Other Business Commons^™

Limited Attention To Detail In Financial Markets: Evidence From Reduced-Form And Structural Estimation, Henrik Cronqvist, Tomislav Ladika, Elisa Pazaj, Zacharias Sautner

Business Faculty Articles and Research

We show that firm valuations fell after a key expense became more visible in financial statements. FAS 123-R required firms to deduct option compensation costs from earnings, instead of disclosing them in footnotes. Firms that granted high option pay experienced earnings reductions, while fundamentals remained unchanged. These firms were more likely to miss earnings forecasts, and they experienced recommendation downgrades and valuation declines. Our findings suggest that market participants exhibited limited attention to option costs before FAS 123-R. As we reuse the FAS 123-R natural experiment, we show how one can address confounding channels by integrating reduced-form and structural estimation.

The Information In Industry-Neutral Self-Financed Trades, Yashar H. Barardehi, Zhi Da, Mitch Warachka

Business Faculty Articles and Research

We identify Industry-Neutral Self-Financed Informed Trading (INSFIT) as stock trades financed by offsetting, equivalent dollar-denominated stock trades in the same industry. Approximately 37% of short-term mutual fund trading profits can be attributed to these trade pairs. Consistent with informed trading, INSFIT precedes unusually high media coverage for the underlying stocks. The trades underlying INSFIT are also larger as the release of stock-level news becomes more imminent. Both relative valuation and the hedging of industry exposure motivate INSFIT’s industry neutrality. While INSFIT positively impacts fund performance, active fund managers who execute INSFIT more aggressively obtain smaller trading profits per execution.

Coming Out Ahead While Losing A Partner: The Thoroughbred Industry Stays On Course, Darcy Fudge Kamal, Cristina Nistor, Charu Sinha

Business Faculty Articles and Research

Purpose

In many industries, firms collaborate as business partners, which helps them achieve superior outcomes and ensure survival in a crisis. Business relationships help companies access limited resources, share information and build trust within the community. This paper aims to highlight the strategies that firms can use to adapt to the loss of a business partner.

Design/methodology/approach

This study considers qualitative examples from what happens when a business partner disappears in the Thoroughbred horse industry. The authors draw attention to several types of partner loss due to firm bankruptcy, owner death and strategic restructuring.

Findings

This paper proposes a framework …

The Economics Of Residential Solar Panels: A Comparison Of Energy Charges For Different Load Profiles, Rate Plans, And Panel Orientations, John B. Broughton, Candace E. Ybarra, Prashanth U. Nyer

Business Faculty Articles and Research

This paper examines the effect of different residential electrical load profiles (electrical energy consumption patterns within a day) on energy charges for customers with solar panels under different Southern California Edison time-of-use (TOU) rate plans. We identify the TOU plan which would be the most cost effective for solar customers with each load profile. The impact of the orientation of the solar panel array (whether it faces south or west or east) and shading patterns on electricity charges are examined. We also determine the ideal usage offset (the percentage of electricity consumption provided by the solar array) for the various …

Privacy Considerations For Online Advertising: A Stakeholder’S Perspective To Programmatic Advertising, Dylan A. Cooper, Taylan Yalcin, Cristina Nistor, Matthew Macrini, Ekin Pehlivan

Business Faculty Articles and Research

Purpose

Privacy considerations have become a topic with increasing interest from academics, industry leaders and regulators. In response to consumers’ privacy concerns, Google announced in 2020 that Chrome would stop supporting third-party cookies in the near future. At the same time, advertising technology companies are developing alternative solutions for online targeting and consumer privacy controls. This paper aims to explore privacy considerations related to online tracking and targeting methods used for programmatic advertising (i.e. third-party cookies, Privacy Sandbox, Unified ID 2.0) for a variety of stakeholders: consumers, AdTech platforms, advertisers and publishers.

Design/methodology/approach

This study analyzes the topic of internet …

The Economics Of Residential Solar And Battery Storage: Analyzing The Impact Of The Joint Iou Proposal For Net Metering 3.0 In California, Candace E. Ybarra, Prashanth U. Nyer, John B. Broughton, Thomas A. Turk

Business Faculty Articles and Research

The California Public Utilities Commission (CPUC) is currently deciding on the structure of the next net metering program, which will determine how customers who install solar panels (and battery storage) under this new program will be compensated for excess energy that they export to the grid, and the additional fees that these solar customers will have to pay. The major investor-owned utility (IOU) companies in the state and some legislators have argued that the current net metering programs are far too generous to the customers and that they create an inequity by favoring the wealthy and causing a cost shift …

The Economics Of Battery Storage For Residential Solar Customers In Southern California, John B. Broughton, Prashanth U. Nyer, Candace E. Ybarra

Business Faculty Articles and Research

Battery storage coupled with solar panels became a consideration after the original net metering program in California (NEM 1.0) ended and gave way to the current net metering program (NEM 2.0). Under NEM 2.0, battery storage gives customers under time-of-use (TOU) rate plans the ability to store the excess electrical energy generated by their panels during sunlight hours (when electricity usage and resale rates are low) and then use that energy in the evening when rates are significantly higher. This reduces the amount of expensive electricity that the customer would have to purchase from the grid. It is widely expected …

Intro To This Special Issue: Refugees/Displaced People In The Workplace, Sharon L. Segrest, Amy E. Hurley-Hanson, Cristina M. Giannantonio

Business Faculty Articles and Research

This special issue focuses on refugees’ experiences and displaced people across a diverse set of ethnicities and circumstances. The growing number of refugees and displaced people and the work and life difficulties they face are central social issues in the world today. This special issue will explore how refugees and displaced people in Brazil can be fully integrated, socialized, engaged, embraced, and affirmed into the workplace and society. Research is presented on the experiences of refugees and displaced people, a growing but under-researched segment of the world’s population. Little is known about refugees’ career experiences and displaced people and how …

Refugees/Displaced People In The Workplace, Sharon L. Segrest, Amy E. Hurley-Hanson, Cristina M. Giannantonio

Business Faculty Articles and Research

No abstract provided.

Lady Luck: Anthropomorphized Luck Creates Perceptions Of Risk-Sharing And Drives Pursuit Of Risky Alternatives, Katina Kulow, Thomas Kramer, Kara Bentley

Business Faculty Articles and Research

We examine decision-making under risk as a function of the degree to which consumers anthropomorphize their luck. We propose that consumers make riskier financial decisions when they anthropomorphize (vs. objectify) their luck and that this effect occurs because humanizing luck engenders a perceived sharing of risk in the presence of “lady luck.” A series of experiments shows that consumers among whom anthropomorphized versus objectified luck is salient display greater risk-taking in financial, but not social, decisions. These effects are heightened among consumers who frequently engage in risky decision-making and are driven by perceptions of risk-sharing produced by anthropomorphized luck. Collectively, …

Do Large Gains Make Willing Sellers?, Dong Hong, Roger K. Loh, Mitch Warachka

Business Faculty Articles and Research

Using unique real estate data that allow for accurately measured capital gains, we examine whether sell propensities depend on the magnitude of a seller’s capital gain. We find that short-term sell propensities are flat over losses and increasing in gains. Consistent with their higher sell propensities, selling prices are lower for properties with larger gains. Large-sized short-term stock investments also have sell propensities that are flat over losses and increasing in gains, although the sell propensities of typical-sized short-term stock investments are V-shaped. Our findings provide empirical support for theories of realization utility.

When The Weak Are Mighty: A Two‐Sided Matching Approach To Alliance Performance, Darcy Fudge Kamal, Florence Honoré, Cristina Nistor

Business Faculty Articles and Research

Research Summary

Network centrality is an important determinant of alliance performance. However, estimating how each alliance member's centrality affects alliance performance is challenging because the end market might value each partner's contribution differently. We solve this empirical question with a two‐sided matching model that accounts for the partners' endogenous selection and estimates the effect of each side's centrality and input quality on performance. We implement the method in the novel context of the Thoroughbred horse industry, in foal‐sharing alliances between buyers and suppliers. We find that buyer centrality has a larger marginal effect on the alliance performance than the supplier …

The Night And Day Of Amihud’S (2002) Liquidity Measure, Yashar H. Barardehi, Dan Bernhardt, Thomas G. Ruchti, Marc Weidenmier

Business Faculty Articles and Research

Amihud’s stock (il)liquidity measure averages daily ratios of the absolute close-to-close return to dollar volume, including overnight returns. Our modified measure uses open-to-close returns matching return and trading volume measurement windows. It is more strongly correlated with trading-cost measures (by 8%–37%) and better explains cross-sections of returns, doubling estimated liquidity premiums. Using nonsynchronous trading near close, we show overnight returns are primarily information driven: including them in Amihud’s proxy for price impacts of trading magnifies measurement error, understating liquidity premiums. Our modification helps wherever Amihud’s measure is required. Our measures are publicly available for 1964–2019 and can be updated. ( …

Together We Stand: The Solidarity Effect Of Personized Sellers On Essential Workers, Katina Kulow, Kara Bentley, Priyali Rajagopal

Business Faculty Articles and Research

The current research examines how products from personized sellers operate as a source of social support and solidarity for essential workers who are experiencing elevated levels of occupational stress since the advent of COVID-19. A series of experiments show that consumers who view themselves as essential workers prefer products from personized sellers (e.g., Etsy) compared to nonpersonized sellers (e.g., Amazon). These effects are driven by higher feelings of solidarity made salient by the personized seller. Our findings document a novel way by which consumers who are experiencing significantly high levels of occupational stress during the COVID-19 pandemic may seek social …

The Dark Side Of Executive Compensation Duration: Evidence From Mergers And Acquisitions, Zhi Li, Qiyuan Peng

Business Faculty Articles and Research

We find that contrary to popular belief, CEOs with long compensation duration do not make better long-term investment decisions. Using a comprehensive pay duration measure, we find that acquisitions conducted by CEOs with long compensation duration receive more negative announcement returns, and experience significantly worse post-acquisition abnormal operating and stock performance, compared with deals conducted by CEOs with short compensation duration. The negative correlation between compensation duration and mergers and acquisitions (M&A) performance is driven by long-term time-vesting plans, not by performance-vesting plans. The results suggest that extending CEO pay horizons without implementing performance requirements is insufficient to improve managerial …

Antecedents To Buyer-Supplier Coordination In The Pharmaceutical Supply Chain, Thanigavelan Jambulingam, Ravi Kathuria

Business Faculty Articles and Research

Purpose

The purpose of this study is to understand the antecedents that influence supply chain coordination in the pharmaceutical supply chain using the transaction cost analysis framework.

Design/methodology/approach

Data from 156 retail pharmacies on their relationship with the pharmaceutical wholesalers are used to test the hypotheses.

Findings

The findings of this paper show the importance of antecedents that are based on the transactional cost theory, such as asset specificity and environmental uncertainty. These antecedents impact the supply chain process coordination at different levels – transactional, operational and strategic.

Research limitations/implications

Future research may investigate additional antecedents using other theoretical lenses. …

The Economics Of Residential Solar Panels: Comparing Tiered And Time Of Use Plans, Prashanth Nyer, Candace Ybarra, Jack B. Broughton

Business Faculty Articles and Research

This case study uses data from a Southern California Edison residential customer on a grandfathered tiered rate plan to investigate 1) whether it is economically beneficial for the customer to switch from a tiered-rate plan to a Time-of-Use (TOU) plan, 2) whether going solar now makes financial sense for new solar customers, 3) what level of usage offset (the percentage of the customer’s annual electricity consumption that is provided by the solar panels) would result in the maximum financial benefit for the customer under each of the many TOU plans, and 4) whether solar customers on TOU plans can save …

How Social Media Communications Can Mitigate Negative Impacts Of Corporate Social Irresponsibility On Corporate Financial Performance?, Saad A. Alhoqail, Hyun Young Cho, Kristopher Floyd

Business Faculty Articles and Research

Previous research on corporate social responsibility (CSR) has focused on corporate reputation (CR) and corporate financial performance (CFP), showing a high correlation between both. While most researchers primarily focus on CSR, our research examines the other side of the coin; corporate social irresponsibility (CSI) and provides findings that counter previous thought. We contribute to the existing literature by showing that CSI has a non-significant impact on corporate financial performance, as measured by market value, while concurrently being negatively correlated to corporate reputation. Further, we show social media, as measured by the Social Media Sustainability Index (SMSI), a measure studied infrequently …

Dynamic Pricing With Fairness Concerns And A Capacity Constraint, Matthew Selove

Business Faculty Articles and Research

Although some firms use dynamic pricing to respond to demand fluctuations, other firms claim that fairness concerns prevent them from raising prices during periods when demand exceeds capacity. This paper explores conditions in which fairness concerns can or cannot cause shortages. In our model, a firm announces a price policy that states its prices during high and low demand, and customers must travel to a venue to learn the current price. We show that the interaction of fairness concerns with travel costs can cause the firm to set stable prices, which leads to shortages during high demand. However, if the …

Corporate Entrepreneurship In The Digital Era: The Cascading Effect Through Operations, Maheshkumar P. Joshi, Ravi Kathuria, Sidhartha Das

Business Faculty Articles and Research

This study examines a firm’s response to perceived changes in the environment, such as the growth of the digital era, at different levels of a firm—beginning with the adoption of corporate entrepreneurship (CE) down to process renewal (PR). We further explore if the technological intensity of a firm, high-tech or low-tech intensity, influences its choice of mode for organisational renewal (OR)—use of internal competence or outside acquisition—to exploit the opportunities created by the digital era. Using survey data from 170 firms, we test a sequential relationship among environmental changes (growth of the digital era), CE, OR and finally PR that …

Unrequited: Asymmetry In Interorganizational Trust, Melissa E. Graebner, Fabrice Lumineau, Darcy Fudge Kamal

Business Faculty Articles and Research

Many studies of interorganizational relationships assume that trust between organizations is symmetric. In this essay, we explore the origins of this assumption and examine relevant quantitative and qualitative evidence from the literatures on strategy, marketing, supply chain management, and information systems. We conclude that no systematic evidence currently exists to support the assumption that interorganizational trust is typically symmetric. We explore how the possibility of asymmetry complicates interpretation of previous research on the effects of interorganizational trust. We encourage further research to identify conditions under which symmetry is likely, and offer a variety of strategies that scholars may use to …

Unrequited: Asymmetry In Interorganizational Trust, Melissa E. Graebner, Fabrice Lumineau, Darcy Fudge Kamal

Business Faculty Articles and Research

Many studies of interorganizational relationships assume that trust between organizations is symmetric. In this essay, we explore the origins of this assumption and examine relevant quantitative and qualitative evidence from the literatures on strategy, marketing, supply chain management, and information systems. We conclude that no systematic evidence currently exists to support the assumption that interorganizational trust is typically symmetric. We explore how the possibility of asymmetry complicates interpretation of previous research on the effects of interorganizational trust. We encourage further research to identify conditions under which symmetry is likely, and offer a variety of strategies that scholars may use to …

Mutually Supportive Or Trade-Offs: An Analysis Of Competitive Priorities In The Emerging Economy Of India, Ravi Kathuria, Narinder Nath Kathuria, Abhishek Kathuria

Business Faculty Articles and Research

To refine the theories of operations strategy, we need research from all different situational contexts, including different countries—both developing and developed. There have been many studies, including some replications, done in various parts of the world to further the debate on whether competitive priorities are mutually supportive or if they present potential trade-offs, but hardly any from a rapidly growing economy, such as India. This study is a significant attempt in that direction. After a thorough review of the literature, a set of hypotheses is introduced to test whether Indian manufacturers view competitive priorities as mutually supportive or trade-offs. The …

The Case For Showrooming, Cristina Nistor, Prashanth Nyer

Business Faculty Articles and Research

Showrooming has deeply affected the retail market in the past decade. As consumers became able to easily compare prices on their mobile devices, they started using retail stores to try on and experience products and then they ordered online the lower priced versions they liked best to be delivered directly to their homes. As retailers are trying to adapt to the showrooming challenges and the shift to online purchases, stores are increasingly adopting showrooming as a new selling format. We present examples of successful showrooming and develop a framework for when the new selling format can be expected to be …

Models Of Intragroup Conflict In Management: A Literature Review, Matthew W. Mccarter, Kimberly A. Wade-Benzoni, Darcy Fudge Kamal, H. Min Bang, Steven J. Hyde, Reshma Maredia

Business Faculty Articles and Research

The study of intragroup dynamics in management studies views conflict as a contingency process that can benefit or harm a group based of characteristics of the group and context. We review five models of intragroup conflict in management studies. These models include diversity-conflict and behavioral negotiation models that focus primarily on conflict within a group of people; social exchange and transaction cost economics models that focus primarily on conflict within a group of firms; and social dilemma models that focus on conflict in collectives of people, organizations, communities, and generations. The review is constituted by summarizing the insights of each …

Financial Synergies And Systemic Risk In The Organization Of Bank Afþliates, Elisa Luciano, Clas Wihlborg

Business Faculty Articles and Research

We analyze theoretically banks’ choice of organizational structures in branches, subsidiaries or stand-alone banks, in the presence of public bailouts and default costs. These structures are characterized by different arrangements for internal rescue of affiliates against default. The cost of debt and leverage are endogenous. For moderate bailout probabilities, subsidiary structures, wherein the two entities provide mutual internal rescue under limited liability, have the highest group value, but also the highest risk taking as measured by leverage and expected loss. We explore the effect of constraints on leverage and policy implications. The conflict of interests between regulators, who minimize systemic …

Herding And Anchoring In Macroeconomic Forecasts: The Case Of The Pmi, John B. Broughton, Bento J. Lobo

Business Faculty Articles and Research

We test if analysts display multiple biases in forecasting the Institute for Supply Management’s (ISM) manufacturing Purchasing Manager’s Index (PMI). We adopt a test that does not require knowledge of the forecaster’s prior information set and is robust to rational clustering, correlated forecast errors and outliers. We find that analysts forecast the PMI poorly and display multiple biases when forecasting. In particular, forecasters anti-herd and anti-anchor. Anti-herding supports a reputation-based notion that forecasters are rewarded not only for forecast accuracy but also for being the best forecast at a single point in time. Anti-anchoring is consistent with forecasters overreacting to …

Mutual And Exclusive: Dyadic Sources Of Trust In Interorganizational Exchange, Bill Mcevily, Akbar Zaheer, Darcy Fudge Kamal

Business Faculty Articles and Research

Trust in interfirm exchange has traditionally been treated as mutually held and jointly determined by the two parties in a relationship. Yet, the expectations of exchange partners can, and routinely do, differ with respect to the goals, preferences, and vulnerabilities in their shared relationship. To account for such differences in expectations, we propose a broadened conceptualization of the sources of interorganizational trust as dyadic. Viewing the sources of trust as dyadic expands the conventional focus on mutual elements to further emphasize exclusive features of an exchange relationship. To substantiate our theory, we examine a key source of interorganizational trust, exchange …

The Financial Services Industry And Society: The Role Of Incentives/Punishments, Moral Hazard, And Conflicts Of Interests In The 2008 Financial Crisis, Noel Murray, Ajay K. Manrai, Lalita Ajay Manrai

Business Faculty Articles and Research

Purpose

This paper aims to present an analysis of the role of financial incentives, moral hazard and conflicts of interests leading up to the 2008 financial crisis.

Design/methodology/approach

The study’s analysis has identified common structural flaws throughout the securitization food chain. These structural flaws include inappropriate incentives, the absence of punishment, moral hazard and conflicts of interest. This research sees the full impact of these structural flaws when considering their co-occurrence throughout the financial system. The authors address systemic defects in the securitization food chain and examine the inter-relationships among homeowners, mortgage originators, investment banks and investors. The authors also …

Optimality Of The Fastest Available Server Policy, William P. Millhiser, Charu Sinha, Matthew J. Sobel

Business Faculty Articles and Research

We give sufficient conditions under which a policy that assigns customers to the Fastest Available Server, labelled FAS, is optimal in queueing models with multiple independent Poisson arrival processes and heterogeneous parallel exponential servers. The criterion is to minimize the long-run average cost per unit time. We obtain results for loss models and for queueing systems with a finite-capacity or infinite-capacity buffer under a head-of-the-line priority scheme. The results depend on cost assumptions, so we analyze the robustness of the cost structure and present counter-examples to illustrate when FAS is not optimal.