (self) or a peer). Local office error-management climate is said to be open and supportive where errors and mistakes are accepted as part of everyday life as long as they are learned from and not repeated. In alternative, a blame error-management climate focuses on a “get it right the first time” culture where mistakes are not tolerated and blame gets attached to those admitting to or found committing such errors. We find that error-management climate has a significant overall effect on auditor willingness to report errors, as does who committed the error originally. We find both predicted and unpredicted significant interactions among the three factors that qualify these observed significant main effects. We discuss implications for audit practice and further research

Earnings management and deferred tax

This study analyses the deferred tax provisions of firms during a period in which the firms' incentive to manage earnings may have been be particularly strong and in which firms made disclosures in relation to partial deferred tax provisions which revealed readily their under- or over-provision of deferred tax. Using a sample of 58 firms for the two years 1991 and 1992, the magnitude of the under- or over-provisions found is economically significant, amounting, on average, to around 20% of the maximum potential deferred tax liability and, more important, 9% of profit or loss before tax. This paper takes such under- and over-provision of deferred tax and investigates its relationship with a number of posited explanatory variables - as derived and developed from the earnings management literature. In a multivariate setting it is found that the level of under-/over-provision is related to the following characteristics: whether the firm is reporting a pre-tax loss or a pre-tax profit; the extent of adjustment to prior year tax; and the level of surplus advance corporation tax (ACT). These findings support a general profit- smoothing hypothesis, and the finding in relation to ACT suggests that firms take an overall view in determining the required level of provision in order to manage earnings, rather than concentrating upon particular line items. There is also weaker evidence of a relationship between the level of under-/over-provision and firms' levels of gearing and effective tax rates