Business Commons^™

Interaction Of New Section 362(E)(2) With Loss Disallowance Rules, Boyd C. Randall, Brian C. Spilker, John M. Werlhof

Faculty Publications

The American Jobs Creation Act of 2004 added Section 362(e)(2), which addresses concerns similar to those addressed by Section 336(d). Section 362(e)(2) was added to the law to close a perceived loophole whereby taxpayers could deduct a single economic loss twice by transferring loss property to a corporation in a Section 351 transaction or as a contribution to capital with the shareholder subsequently selling the stock and the corporation selling the loss asset. This provision was designed to prevent the recognition of a single economic loss twice. However, this new provision overlaps and interacts with the corporate liquidation loss disallowance …

The Unique Benefits Of Treating Personal Goodwill As Property In Corporate Acquisitions, Darian M. Ibrahim

Faculty Publications

Corporate acquisition talks may not get far if buyer and seller disagree over transaction structure, which can have significant after-tax effects. But the parties may have overlooked an item that, due to its potential tax treatment, could be the key to facilitating the acquisition. That item is the selling shareholder's "personal goodwill."

Personal goodwill exists when the shareholder's reputation, expertise, or contacts gives the corporation its intrinsic value. It is most likely to be found in closely held businesses, especially those that are technical, specialized, orprofessional in nature or have few customers and suppliers. If personal goodwill is treated as …

A Semantic Web Data Retrieval Implementation With An Adaptive Model For Supporting Agent Decision Structures, James V. Hansen, James B. Mcdonald, Conan C. Albrecht, Douglas L. Dean, Bonnie B. Anderson

Faculty Publications

This paper proposes an adaptive learning approach that yields decision models that can be applied by a transactions agent. This model can learn effectively with a variety of data distributions. This research used the Semantic Web as a data access approach. The Semantic Web is a method that sellers can use to publish semantically meaningful information on Websites so that automated applications can reliably access that information. We implemented a Semantic Web composed of 30 vendors’ Web pages and a spider to search those pages to obtain product and vendor information. This information was used to train a learning agent, …

Real And Illusory Value Creation By Insurance Companies, David F. Babbel, Craig B. Merrill

Faculty Publications

One of the fundamental tenets of financial economics is that insurance companies, just as other financial and non-financial firms, have a very strong incentive to maximize current shareholder value.1 This seemingly simple observation leads to a wide variety of managerial behavior.2 In this article we will review a simple decomposition of the value of an insurance company. The decomposition illuminates the motivation for a variety of strategies that can be observed in practice. These strategies run the gamut from accounting manipulation through risk transfer schemes to positive net present value (NPV) “project” selection. We will review these in some detail …

Deception Detection Through Automatic, Unobtrusive Analysis Of Nonverbal Behavior, Thomas O. Meservy, Matthew L. Jensen, John Kruse, Judee K. Burgoon, Jay F. Nunamaker Jr., Douglas P. Twitchell, Gabriel Tsechpenakis, Dimitris N. Metaxas

Faculty Publications

Every day, hundreds of thousands of people pass through airport security checkpoints, border crossing stations, or other security screening measures. Security professionals must sift through countless interactions and ferret out high-risk individuals who represent a danger to other citizens. During each interaction, the security professional must decide whether the individual is being forthright or deceptive. This task is difficult because of the limits of human vigilance and perception and the small percentage of individuals who actually harbor hostile intent. Our research initiative is based on a behavioral approach to deception detection. We attempted to build an automated system that can …

Diversification And Focus: A Bayesian Application Of The Resource-Based View, Lee T. Perry, Mark H. Hansen, C. Shane Reese, Greggory Pesci

Faculty Publications

We propose a new application of the resource-based view (RBV) that is more consistent with Penrose's (1959) original framework. We use that framework to study the relationship between diversification and refocusing strategies and economic performance. We propose that the RBV may be enhanced by the explicit recognition of Penrose's two classes of resources, administrative and productive resources. This distinction suggests a focus on the administrative decisions of managers, including the multiple decisions associated with diversification and refocusing strategies, which lead to economic performance. Second, we argue that RBV theory is a theory about extraordinary performers or outliers, not averages. Therefore, …

Early Decisions: A Regulatory Framework, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

We describe a regulatory framework that helps consumers who have difficulty sticking to their own long-run plans. Early Decision regulations help long-run preferences prevail by allowing consumers to partially commit to their long-run goals, making it harder for a momentary impulse to reverse past decisions. In the cigarette market, examples of Early Decision regulations include restricting the locations or times at which cigarettes are sold, delaying the receipt of cigarettes following purchase, and allowing a consumer to choose in advance the legal restrictions on her own cigarette purchases. A formal model of Early Decision regulations demonstrates that Early Decisions are …

The Role Of Normative Political Ideology In Consumer Behavior, David Crockett, Melanie Wallendorf

Faculty Publications

This study of African-American consumers living in a large racially segregated midwestern city adds to extant theory on ideology in consumer behavior by considering the role of normative political ideology in provisioning. The specific roles of traditional black liberal and black nationalist political ideologies are discussed. We conclude that normative political ideology is central to understanding shopping as an expression of social and political relations between households confronting attenuated access to goods and services, ranging from housing to food, in a setting stratified by gender, race, and class. Beyond the specifics of this demographic group and setting, we suggest contemporary …

Install Your Own Wireless Network, William G. Heninger, Craig J. Lindstrom, Bryce H. Peterson, Marshall B. Romney

Faculty Publications

Would you like to access the Internet, your printer and your other computers, including laptops, without stringing wires throughout your office or home? The solution is a wireless local area network (WLAN) and we'll tell you how easy it is to install one yourself at a nominal cost. WLANs replace conventional wires with devices called wireless access points that plug into any electrical wall socket. WLAN hardware contains miniature transmitters and antennae that send and receive radio signals to and from your computers and other peripherals.

The Dynamics Of Market Entry: The Effects Of Mergers And Acquisitions On Entry In The Banking Industry, Allen N. Berger, Seth D. Bonime, Lawrence G. Goldberg, Lawrence J. White

Faculty Publications

We study the dynamics of market entry following mergers and acquisitions (M&As) using banking industry data. The findings suggest that M&As are associated with statistically and economically significant increases in the probability of entry. The data suggest that M&As affect the proportion of the markets with entry by about 10-20%. These findings also suggest that entry may be part of an "external" effect of M&As that helps supply credit to some relationship-dependent small business borrowers. Our results are robust to the use of alternative econometric methods, changes in specifications of the exogenous variables, and alteration of the data samples.

When And How Trustworthiness Matters: Knowledge Transfer And The Moderating Effect Of Causal Ambiguity, Robert J. Jensen, Gabriel Szulanski, Rossella Cappetta

Faculty Publications

The recognition that better use of existing internal knowledge could enhance survival chances or organizations has spawned substantial interest in the transferability of routinized, experiential learning to additional settings within the organization Previous research has established that trustworthiness of the source enhances such knowledge transfer. More recent work, however, suggests that this may not always be the case. Yet, little systematic attention has been paid to moderating conditions. The major purpose of this paper is to identify a moderator, causal ambiguity, which delineates the conditions as to when and how a recipient's perception of the trustworthiness of a source affects …

Built Along The Shores Of Macatawa: The History Of Boat Building In Holland, Michigan, Geoffrey D. Reynolds

Faculty Publications

Built Along the Shores of Macatawa:  The History of Boat Building in Holland, Michigan is an article concerning the history of ship and boat building in the Holland, Michigan area from 1836-2004.

Description And Assessment Of A Business Plan Competition And New Venture Fair At San José State University, Malu Roldan, Asbjorn Osland, Michael Solt, Burton Dean

Faculty Publications

After the first business plan competition, in May 2003, San José State University (SJSU) faculty and community entrepreneurs serving on the university’s Silicon Valley Center for Entrepreneurship (SVCE) concluded that the process should be spread over an academic year. Hence, the New Venture Fair (NVF) was born, which was held Dec. 16, 2003. The feedback from all sources has been very positive regarding the NVF. A significant NVF exhibit was the Hewlett Packard Mobile Computing Grant (HPMCG). All teams completed projects that were impressive to most observers from the university and greater community but additional lessons were learned that will …

Stickiness And The Adaptation Of Organizational Practices In Cross-Border Knowledge Transfers, Robert J. Jensen, Gabriel Szulanski

Faculty Publications

The re-use of organizational practices in multiple locations is a fundamental way MNCs leverage knowledge to seek competitive advantage. Scholars approaching the issue of adaptation from both a market and an institutional perspective argue that, in order to achieve fit with the local environment, some degree of adaptation is advisable with the need for adaptation increasing as the institutional distance between source and recipient locations increases. However, arguments to date have examined the effect of adaptation primarily on a subsidiary's long term performance. A necessary precursor is to understand the effect of adaptation on the transfer process itself as transfer …

When Do Fair Beliefs Infiuence Bargaining Behavior? Experimental Bargaining In Japan And The United States, Nancy R. Buchan, Rachel T.A. Croson, Eric J. Johnson

Faculty Publications

In this research, we examine the influence of beliefs about fairness on bargaining behavior. Using a repeated ultimatum game, we examine bargaining contexts in Japan and the United States in which buyers' or sellers' fair beliefs are either in alignment with or in conflict with their own self-interest. We suggest that understanding the relationship between fair beliefs and self-interest is central to understanding when fair beliefs will influence bargaining behavior. Our results demonstrate that fair beliefs predict bargaining behavior when they are aligned with one's own self-interest.

“Lucy In The Sky With Diamonds”: Airline Liability For Checked-In Jewelry, Eloisa Rodriguez-Dod

Faculty Publications

It is expected that when you arrive at an airport you most likely will have to check in a bag or two. What is not expected, however, is that someone would rummage through your baggage and take your belongings. Unfortunately, this happens frequently. A passenger packs her jewelry in her luggage, checks that luggage in, boards her flight, and never sees that jewelry again. Once she discovers the missing jewelry, her options for recovering the loss are quite limited.

This article examines the history and current state of the law regarding airline liability for passengers’ lost belongings on domestic as …

Examining The Effects Of Strategic Marketing Initiative And First-Mover Efforts On Market Share Performance, Richard A. Heiens, Larry P. Pleshko, Robert T. Leach

Faculty Publications

No abstract provided.

Employee Investment Decisions About Company Stock, James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick

Faculty Publications

Recent high-profile cases have illustrated the dangers of employee investment in company stock. These debacles are unlikely to be the last ones, or even the most severe. Companies with more than 50 percent of retirement assets in company stock are common, and fractions over 80 percent continue to prevail at such large companies as Procter & Gamble, Anheuser- Busch, and Pfizer.¹

The concentration of retirement wealth in company stock is a clear violation of diversification principles. Recently, several studies have quantified the economic costs of this concentration. Muelbroek (2002) uses a Sharperatio approach and finds that the average diversification …

Strategic Considerations In The Financial Services Industry: Does Strategic Consistency Influence Performance?, Larry P. Pleshko, Richard A. Heiens

Faculty Publications

This paper suggests that the consistency of strategic leadership decisions is relevant to the performance of a firm. An organization with consistency in decision making across six relevant marketing strategy variables (promotion, price, channels, products, markets, and technology) is described as exhibiting "purity-of-form". An empirical examination is performed in the financial services industry investigating the relationship of strategic consistency to both profitability and market share while controlling for the firm's environment, structure, and size.

The findings indicate that a consistent strategy may have a positive effect on share performance, with high-levels of strategic leadership observed in the better-performing group. The …

Why Do Auditors Over-Rely On Weak Analytical Procedures? The Role Of Outcome And Insensitivity To Precision, Steven M. Glover, Douglas F. Prawitt, T. Jeffrey Wilks

Faculty Publications

Recent evidence from highly publicized frauds and from the Public Oversight Board’s Panel on Audit Effectiveness (2000) indicates that auditors sometimes over-rely on weak evidence supporting a clean audit opinion. In experiment 1 we examine whether a favorable outcome, together with insensitivity to factors relating to the strength of evidence, could lead to over-reliance on weak substantive procedures. In experiment 2 we examine whether an explicit ex ante prompt can sensitize auditors to the weaknesses of an unreliable substantive procedure. Our examination is conducted in the context of substantive analytical procedures that are performed to provide evidence during the substantive …

Health Insurance, Labor Supply, And Job Mobility: A Critical Review Of The Literature, Jonathan Gruber, Brigitte C. Madrian

Faculty Publications

This paper provides a critical review of the empirical literature on the relationship between health insurance, labor supply, and job mobility. We review over 50 papers on this topic, almost exclusively written in the last 10 years. We reach five conclusions. First, there is clear and unambiguous evidence that health insurance is a central determinant of retirement decisions. Second, there is fairly clear evidence that health insurance is not a major determinant of the labor supply and welfare exit decisions of low income mothers. Third, there is fairly compelling evidence that health insurance is an important factor in the labor …

The Cognitive And Affective Antecedents Of General Trust Within Cooperative Organizations, J.L. Morrow Jr., Mark H. Hansen, Allison W. Pearson

Faculty Publications

Recently, much attention has been devoted to the important role that trust may play in the management of organizations. From a theoretical perspective, scholars have considered a wide range of topics such as the distinction between trust and distrust (Lewicki et al, 1998), the initial development and evolution of trust within organizations (Jones and George, 1998; Mayer et aL, 1995) and the betrayal of trust (Elangovan and Shapiro, 1998). EmpiricaJJy, researchers have examined how trust impacts organizations at the individual (McAllister, 1995), group (Korsgaard et al, 1995) and organizational levels (Davis fl al., 2000). Despite increasing interest in the effects …

Risky Loss Distributions And Modeling The Loss Reserve Pay-Out Tail, J. David Cummins, James B. Mcdonald, Craig B. Merrill

Faculty Publications

Although an extensive literature has developed on modeling the loss reserve runoff triangle, the estimation of severity distributions applicable to claims settled in specific cells of the runoff triangle has received little attention in the literature. This paper proposes the use of a very flexible probability density function, the generalized beta of the 2nd kind (GB2) to model severity distributions in the cells of the runoff triangle and illustrates the use of the GB2 based on a sample of nearly 500,000 products liability paid claims. The results show that the GB2 provides a significantly better fit to the severity data …

Worker Ownership In Enron's Wake - Revisiting A Community Development Tactic, Peter R. Pitegoff

Faculty Publications

Worker ownership of business enterprise has long been touted as a vehicle for community economic development. Employee stock ownership plans in leveraged buy-outs, ESOPs and broad-based stock options in going concerns, and worker cooperatives in selected sectors - the experience has varied widely in goals, method, and outcome.

This Article reflects on the continued utility of worker ownership as a component of community development and calls attention to contrasts with conventional corporate governance and goals. Rather than an end in itself or just another way of doing business, worker ownership can be a vital element of a broader job creation, …

A Bayesian Operationalization Of The Resource-Based View, Mark H. Hansen, Lee T. Perry, C. Shane Reese

Faculty Publications

This paper argues that the gap between the theoretical utility and the practical utility of the resource-based view (RBV) may be narrowed by operationalizing the theory more consistently with Penrose's original framework. The operationalization proposed here is a twofold approach. First, the RBV may be enhanced by the explicit recognition of Penrose's two classes of resources, namely, administrative resources and productive resources. This distinction suggests a focus on the administrative decisions of managers that lead to economic performance. Second, we argue that the RBV is a theory about extraordinary performers or outliers—not averages. Therefore, the statistical methods used in applying …

Plan Design And 401(K) Savings Outcomes, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

We assess the impact of 401(k) plan design on four different 401(k) savings outcomes: participation in the 401(k) plan, the distribution of employee contribution rates, asset allocation, and cash distributions. We show that plan design can have an important effect on all of these savings outcomes. This suggests an important role for both employers in determining how to structure their 401(k) plans and government regulators in creating institutions that encourage or discourage particular aspects of 401(k) plan design.

For Better Or For Worse: Default Effects And 401(K) Savings Behavior, James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick

Faculty Publications

Seemingly minor changes in the way a choice is framed to a decision maker can generate dramatic changes in behavior. Automatic enrollment provides a clear example of such effects. Under automatic enrollment (also called negative election), employees are automatically enrolled in their company’s 401(k) plan unless the employees elect to opt out of the plan. This contrasts with the usual arrangement in which employees must actively choose to participate in their employer’s 401(k).

Do Venture Capitalists Add Value To Small Manufacturing Firms? An Empirical Analysis Of Venture And Nonventure Capital-Backed Initial Public Offerings, James C. Brau, Richard A. Brown, Jerome S. Osteryoung

Faculty Publications

We examine a set of small, venture capital (VC)-backed manufacturing firms and compare it to a control sample of nonVC-backed manufacturing firms going public between 1990 and 1996. We use the degree of underpricing, three-year sales growth, three-year cumulative stock return, and three-year survivability as measures of success. First, we test if the presence of VC backing results in significant differences in success between the two samples. Next, we test if certain VC and deal characteristics are discriminators within the VC-backed sample of firms. Despite previous literature, which argues for either inferior or superior VC post-initial public offering (IPO) performance, …

Microfinance: A Comprehensive Review Of The Existing Literature, James C. Brau, Gary M. Woller

Faculty Publications

Although the word finance is in the term microfinance, and the core elements of microfinance are those of the finance discipline, microfinance has yet to break into the mainstream or entrepreneurial finance literature. The purpose of this article is to introduce the finance academic community to the discipline of microfinance and microfinance institutions (MFIs). We provide a comprehensive review of over 350 articles and address the issues of MFI sustainability, products and services, management practices, clientele targeting, regulation and policy, and impact assessment.

Market Reaction To The Expiration Of Ipo Lockup Provisions, James C. Brau, David A. Carter, Stephen E. Christophe, Kimberly G. Key

Faculty Publications

Initial public offering (IPO) lockup agreements prevent insider sale of shares for specified periods of time (often 180 days). This study investigates share price reactions at and around the time the lockup agreements expire. Results indicate statistically significant negative abnormal returns in the event window surrounding the expiration date. The results are consistent with informational asymmetries and decreasing incentive alignment between insiders and general shareholders. In addition, multivariate analysis identifies several variables that help explain these abnormal returns.