The Impact of Earnings on the Pricing of Credit Default Swaps

This study evaluates the impact of earnings on firm credit risk as captured by Credit Default Swaps (CDS). We find that earnings (changes) are negatively correlated with one-year swap premia (changes) after controlling for equity returns but not with longer term premia (changes). We also find that earnings surprises are significantly correlated with one-year CDS premia changes in the short window surrounding preliminary earnings dates and that absolute earnings surprises are significantly correlated with absolute one-year CDS premia changes in the short window surrounding SEC filing dates. These results suggest that high earnings convey favorable information about the short-term default risk of firms but not about the long term default risk. We further document that accruals/cash flow information conveyed by SEC filings provides information about long-term credit risk. Furthermore, the empirical results are consistent with structural and hybrid model-driven implications of CDS pricing

The pricing of conservative accounting and the measurement of conservatism at the firm-year level

This paper analyzes the relation between equity prices and conditional conservatism and introduces a new measure of conservatism at the firm-year level. We show that the asymmetric properties of conservative accounting, the existence of non-accounting sources of information, and the properties of GAAP related to special items combine to generate a nonlinear relation between unexpected equity returns and earnings news (the shock to expected current and future earnings). Based on this model, we construct a conservatism ratio (CR) defined as the ratio of the current earnings shock to earnings news. CR measures the proportion of the total shock to expected current and future earnings recognized in current year earnings. Ranking firms according to CR, we show empirically that higher CR firms have more leverage, increased volatility of returns, more incidence of losses, more negative accruals, and increased volatility of earnings and accruals, consistent with the literature on conservative accounting

Accounting Restatements: Are they Always Bad News for Investors?

This study investigates a large sample of financial statement restatements over the period 1986-2001, and compares restatements caused by changes in accounting principles to those caused by errors. Typically, investors perceive restatements as negative signals due to three potential reasons: (i) the restatement indicates problems with the accounting system that may be manifestations of broader operational (and managerial) problems, (ii) the restatement causes downward revisions in future cash flows expectations, and (iii) the restatement indicates managerial attempts to cover up income decline through “cooking the books”. We provide evidence that market reactions to restatements due to errors are generally negative. We show that these restatements come in periods of declining profits and lower profits than industry peers for the restating firms, consistent with both opportunistic managerial behavior and operational problems. However, investors’ reactions to income-increasing restatements due to errors are not different from zero, suggesting that the perceived failure of the accounting system is just offset by the upward revisions in future cash flow expectations in these cases of income-increasing errors. Thus, our combined results show that not all restatements are alike; users of the information need to carefully assess the existence and potential effects of the three factors that typically cause the downward revisions in stock prices on a case by case basis

The Impact of Earnings on the Pricing of Credit Default Swaps

This study evaluates the impact of earnings on credit risk in the Credit Default Swap (CDS) market using levels, changes, and event study analyses. We find that earnings (cash flows, accruals) of reference firms are negatively and significantly correlated with the level of CDS premia, consistent with earnings (cash flows, accruals) conveying information about default risk. Based on the changes analysis, a 1 percent increase in ROA decreases CDS rates significantly by about 5 percent. We also find that (1) CDS premia are more highly correlated with below-median earnings than with above-median earnings and (2) CDS premia are more highly correlated with earnings of low-rated firms than with earnings of high-rated firms. Evidence indicates further that short-window earnings surprises are negatively and significantly correlated with CDS premia changes in the three-day window surrounding the preliminary earnings announcement, although the impact is concentrated in the shorter maturities

Effects of Two Commercial Electronic Prescribing Systems on Prescribing Error Rates in Hospital In-Patients: A Before and After Study

In a before-and-after study, Johanna Westbrook and colleagues evaluate the change in prescribing error rates after the introduction of two commercial electronic prescribing systems in two Australian hospitals

LSST: from Science Drivers to Reference Design and Anticipated Data Products

(Abridged) We describe here the most ambitious survey currently planned in the optical, the Large Synoptic Survey Telescope (LSST). A vast array of science will be enabled by a single wide-deep-fast sky survey, and LSST will have unique survey capability in the faint time domain. The LSST design is driven by four main science themes: probing dark energy and dark matter, taking an inventory of the Solar System, exploring the transient optical sky, and mapping the Milky Way. LSST will be a wide-field ground-based system sited at Cerro Pach\'{o}n in northern Chile. The telescope will have an 8.4 m (6.5 m effective) primary mirror, a 9.6 deg$^2$ field of view, and a 3.2 Gigapixel camera. The standard observing sequence will consist of pairs of 15-second exposures in a given field, with two such visits in each pointing in a given night. With these repeats, the LSST system is capable of imaging about 10,000 square degrees of sky in a single filter in three nights. The typical 5$\sigma$ point-source depth in a single visit in $r$ will be $\sim 24.5$ (AB). The project is in the construction phase and will begin regular survey operations by 2022. The survey area will be contained within 30,000 deg$^2$ with $\delta<+34.5^\circ$, and will be imaged multiple times in six bands, $ugrizy$, covering the wavelength range 320--1050 nm. About 90\% of the observing time will be devoted to a deep-wide-fast survey mode which will uniformly observe a 18,000 deg$^2$ region about 800 times (summed over all six bands) during the anticipated 10 years of operations, and yield a coadded map to $r\sim27.5$. The remaining 10\% of the observing time will be allocated to projects such as a Very Deep and Fast time domain survey. The goal is to make LSST data products, including a relational database of about 32 trillion observations of 40 billion objects, available to the public and scientists around the world.Comment: 57 pages, 32 color figures, version with high-resolution figures available from https://www.lsst.org/overvie

MRN complex function in the repair of chromosomal Rag-mediated DNA double-strand breaks

The Mre11–Rad50–Nbs1 (MRN) complex functions in the repair of DNA double-strand breaks (DSBs) by homologous recombination (HR) at postreplicative stages of the cell cycle. During HR, the MRN complex functions directly in the repair of DNA DSBs and in the initiation of DSB responses through activation of the ataxia telangiectasia-mutated (ATM) serine-threonine kinase. Whether MRN functions in DNA damage responses before DNA replication in G0/G1 phase cells has been less clear. In developing G1-phase lymphocytes, DNA DSBs are generated by the Rag endonuclease and repaired during the assembly of antigen receptor genes by the process of V(D)J recombination. Mice and humans deficient in MRN function exhibit lymphoid phenotypes that are suggestive of defects in V(D)J recombination. We show that during V(D)J recombination, MRN deficiency leads to the aberrant joining of Rag DSBs and to the accumulation of unrepaired coding ends, thus establishing a functional role for MRN in the repair of Rag-mediated DNA DSBs. Moreover, these defects in V(D)J recombination are remarkably similar to those observed in ATM-deficient lymphocytes, suggesting that ATM and MRN function in the same DNA DSB response pathways during lymphocyte antigen receptor gene assembly

The development, design, testing, refinement, simulation and application of an evaluation framework for communities of practice and social-professional networks

Background. Communities of practice and social-professional networks are generally considered to enhance workplace experience and enable organizational success. However, despite the remarkable growth in interest in the role of collaborating structures in a range of industries, there is a paucity of empirical research to support this view. Nor is there a convincing model for their systematic evaluation, despite the significant potential benefits in answering the core question: how well do groups of professionals work together and how could they be organised to work together more effectively? This research project will produce a rigorous evaluation methodology and deliver supporting tools for the benefit of researchers, policymakers, practitioners and consumers within the health system and other sectors. Given the prevalence and importance of communities of practice and social networks, and the extent of investments in them, this project represents a scientific innovation of national and international significance. Methods and design. Working in four conceptual phases the project will employ a combination of qualitative and quantitative methods to develop, design, field-test, refine and finalise an evaluation framework. Once available the framework will be used to evaluate simulated, and then later existing, health care communities of practice and social-professional networks to assess their effectiveness in achieving desired outcomes. Peak stakeholder groups have agreed to involve a wide range of members and participant organisations, and will facilitate access to various policy, managerial and clinical networks. Discussion. Given its scope and size, the project represents a valuable opportunity to achieve breakthroughs at two levels; firstly, by introducing novel and innovative aims and methods into the social research process and, secondly, through the resulting evaluation framework and tools. We anticipate valuable outcomes in the improved understanding of organisational performance and delivery of care. The project's wider appeal lies in transferring this understanding to other health jurisdictions and to other industries and sectors, both nationally and internationally. This means not merely publishing the results, but contextually interpreting them, and translating them to advance the knowledge base and enable widespread institutional and organisational application

The FANCM:p.Arg658* truncating variant is associated with risk of triple-negative breast cancer

Abstract: Breast cancer is a common disease partially caused by genetic risk factors. Germline pathogenic variants in DNA repair genes BRCA1, BRCA2, PALB2, ATM, and CHEK2 are associated with breast cancer risk. FANCM, which encodes for a DNA translocase, has been proposed as a breast cancer predisposition gene, with greater effects for the ER-negative and triple-negative breast cancer (TNBC) subtypes. We tested the three recurrent protein-truncating variants FANCM:p.Arg658*, p.Gln1701*, and p.Arg1931* for association with breast cancer risk in 67,112 cases, 53,766 controls, and 26,662 carriers of pathogenic variants of BRCA1 or BRCA2. These three variants were also studied functionally by measuring survival and chromosome fragility in FANCM−/− patient-derived immortalized fibroblasts treated with diepoxybutane or olaparib. We observed that FANCM:p.Arg658* was associated with increased risk of ER-negative disease and TNBC (OR = 2.44, P = 0.034 and OR = 3.79; P = 0.009, respectively). In a country-restricted analysis, we confirmed the associations detected for FANCM:p.Arg658* and found that also FANCM:p.Arg1931* was associated with ER-negative breast cancer risk (OR = 1.96; P = 0.006). The functional results indicated that all three variants were deleterious affecting cell survival and chromosome stability with FANCM:p.Arg658* causing more severe phenotypes. In conclusion, we confirmed that the two rare FANCM deleterious variants p.Arg658* and p.Arg1931* are risk factors for ER-negative and TNBC subtypes. Overall our data suggest that the effect of truncating variants on breast cancer risk may depend on their position in the gene. Cell sensitivity to olaparib exposure, identifies a possible therapeutic option to treat FANCM-associated tumors