Business Commons^™

Portfolio Rebalancing In General Equilibrium, Miles S. Kimball, Matthew D. Shapiro, Tyler Shumway, Jing Zhang

Faculty Publications

Standard portfolio advice is that agents should hold a constant share of risky assets. All agents cannot, however, follow this advice because supply and demand of risky assets must be equal. To study equilibrium rebalancing, the paper develops an overlapping generations model in which agents differ both in age and risk tolerance. Equilibrium rebalancing is driven by a leverage effect that affects levered and unlevered agents in opposite directions, an aggregate risk tolerance effect which depends on the distribution of wealth, and an intertemporal hedging effect. Optimal equilibrium portfolio rebalancing departs significantly from the standard advice.

Firm Size Matters: An Empirical Investigation Of Organizational Size And Ownership On Sustainability- Related Behaviors, Peter Jack Gallo, Lisa Jones Christensen

Faculty Publications

The phrase “corporate sustainability” is increasingly prevalent in both the industry press and management journals (Engardio, 2007; Montiel, 2008). Corporate sustainability pledges and reports are also increasingly prevalent, yet empirical studies on how top managers define and enact the construct are lacking. To address this deficiency, we investigate how firms define, support, and report their sustainability efforts. In a large sample (N = 922) study of accounting executives at U.S.-based firms, we find evidence that organizational size, ownership, and industry are strongly related with support mechanisms and reporting of sustainability.

Reit Going Private Decisions, James C. Brau, J. Troy Carpenter, Mauricio Rodriguez, C. F. Sirmans

Faculty Publications

Over the recent decade there was a wave of REITs going private, from an average of about three per year to 40 between 2005 and 2007. Standard corporate finance theory posits that firms go private when there is no longer a positive tradeoff between the expected benefits and the costs of being public, and it provides empirical evidence that going private decisions are motivated by potential gains from leverage, tax benefits, and expected improvements in corporate governance. Given the unique institutional environment for the REIT industry, this paper sheds new light on the going-private decision. Specifically, we examine the determinants …

Forecasting Multivariate Realized Stock Market Volatility, Gregory H. Bauer, Keith Vorkink

Faculty Publications

We present a new matrix-logarithm model of the realized covariance matrix of stock returns. The model uses latent factors which are functions of lagged volatility, lagged returns and other forecasting variables. The model has several advantages: it is parsimonious; it does not require imposing parameter restrictions; and, it results in a positive-definite estimated covariance matrix. We apply the model to the covariance matrix of size-sorted stock returns and find that two factors are sufficient to capture most of the dynamics.

Why Did U.S. Banks Invest In Highly-Rated Securitization Tranches?, Isil Erel, Taylor Nadauld, René M. Stulz

Faculty Publications

We estimate holdings of highly-rated tranches of mortgage securitizations of American deposit-taking banks ahead of the credit crisis and evaluate hypotheses that have been advanced to explain these holdings. We find that holdings of highly-rated tranches were economically trivial for the typical bank, but banks with greater holdings performed more poorly during the crisis. Though univariate comparisons show that banks with large trading books had greater holdings, the holdings of highly-rated tranches are not higher for banks with large trading books in regressions that control for bank size. The ratio of highly-rated tranches holdings to assets increases with bank assets, …

Video Game Design In The Mba Curriculum: An Experiential Learning Approach For Teaching Design Thinking, James Gaskin, Nicholas Berente

Faculty Publications

In the spirit of design thinking, we have developed a ―hands-on‖ video game design workshop intended to be used for an MBA course on design thinking. This novel approach to teaching complex concepts and skills to business students has been received with enthusiasm, and it provides a unique and memorable experience for students to draw on as they encounter situations in which they will apply design thinking in the future. Additionally, student-produced games and student reflections on the workshops provide initial evidence of the value of teaching design thinking through this type of experiential method. In this article we review …

Model-Driven Software Development, Stephen W. Liddle

Faculty Publications

Software development is a complex and difficult task that requires the investment of significant resources and carries major risk of failure. For decades now, researchers have proposed “model-driven” approaches to improve the state of the art in software engineering. Software models are intended to improve communication among stakeholders and aid in the overall understanding both of a problem space and a proposed software solution that satisfies given requirements. As with architectural blueprints or miniature 3D models, software models make it possible to explore and test a design and its ramifications before investing in the actual build-out. The traditional approach to …

Multilingual Ontologies For Cross-Language Information Extraction And Semantic Search, David W. Embley, Stephen W. Liddle, Deryle W. Lonsdale, Yuri Tijerino

Faculty Publications

Valuable local information is often available on the web, but encoded in a foreign language that non-local users do not understand. Can we create a system to allow a user to query in language L1 for facts in a web page written in language L2? We propose a suite of multilingual extraction ontologies as a solution to this problem. We ground extraction ontologies in each language of interest, and we map both the data and the metadata among the language-specific extraction ontologies. The mappings are through a central, language-agnostic ontology that allows new languages to be added by only having …

Drilling For Micro-Foundations Of Human Capital Based Competitive Advantages, Russell Coff, David Kryscynski

Faculty Publications

From the origins of the Resource Based View, scholars have emphasized the importance of human capital as a source of sustained competitive advantage and recently there has been great interest in gaining a better understanding of the micro-foundations of strategic capabilities. Along these lines, there is little doubt that heterogeneous human capital is often a critical underlying mechanism for capabilities. Here, we explore how individual level phenomena underpin isolating mechanisms that sustain human capital-based advantages but also create management dilemmas that must be resolved in order to create value. The solutions to these challenges cannot be found purely in generic …

Accounting Doctoral Program Rankings Based On Research Productivity Of Program Graduates, Nathaniel M. Stephens, Scott L. Summers, Brady Williams, David A. Wood

Faculty Publications

This paper presents rankings of accounting doctoral programs based on the research productivity of each institution’s graduates in the years immediately following their graduation. We use two time periods for analysis: the first three years after graduation and the first six years after graduation. We extend previous doctoral program ranking literature by expanding rankings of accounting doctoral programs with specific rankings for topical areas (accounting information systems (AIS), audit, financial, managerial, and tax) and methodologies (analytical, archival, and experimental). We show that rankings for topical and methodological areas differ significantly from rankings produced using methodologies that create a singular doctoral …

Short Interest As A Signal Of Audit Risk, Cory A. Cassell, Michael S. Drake, Stephanie J. Rasmussen

Faculty Publications

Motivated by evidence from the empirical accounting and finance literatures suggesting that short sellers target firms with suspect financial reporting, we investigate whether short interest provides a signal of the degree of audit risk. We find a positive association between audit fees and short interest (total shares sold short scaled by total shares outstanding) after controlling for other determinants of audit fees. This finding suggests that short interest is an indicator of audit risk that reflects information not captured by traditional client risk measures. We also find an increase in the magnitude of the association between audit fees and short …

Do Earnings Reported Under Ifrs Tell Us More About Future Earnings And Cash Flows?, T.J. Atwood, Michael S. Drake, James N. Myers, Linda A. Myers

Faculty Publications

We contribute to the debate about the relative benefits and costs of International Financial Reporting Standards (IFRS) adoption by examining whether earnings persistence and the association between current accounting earnings and future cash flows differ for firms reporting under IFRS versus firms reporting under United States Generally Accepted Accounting Principles (U.S. GAAP) and firms reporting under non-U.S. domestic accounting standards (DAS). Using samples comprised of 58,832 firm-year observations drawn from 33 countries from 2002 through 2008, we find that positive earnings reported under IFRS are no more or less persistent than earnings reported under U.S. GAAP but losses reported under …

A Perspective On The Joint Iasb/Fasb Exposure Draft On Accounting For Leases, Yuri Biondi, Robert Bloomfield, Jonathan C. Glover, Karim Jamal, James A. Ohlson, Stephen H. Penman, Eiko Tsujiyama, T. Jeffrey Wilks

Faculty Publications

The International Accounting Standards Board (IASB) and The Financial Accounting Standards Board (FASB) recently issued a joint exposure draft on accounting for leases. This exposure draft seeks to shift lease accounting from an “ownership” model to a “right-to-use” model. Under the current ownership model, leases can be reported on balance sheet (finance leases) if certain tests are met, or off balance sheet (operating leases) if those tests are not met. The new model seeks to report all leases on the balance sheet based on the present value of lease obligations without any bright line tests, and no sharp on or …

Psychological Need Satisfaction Through Sports Participation Among International Athletes With Cerebral Palsy, Neil R. Lundberg, Diane G. Groff, Ramon Zabriskie

Faculty Publications

Research indicates that people with disabilities who participate in sports and are physically active rate themselves higher in psychological well-being. The primary purpose of this study was to observe differences in the satisfaction of psychological needs through sports participation based on one’s impairment level. Participants in the study included 50 English-speaking individuals with cerebral palsy who were 18 years of age or older and who were competing in the 2005 World Cerebral Palsy Championship in New Haven, Connecticut. Descriptive statistics were gathered and a simple one-way ANOVA was used to test the differences in psychological need fulfillment. Results indicated a …

Positive Youth Development Within A Family Leisure Context: Youth Perspectives Of Family Outcomes, Peter J. Ward, Ramon B. Zabriskie

Faculty Publications

Family leisure involvement may provide the first and most essential context for positive youth development in today's society.

Structured and organized programs and activities provide valuable settings for youth development. However, the primary setting of the home should be considered the fi rst, and perhaps the most essential, context for positive youth development. Within the home environment, the parents are often the most invested adults in the lives of youth. Parental involvement is one of the strongest protective factors an adolescent can have related to maximizing his or her potential. Evidence supports that strong, positive parental infl uence contributes to …

$100 Bills On The Sidewalk: Violations Of No-Arbitrage In 401(K) Accounts, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

We identify employees at seven companies whose 401(k) investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty-free 401(k) withdrawals for any reason because they are older than 59½. At the average firm, 36% of match-eligible employees over age 59½ forgo arbitrage profits that average 1.6% of their annual pay, or $507. A survey educating employees about the free lunch they are forgoing raised contribution rates by a statistically insignificant 0.67% of income among those completing the survey.

Friends Or Foes? Target Selection Decisions Of Sovereign Wealth Funds And Their Consequences, Jason Kotter, Ugur Lel

Faculty Publications

This paper examines investment strategies of sovereign wealth funds (SWFs), their effect on target firm valuation, and how both of these are related to SWF transparency. We find that SWFs prefer large and poorly performing firms facing financial difficulties. Their investments have a positive effect on target firms’ stock prices around the announcement date but no substantial effect on firm performance and governance in the long run. We also find that transparent SWFs are more likely to invest in financially constrained firms and have a greater impact on target firm value than opaque SWFs. Overall, SWFs are similar to passive …

Digital Technology And The Variation In Design Routines: A Sequence Analysis Of Four Design Processes, James Gaskin, B. Veeresh Thummadi, Kalle Lyytinen, Youngjin Yoo

Faculty Publications

We advance a theory of design process variation across organizational types and the effects of digitalization on these processes. We argue that design routines are subject to greater variation within and between organizations as organizations embed increasingly rich repertoires of digital capabilities in their design activities. Using a sequence analysis method we compare design process variation in four organizations to examine how design routines vary due to differences in embedded digital capabilities and organization of the design process. Our analysis reveals new insights on the effects organizational context and digitalization have on design routine composition.

Style-Related Comovement: Fundamentals Or Labels?, Brian H. Boyer

Faculty Publications

I find that economically meaningless index labels cause stock returns to covary in excess of fundamentals. S&P/Barra follow a simple mechanical procedure to define their Value and Growth indices. In doing so, they reclassify some stocks from Value to Growth even after their book-to-market ratios have risen, and vice versa. Such stocks begin to covary more with the index they join and less with the index they leave. Backdated constituent data from Barra reveal no such label-related shifts in comovement during the 10 years prior to the actual introduction of the indices in 1992.

Effects Of Automated And Participative Decision Support In Computer-Aided Credibility Assessment, Matthew L. Jensen, Paul Benjamin Lowry, Jeffrey L. Jenkins

Faculty Publications

Historically, inaccurate credibility assessments have resulted in tremendous costs to businesses and to society. Recent research offers unobtrusive credibility assessment aids as a solution; however, the accuracy of these decision aids is inadequate, and users often resist accepting the aids’ recommendations. We follow the principles of signal detection theory to improve the accuracy of recommendations in computer-aided credibility assessment by combining automated and participatory decision support. We also leverage participation in decision-making theory to explain and predict an increased acceptance of assessment aid recommendations when perceptual cues are elicited from users. Based on these two theories, we design and test …

An Approach To Theory-Based Youth Programming, Mat D. Duerden, Ann Gillard

Faculty Publications

A key but often overlooked aspect of intentional, out-of-school-time programming is the integration of a guiding theoretical framework. The incorporation of theory in programming can provide practitioners valuable insights into essential processes and principles of successful programs. While numerous theories exist that relate to youth development practice, they often remain inaccessible to practitioners. Therefore, the goal of this article is to synthesize two theoretical perspectives, the social development model and self-determination theory, into a practitioner-friendly programming framework. The resulting social development programming model outlines specific components, processes, and outcomes of effective and intentional youth development programs.

Assessing The Need For The Development Of Standardized Life Skills Measures, Mat D. Duerden, Peter A. Witt

Faculty Publications

Youth practitioners often select life skills as intentionally targeted program outcomes. While research findings suggest the efficacy of program experiences to positively influence a variety of life skills, it remains difficult to compare these findings due to measurement incongruities. Individual life skills (e.g., leadership, decision making, etc.) often lack standardized conceptualizations and measurement approaches. The purpose of the study reported here was to gather data about practitioners' perceptions of those life skill domains most in need of measurement development. Based on the results of the study, 10 life skill sub-domains are recommended for future measurement development efforts.

Using Implementation Intentions Prompts To Enhance Influenza Vaccination Rates, Katherine L. Milkman, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

We evaluate the results of a field experiment designed to measure the effect of prompts to form implementation intentions on realized behavioral outcomes. The outcome of interest is influenza vaccination receipt at free on-site clinics offered by a large firm to its employees. All employees eligible for study participation received reminder mailings that listed the times and locations of the relevant vaccination clinics. Mailings to employees randomly assigned to the treatment conditions additionally included a prompt to write down either (1) the date the employee planned to be vaccinated or (2) the date and time the employee planned to be …

Consumer Financial Protection, John Y. Campbell, Howell E. Jackson, Brigitte C. Madrian, Peter Tufano

Faculty Publications

Over the past 65 years, fi nancial innovation has presented U.S. households with an ever-widening set of fifi nancial options from an expanding set of fifi rms and accompanied by a sometimes dizzying amount of information. At the same time, consumer fifi nance has increasingly become a “do-it-yourself ” activity (Ryan, Trumbull, and Tufano, 2010). Households are expected to make decisions about pension plan contributions and payouts, to choose from a wide array of credit instruments to fund everything from home purchase to short-term cash needs, and more generally to assume a greater level of responsibility for their fifi nancial …

Web 2.0: A Definition, Literature Review, And Directions For Future Research, David W. Wilson, Xiaolin Lin, Phil Longstreet, Saonee Sarker

Faculty Publications

The Web 2.0 paradigm has gained substantial momentum in the last decade. The influence of Web 2.0 principles and technologies has fueled an explosion of information and media content on the Web, and individual and corporate adoption of the technologies continues to rise. As the popularity and usefulness of these technologies continue to unfold, there has yet been no concise definition of the term Web 2.0, nor a clear understanding of its scope. We synthesize and analyze the extant academic and practitioner-oriented literature on the topic to 1) provide a clear, concise definition of the term Web 2.0, 2) categorize …

Conceptual-Model Programming: A Manifesto, David W. Embley, Stephen W. Liddle, Óscar Pastor

Faculty Publications

In order to promote conceptual-model programming (CMP), we present these CMP articles. We hold these articles to be the defining principles for model-complete software development.

Essentially, this CMP manifesto asserts that programming activities are to be carried out via conceptual modeling. For applications amenable to conceptual-model designs, software developers should never need to write a line of traditional code. Thus, programming is actually conceptual-model programming.

To accommodate CMP, conceptual-modeling languages must be executable. They must also be capable of completely deploying both databases and user interfaces and conceptually expressing database access and user interaction. To enable CMP, a conceptual-model compiler …

Picturing Flag Violence In Civil War Sheet Music: The Case Of “Down With The Traitors’ Serpent Flag”, Kenneth Hartvigsen

Faculty Publications

Published in Chicago in 1861, “Down with the Traitors’ Serpent Flag” is one of thousands of political parlor songs from the American Civil War. Many of these songs are unremarkable musically and were preserved in homes, archives, and museum collections largely for their vibrant illustrations. In my presentation I examine this song’s lithographic cover illustration—a Union soldier grinding a Confederate flag into the dust—within a broader discourse of Civil War flag imagery taken from songs, political cartoons, and cartes-de-visite.

Compelling secrets exist within this colorful image that may not first meet the eye; to uncover these meanings along with the …

Dynamic Collaboration: Participant-Driven Agile Processes For Complex Tasks, Joel H. Helquist, Amit Deokar, Thomas Meservy, John Kruse

Faculty Publications

Groups and decision makers are increasingly running headlong into complexity as interconnections and interdependencies between individuals and organizations continue to grow, decision time horizons shrink and more work is being performed by distributed teams. These factors are driving up overall problem space complexity and limiting the effectiveness of time-tested decision and collaboration processes. Increases in problem space complexity lead to higher equivocality in collaborative processes and associated products. Electronic collaboration support tools and associated process management schemes have proven successful in many challenging contexts. However, current collaboration process management schemes and tools may not be able to effectively handle more …

Analysts’ Accrual-Related Over-Optimism: Do Analyst Characteristics Play A Role?, Michael S. Drake, Linda A. Myers

Faculty Publications

Bradshaw, Richardson, and Sloan (2001) find that analyst forecast over-optimism is greater for firms with high accruals. This “accrual-related over-optimism” is generally interpreted as evidence that analyst forecasts do not fully incorporate predictable earnings reversals associated with high accruals. We investigate whether analyst experience, access to resources (brokerage size), and portfolio complexity moderate the relation between over-optimistic forecasts and high accruals. We demonstrate the robustness of accrual-related over-optimism to controls for cash flow and prior forecast errors. We find that accrual-related over-optimism is lower for analysts with greater general experience and for analysts following fewer firms but find only limited …

Individual Accounting Faculty Research Rankings By Topical Area And Methodology, Jeffrey Pickerd, Nathaniel M. Stephens, Scott L. Summers, David A. Wood

Faculty Publications

This paper ranks individual accounting researchers based on their research productivity in the most recent 6, 12, and 20 years. We extend prior individual faculty rankings by providing separate individual faculty research rankings for each topical area commonly published in accounting journals (AIS, audit, financial, managerial, and tax). In addition, we provide individual faculty research rankings for each research methodology commonly used by accounting researchers (analytical, archival, and experimental). These findings will be of interest to potential doctoral students and current faculty, as well as accounting department, business school, and university administrators as they make decisions based on individual faculty …