Business Commons^™

An Evaluation Of Security In Blockchain-Based Sharing Of Student Records In Higher Education, Timothy Arndt, Angela Guercio, Yonghun Chae

Information Systems

Blockchain has recently taken off as a disruptive technology, from its initial use in cryptocurrencies to wider applications in areas such as property registration and insurance due to its characteristic as a distributed ledger which can remove the need for a trusted third party to facilitate transactions. This spread of the technology to new application areas has been driven by the development of smart contracts – blockchain-based protocols which can automatically enforce a contract by executing code based on the logic expressed in the contract. One exciting area for blockchain is higher education. Students in higher education are ever more …

How Incidents Impact Congestion On Roadways: A Queuing Network Approach, Pedro Cesar Lopes Gerum, Melike Baykal-Gursoy

Supply Chain Management

Motivated by the need for transportation infrastructure and incident management planning, we study traffic density under non-recurrent congestion. This paper provides an analytical solution approximating the stationary distribution of traffic density in roadways where deterioration of service occurs unpredictably. The proposed solution generalizes a queuing model discussed in the literature to long segments that are not space-homogeneous. We compare single and tandem queuing approaches to segments of different lengths and verify whether each model is appropriate. A single-queue approach works sufficiently well in segments with similar traffic behavior across space. In contrast, a tandem-queue approach more appropriately describes the density …

How Random Incidents Affect Travel-Time Distributions, Melike Baykal-Gürsoy, Andrew Reed Benton, Pedro Cesar Lopes Gerum, Marcelo Figueroa Candia

Supply Chain Management

We present a novel analytical model to approximate the travel-time distribution of vehicles traversing a freeway corridor that experiences random quality of service degradations due to non-recurrent incidents. The proposed model derives the generating function of travel times in closed-form using clearance time, incident frequency and severity, and other ordinary traffic characteristics. We validate the model using data from a freeway corridor where weather events and traffic accidents serve as the principal causes of service degradation. The resulting model is equivalent in performance to widely used methodologies while uniquely providing a clear connection on how incidents affect travel time distribution. …

Collaborative Test Bank Development: Multi-Institutional & Pandemic Style, Anita Walz, Eli Jamison, Candice Vander Weerdt, Mandi Goodsett

Michael Schwartz Library Publications

During 2020-21 two business faculty from different institutions together with OER librarians, undergraduate students, and graduate assistants conspired to create a faculty-access-only test bank aligned to senior undergraduate-level open textbook, Strategic Management (2020) and AACSB Standards. Test bank development followed instructional and ethical practices for non-disposable assignments including faculty development of assignments, student ownership of student work, student “opt in” to go public, choice of no or some student attribution, financial incentives for various project participants, project MOUs, professional copyediting, and public release to vetted requestors. This presentation describes our respective motivations, process, how we found one another, why the …

Payout Policy, Managerial Perquisites, And Sticky Sg&A Costs, Deborah Smith

Business Faculty Publications

Background

Sticky SG&A costs provide a novel opportunity to investigate whether payout policy serves as a remedy for management overspending on perquisites that are embedded in SG&A expenses. Payout policy, especially under strong governance, may reduce overspending. Another possibility is that management may use sales declines opportunistically to repurchase shares when sales are expected to rebound.

Methods

Regression analysis is used to examine the effect of payout mechanisms (dividends, share repurchases, and combinations thereof) and shareholder rights (EIndex) to determine whether managerial overspending on perquisites is reduced through payout policy.

Results

The results indicate that dividends and share repurchases are …

Does Industry Timing Ability Of Hedge Funds Predict Their Future Performance, Survival, And Fund Flows?, Turan G. Bali, Stephen J. Brown, Mustafa O. Caglayan, Umut Celiker

Business Faculty Publications

This paper investigates hedge funds’ ability to time industry-specific returns and shows that funds’ timing ability in the manufacturing industry improves their future performance, probability of survival, and ability to attract more capital. The results indicate that the best industry-timing hedge funds in the manufacturing sector have the highest return exposure to earnings surprises. This, together with persistently sticky earnings surprises, transparent information environment in regards to earnings releases, and large post-earnings-announcement drift in the manufacturing industry, explain to a great extent why best-timing hedge funds can generate significantly larger future returns compared to worst-timing hedge funds.

A Dynamic Computational Model Of Social Stigma, Myong-Hun Hun Chang, Joseph1 Harrington Jr.

Business Faculty Publications

No abstract provided.

State Ownership And Banks Information Rents: Evidence From China, Fengyan Ru, Qi Liang, Wei Wang

Business Faculty Publications

In a lending relationship, a bank with an information advantage regarding its client tends to hold up the borrower and charge higher interest rates. We conjecture that state-owned enterprises (SOEs), with worse information asymmetry, are subject to greater information
rents. State-owned banks place less emphasis on information production and hence extract lower rents compared to profit maximizing private banks. We use the decline of loan interest rates around the borrowers’ equity initial public offerings (IPOs) as the proxy of banks’ information rents. We find SOEs in China experience
larger declines in loan interest rates around their IPOs; the central government-controlled …

Traffic Density On Corridors Subject To Incidents: Models For Long-Term Congestion Management, Pedro Cesar Lopes Gerum, Andrew Reed Benton, Melike Baykal-Gürsoy

Supply Chain Management

The purpose of this research is to provide a faster and more efficient method to determine traffic density behavior for long-term congestion management using minimal statistical information. Applications include road work, road improvements, and route choice. To this end, this paper adapts and generalizes two analytical models (for non-peak and peak hours) for the probability mass function of traffic density for a major highway. It then validates the model against real data. The studied corridor has a total of 36 sensors, 18 in each direction, and the traffic experiences randomly occurring service deterioration due to accidents and inclement weather such …

Data-Driven Predictive Maintenance Scheduling Policies For Railways, Pedro Cesar Lopes Gerum, Ayca Altay, Melike Baykal-Gürsoy

Supply Chain Management

Inspection and maintenance activities are essential to preserving safety and cost-effectiveness in railways. However, the stochastic nature of railway defect occurrence is usually ignored in literature; instead, defect stochasticity is considered independently of maintenance scheduling. This study presents a new approach to predict rail and geometry defects that relies on easy-to-obtain data and integrates prediction with inspection and maintenance scheduling activities. In the proposed approach, a novel use of risk-averse and hybrid prediction methodology controls the underestimation of defects. Then, a discounted Markov decision process model utilizes these predictions to determine optimal inspection and maintenance scheduling policies. Furthermore, in the …

Does Institutional Ownership Affect Information Sharing With Independent Board Members?, Deborah D. Smith, Heidi H. Meier, Pervaiz Alam

Business Faculty Publications

Research Question This is an investigation of board independence to determine whether management shares information with the board, or withholds information to retain autonomy. A key contribution is to examine the interaction of institutional ownership with the main test variables to determine whether institutional governance influences the information environment as board independence is increased. Research Findings The results show that information asymmetry decreases internally and increases externally as board independence increases, yet institutional ownership appears to moderate or reverse this relationship. The following variables are used to explain why managers of firms are likely to have more information than outsiders: …

Incorporating Active Adjustment Into A Financing Based Model Of Capital Structure, Neal Maroney, Wei Wang, M. Kabir Hassan

Business Faculty Publications

The conventional partial adjustment model, which focuses on leverage evolution, has difficulty identifying deliberate capital structure adjustments as it confounds financing decisions with the mechanical autocorrelation of leverage. We propose and estimate a financing-based partial adjustment model that separates the effects of financing decisions on leverage evolution from mechanical evolution. The speed of adjustment (SOA) is firm specific and stochastic, and active targeting of capital structure has a multiplier effect that depends on the size of financial deficit. Overall, we find expected SOA from active rebalancing
(30%) more than doubles what is expected from mechanical mean reversion alone (13%).

Governance Structure And Performance Of Private Family Firms, Tarun Mukherjee, Vighneshwara Swami, Wei Wang

Business Faculty Publications

A debate exists on the issue of whether a governance system is value additive or even necessary for a privately-held firm. One side of the debate suggests that, since agency problems do not exist in a small private firm, it does not need a costly governance system. The other side argues that a private firm indeed faces agency costs in the form of altruism and, therefore, could extract net gains from a governance system. In this paper, we empirically investigate whether a good governance system crates or destroys value of private family firms. We first demonstrate that a multifamily firm …

Market Share Growth And Stock Returns, Jaideep Chowdhury, Gokhan Sonaer, Umut Celiker

Business Faculty Publications

We find a negative relationship between market share growth and subsequent stock returns, three- and four-factor alphas. We report the potential explanatory role of market share growth in explaining subsequent average monthly stock returns. High (Low) market share growth firms report good (poor) operating performance and positive (negative) SUEs in the quarter in which market share growth is measured and investors overact to that good (bad) news. However, high (low) market share growth firms experience decrease (increase) in operating performance and SUEs in the subsequent quarters resulting in corrections in investors’ expectations and subsequent lower (higher) stock returns.

An Examination Of State And Local Government Pension Underfunding –Implications And Guidance For Governance And Regulation, Craig L. Foltin

Business Faculty Publications

State and local government pension underfunding has become a major focus of public policy debate due in large part to recent Governmental Accounting Standards Board (GASB) actions that have brought national attention to the issue. The extent of these plans underfunding has been debated, along with the necessity for state government intervention and the level of regulatory actions that should be enacted by state legislatures. State and local public pension plans do not fall under the enumerated powers of the federal government in the Constitution and are therefore left to each individual state to regulate. The amount of plan underfunding …

Hedge Fund Vs. Non-Hedge Fund Institutional Demand And The Book-To-Market Effect, Mustafa Onur Caglayan, Umut Celiker, Gokhan Sonaer

Business Faculty Publications

Recent studies have documented that institutional investors trade contrary to the predictions of the book-to market anomaly. We examine whether a prominent sub-group of institutional investors, namely hedge funds, differ from other institutions in terms of their trading behavior with respect to the book-to-market effect. We find that hedge funds significantly alter their trading preferences with respect to growth and value stocks, after book-to-market values become public information. More importantly, we show that hedge funds are better able to identify overpriced growth stocks compared to other institutions. Our results contribute to the literature on institutional investors’ trading with respect to …

The Impact Of Client Information Technology Capability On Audit Pricing, Benjamin Hoffman, R. Drew Sellers, Justyna Skomra

Business Faculty Publications

This paper explores the question: “How does a client's information technology (IT) capability influence audit pricing?” Company data for the years 2004 through 2012 are employed. Firms appearing on the InformationWeek 500 (IW500) annual list of U.S. organizations with superior IT functions serve as a proxy for companies with superior IT capability. Our findings suggest that companies with superior IT capabilities incur higher levels of audit fees. In addition, as client size increases, the audit fees of firms with advanced IT capabilities increase at a greater rate than firms without such capabilities. These findings contrast with prior research …

Legislation Meets Tradition: Interpretations And Implications Of The Volunteer Protection Act For Nonprofit Organizations As Viewed Through The Lens Of Hermeneutics, Patricia Groble, Nicholas C. Zingale, Joseph Mead

All Maxine Goodman Levin School of Urban Affairs Publications

Volunteers enable nonprofit organizations to reach more clients and more effectively fulfill their missions. However, the good done by these volunteers may be offset by their careless behavior. Rising fears that resulting lawsuits and monetary damages would deter potential volunteers from volunteering caused Congress to enact the Volunteer Protection Act. This research studies court decisions to ascertain whether the law fulfills its purpose and considers the implications of these interpretations for nonprofit managers. It also tests the usefulness of the hermeneutical approach to legal interpretation and to determine how the Act has changed as a result of these court decisions.

Market Imperfections, Macroeconomic Conditions, And Capital Structure Dynamics: A Cross-Country Study, Moonsoo Kang, Wei Wang, Ying Xiao

Business Faculty Publications

This paper investigates how “systematic” adjustment costs proxied by market imperfections and macroeconomic conditions affect capital structure dynamics in a cross-country setting. We document substantial variations in firms’ capital structure adjustments across countries and, particularly, over time. Consistent with adjustment costs impeding firms from rebalancing their capital structures, worse market imperfections are associated with slower speeds of adjustment (SOA) and larger leverage deviations. Intertemporally, capital structure adjustment is procyclical, with SOA increasing by 0.9 percentage point for a one-percentage-point increase in GDP growth rate. The procyclicality is attributable to good macroeconomic conditions mitigating market imperfections through channels of 1) facilitating …

Managerial Conservatism, Board Independence And Corporate Innovation, Jun Lu, Wei Wang

Business Faculty Publications

Using panel data on U.S. public firms, we document a positive effect of board independence on corporate innovation. This effect is concentrated in firms that are larger in size, in the non-technical industries, facing less product market competition, and using more debt, where managers are more likely to be excessively risk averse. We establish causality of board independence on innovation using a difference-in-difference approach that exploits an exogenous shock to board composition, namely, the mandate of a majority of outside directors on company boards by NYSE and NASDAQ in response to the passage of Sarbanes-Oxley Act in 2002. We further …

Task-Representation Fit’S Impact On Cognitive Effort In The Context Of Decision Timeliness And Accuracy: A Cognitive Fit Perspective, Dinko Bacic, Raymond M. Henry

Business Faculty Publications

Cognitive fit theory (CFT) has emerged as a dominant theoretical lens to explain decision performance when using data representations to solve decision making tasks. Despite the apparent consensus regarding cognitive effort's theoretical criticality in CFT-based research, researchers have made limited attempts to evaluate and empirically measure cognitive effort and its impact. Unlike prior CFT-based literature that has theorized only the role of cognitive effort, in our empirical study, we presented information and tasks to 68 participants and directly measured cognitive effort to understand how cognitive fit impacts it and how it impacts decision performance. We found that 1) cognitive fit …

Avoiding China's Capital Market: Evidence From Hong Kong-Listed P-Chips And Red-Chips, Weishi Jia, Grace Powell, Jingram Zhao

Business Faculty Publications

The purpose of this paper is to explore the puzzle of why so many Chinese firms eschew listings in China. Hundreds of firms founded in China have reorganized themselves as overseas corporations and listed on the Hong Kong Stock Exchange. These firms are called Red-chips if they are state-owned enterprises (SOEs) and Pchips if they are not state-owned (non-SOEs). To examine the rationale behind the listing decisions of P-chips and Red-chips, we compare the characteristics of Red-chips (P-chips) with SOEs (non-SOEs) listed on China stock exchanges. We find that SOEs are more likely to list in China. Moreover, while we …

Ceo’S Inside Debt And Dynamics Of Capital Structure, Eric Brisker, Wei Wang

Business Faculty Publications

Debt-type compensation (inside debt) exacerbates the divergence in risk preferences between the chief executive officer (CEO) and shareholders and, in turn, affects capital structure decisions. An excessively risk-averse CEO tends to use less debt than the shareholders desire, reduce debt
quickly when the firm is overlevered, but is reluctant to increase debt when the firm is underlevered. We find that higher CEO’s inside debt ratio (i.e., inside debt as a percentage of total incentive compensation) is associated with lower firm leverage and faster (slower) leverage adjustments toward the shareholders’ desired level for overlevered (underlevered) firms. The CEO’s inside debt ratio …

Blockholder Characteristics And Earnings Quality, Aslihan G. Korkmaz, Qingzhong Ma, Haigang Zhou

Business Faculty Publications

This study focuses on the impact of blockholder characteristics on earnings quality. Most of the studies in
literature make the implicit assumption that blockholders are a homogeneous group. This study is one of
few studies that acknowledges the heterogeneity of blockholders and attempts to understand the
unexplained proportion of blockholder heterogeneity. Earnings quality is calculated using the modified
Dechow and Dichev (2002) model with fixed effects (FDD model) by Lee and Masulis (2009), and it is
regressed on various blockholder characteristics. The results show that earnings quality is lower for
firms with market-driven and multilateral blockholders.

Corporate Investment And Stock Liquidity: Evidence On The Price Impact Of Trade, Moonsoo Kang, Wei Wang, Chanyoung Eom

Business Faculty Publications

We document that corporate investment contributes to stock liquidity. This study demonstrates a positive relationship between abnormal corporate investment and stock liquidity in the cross-section.Moreover, stock liquidity
improves more apparently for firms with financial constraints. Our robustness check confirms that the
existing regularities cannot explain the current finding. This analysis suggests that corporate investment decreases
the risk of a firm and that a change in the risk affects the behavior of a market maker, leading to an increase
in stock liquidity.

Determining The Multi-Scale Hedge Ratios Of Stock Index Futures Using The Lower Partial Moments Method, Jun Dai, Haigang Zhou

Business Faculty Publications

This paper considers a multi-scale future hedge strategy that minimizes lower partial moments (LPM). To do this, wavelet analysis is adopted to decompose time series data
into different components. Next, different parametric estimation methods with known distributions are applied to calculate the LPM of hedged portfolios, which is the key to
determining multi-scale hedge ratios over different time scales. Then these parametric methods are compared with the prevailing nonparametric kernel metric method. Empirical results indicate that in the China Securities Index 300 (CSI 300) index futures and spot markets, hedge ratios and hedge efficiency estimated by the nonparametric kernel metric …

Cash Flow News, Discount Rate News, And Momentum, Umut Celiker, Nuri Volkan Kayacetin, Raman Kumar, Gokhan Sonaer

Business Faculty Publications

We examine the effect of aggregate cash flow news and discount rate news on momentum returns. We find that momentum profits are higher following aggregate positive cash flow news, even in down markets or low sentiment periods. This finding expands on the evidence in Cooper et al. (2004) that momentum is significant only when past market returns are non-negative and in Antoniou et al. (2013) that momentum is weaker when sentiment is pessimistic. We find that the higher momentum profits during aggregate positive cash flow news periods are primarily driven by the losers continuing to underperform in subsequent periods. Our …

Acquisitions And Regulatory Arbitrage By Captive Finance Companies, Deborah Smith, Mina Glambosky, Kimberly Gleason, K. Bryan Menk

Business Faculty Publications

Captive finance firms play an important role as financial intermediaries. Yet, they receive little attention in financial research. Recently, finance companies have grown by engaging in acquisition activities. Given their unique characteristics, finance companies may be more capable of extracting gains from acquisitions than other firms. We explain their advantages, and assess the market response and long-term valuation of finance companies that engage in acquisitions. Our results indicate that acquisitions by captive finance firms are wealth enhancing in the short term and the long term. However, the market reacts negatively when flexible captive financing firms acquire highly regulated depository institutions.

Global Economic Integration In Developing Countries: The Role Of Corruption And Human Capital Investment, Charles E. Bryant, Rajshekhar G. Javalgi

Business Faculty Publications

Globalization is multifaceted and involves the interaction among businesses, services, governments, and societies beyond national borders. As a result, the flow of foreign direct investment (FDI), international trade in goods and services, and the economic interdependence of the nations of the world have been increasing. At the same time, much attention has been paid to the effect of corruption prevalent within many cultures and societies, and its impact on the economies, especially developing economies. This paper examines the relationship between human capital investment, the level of national corruption, and the global economic integration (GEI) of a nation in developing countries. …

Courts, Constituencies, And The Enforcement Of Fiduciary Duties In The Nonprofit Sector, Joseph Mead, Michael Pollack

All Maxine Goodman Levin School of Urban Affairs Publications

Directors of nonprofit organizations owe fiduciary duties to their organizations, but the content of these duties—and how and when courts should enforce these duties—has long been debated among scholars and courts. This debate emerges in several areas, including the level of deference to be shown by courts to nonprofit directors (the business judgment rule), who should be allowed to sue to enforce duties (standing), and the type of relief available to prevailing plaintiffs (remedies). Existing literature explores these legal rules in isolation and in abstraction, generally failing to consider how the rules interact with each other and ignoring the empirical …