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

Single-inhaler fluticasone furoate/umeclidinium/vilanterol versus fluticasone furoate/vilanterol plus umeclidinium using two inhalers for chronic obstructive pulmonary disease: A randomized non-inferiority study

Background: Single-inhaler fluticasone furoate/umeclidinium/vilanterol (FF/UMEC/VI) 100/62.5/25 μg has been shown to improve lung function and health status, and reduce exacerbations, versus budesonide/formoterol in patients with chronic obstructive pulmonary disease (COPD). We evaluated the non-inferiority of single-inhaler FF/UMEC/VI versus FF/VI + UMEC using two inhalers. Methods: Eligible patients with COPD (aged ≥40 years; ≥1 moderate/severe exacerbation in the 12 months before screening) were randomized (1:1; stratified by the number of long-acting bronchodilators [0, 1 or 2] per day during run-in) to receive 24-week FF/UMEC/VI 100/62.5/25 μg and placebo or FF/VI 100/25 μg + UMEC 62.5 μg; all treatments/placebo were delivered using the ELLIPTA inhaler once-daily in the morning. Primary endpoint: change from baseline in trough forced expiratory volume in 1 s (FEV1) at Week 24. The non-inferiority margin for the lower 95% confidence limit was set at − 50 mL. Results: A total of 1055 patients (844 [80%] of whom were enrolled on combination maintenance therapy) were randomized to receive FF/UMEC/VI (n = 527) or FF/VI + UMEC (n = 528). Mean change from baseline in trough FEV1 at Week 24 was 113 mL (95% CI 91, 135) for FF/UMEC/VI and 95 mL (95% CI 72, 117) for FF/VI + UMEC; the between-treatment difference of 18 mL (95% CI -13, 50) confirmed FF/UMEC/VI’s was considered non-inferior to FF/ VI + UMEC. At Week 24, the proportion of responders based on St George’s Respiratory Questionnaire Total score was 50% (FF/UMEC/VI) and 51% (FF/VI + UMEC); the proportion of responders based on the Transitional Dyspnea Index focal score was similar (56% both groups). A similar proportion of patients experienced a moderate/severe exacerbation in the FF/UMEC/VI (24%) and FF/VI + UMEC (27%) groups; the hazard ratio for time to first moderate/ severe exacerbation with FF/UMEC/VI versus FF/VI + UMEC was 0.87 (95% CI 0.68, 1.12). The incidence of adverse events was comparable in both groups (48%); the incidence of serious adverse events was 10% (FF/UMEC/VI) and 11% (FF/VI + UMEC). Conclusions: Single-inhaler triple therapy (FF/UMEC/VI) is non-inferior to two inhalers (FF/VI + UMEC) on trough FEV1 change from baseline at 24 weeks. Results were similar on all other measures of efficacy, health-related quality of life, and safety. Trial registration: GSK study CTT200812; ClinicalTrials.gov NCT02729051 (submitted 31 March 2016)

Noise-induced volatility of collective dynamics

"Noise-induced volatility" refers to a phenomenon of increased level of fluctuations in the collective dynamics of bistable units in the presence of a rapidly varying external signal, and intermediate noise levels. The archetypical signature of this phenomenon is that --beyond the increase in the level of fluctuations-- the response of the system becomes uncorrelated with the external driving force, making it different from stochastic resonance. Numerical simulations and an analytical theory of a stochastic dynamical version of the Ising model on regular and random networks demonstrate the ubiquity and robustness of this phenomenon, which is argued to be a possible cause of excess volatility in financial markets, of enhanced effective temperatures in a variety of out-of-equilibrium systems and of strong selective responses of immune systems of complex biological organisms. Extensive numerical simulations are compared with a mean-field theory for different network topologies

FULFIL Trial: Once-Daily Triple Therapy in Patients with Chronic Obstructive Pulmonary Disease

RATIONALE: Randomized data comparing triple therapy with dual inhaled corticosteroid (ICS)/long-acting β2-agonist (LABA) therapy in patients with chronic obstructive pulmonary disease (COPD) are limited. OBJECTIVES: We compared the effects of once-daily triple therapy on lung function and health-related quality of life with twice-daily ICS/LABA therapy. METHODS: FULFIL was a randomized, double-blind, double-dummy study comparing 24 weeks of once-daily triple therapy (fluticasone furoate/umeclidinium/vilanterol 100 μg/62.5 μg/25 μg; ELLIPTA(®) inhaler) with twice-daily ICS/LABA therapy (budesonide/formoterol 400 μg/12 μg; Turbuhaler(®)). A patient subgroup remained on blinded treatment for up to 52 weeks. Co-primary endpoints were change from baseline in trough forced expiratory volume in 1 second (FEV1) and in St George's Respiratory Questionnaire (SGRQ) Total score, at Week 24. MEASUREMENTS AND MAIN RESULTS: In the intent-to-treat population (N = 1,810) at Week 24 for triple therapy (n = 911) and ICS/LABA therapy (n = 899): mean change from baseline in FEV1 was 142 mL (95% confidence interval [CI], 126,158) and -29 mL (95% CI, -46,-13), respectively; mean change from baseline SGRQ was -6.6 units (95% CI, -7.4,-5.7) and -4.3 units (95% CI, -5.2,-3.4), respectively. For both endpoints, the between-group differences were statistically significant (P < 0.001). There was a statistically significant reduction in moderate/severe exacerbation rate with triple versus ICS/LABA therapy (35% reduction, 95% CI, 14,51; P = 0.002). The safety profile of triple therapy reflected the known profiles of the components. CONCLUSIONS: These results support the benefits of single inhaler triple therapy compared with ICS/LABA therapy, in patients with advanced COPD. Clinical trial registration available at www.clinicaltrials.gov, ID NCT02345161

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

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

Credit bureaus between risk-management, creditworthiness assessment and prudential supervision

"This text may be downloaded for personal research purposes only. Any additional reproduction for other purposes, whether in hard copy or electronically, requires the consent of the author. If cited or quoted, reference should be made to the full name of the author, the title, the working paper or other series, the year, and the publisher."This paper discusses the role and operations of consumer Credit Bureaus in the European Union in the context of the economic theories, policies and law within which they work. Across Europe there is no common practice of sharing the credit data of consumers which can be used for several purposes. Mostly, they are used by the lending industry as a practice of creditworthiness assessment or as a risk-management tool to underwrite borrowing decisions or price risk. However, the type, breath, and depth of information differ greatly from country to country. In some Member States, consumer data are part of a broader information centralisation system for the prudential supervision of banks and the financial system as a whole. Despite EU rules on credit to consumers for the creation of the internal market, the underlying consumer data infrastructure remains fragmented at national level, failing to achieve univocal, common, or defined policy objectives under a harmonised legal framework. Likewise, the establishment of the Banking Union and the prudential supervision of the Euro area demand standardisation and convergence of the data used to measure debt levels, arrears, and delinquencies. The many functions and usages of credit data suggest that the policy goals to be achieved should inform the legal and institutional framework of Credit Bureaus, as well as the design and use of the databases. This is also because fundamental rights and consumer protection concerns arise from the sharing of credit data and their expanding use

Automatic determination of Greulich and Pyle bone age in healthy Dutch children

Background: Bone age (BA) assessment is a routine procedure in paediatric radiology, for which the Greulich and Pyle (GP) atlas is mostly used. There is rater variability, but the advent of automatic BA determination eliminates this. Objective: To validate the BoneXpert method for automatic determination of skeletal maturity of healthy children against manual GP BA ratings. Materials and methods: Two observers determined GP BA with knowledge of the chronological age (CA). A total of 226 boys with a BA of 3-17 years and 179 girls with a BA of 3-15 years were included in the study. BoneXpert's estimate of GP BA was calibrated to agree on average with the manual ratings based on several studies, including the present study. Results: Seven subjects showed a deviation between manual and automatic BA in excess of 1.9 years. They were re-rated blindly by two raters. After correcting these seven ratings, the root mean square error between manual and automatic rating in the 405 subjects was 0.71 years (range 0.66-0.76 years, 95% CI). BoneXpert's GP BA is on average 0.28 and 0.20 years behind the CA for boys and girls, respectively. Conclusion: BoneXpert is a robust method for automatic determination of BA

Economic Activity of Firms and Asset Prices

In this review we survey the recent research on the fundamental determinants of stock returns. These studies explore how firms' systematic risk and their investment and production decisions are jointly determined in equilibrium. Models with production provide insights into several types of empirical patterns, including (a) the correlations between firms' economic characteristics and their risk premia, (b) the comovement of stock returns among firms with similar characteristics, and (c) the joint dynamics of asset returns and macroeconomic quantities. Moreover, by explicitly relating firms' stock returns and cash flows to fundamental shocks, models with production connect the analysis of financial markets with the research on the origins of macroeconomic fluctuations

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