Research Colloquia

Modeling Managers As EPS Maximizers

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Itzhak (Zahi) Ben-David, Professor of Finance and Neil Klatskin Chair in Finance and Real Estate
University: Ohio State University, Fisher College of Business
Time: Thursday, December 7, 2023; 11:00 AM - 12:30 PM PST
Location: SB1 5200 (Lyman Porter Colloquia Room)

Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, the people running large public corporations say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take managers at their word and show that EPS maximization provides a single unified explanation for a wide range of corporate policies such as leverage, share issuance and repurchases, M&A payment method, cash accumulation, and capital budgeting.

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Generative AI and Firm Values

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Miao (Ben) Zhang, Assistant Professor of Finance and Business Economics
University: University of Southern California, Marshall School of Business
Time: Wednesday, November 22, 2023; 10:30 AM - 11:30 AM PST
Location: SB1 5100 (Corporate Partners Executive Boardroom)

What are the effects of recent advances in Generative AI on the value of firms? Our study offers a quantitative answer to this question for U.S. publicly traded companies based on the exposures of their workforce to Generative AI. Our novel firm-level measure of workforce exposure to Generative AI is validated by data from earnings calls, and has intuitive relationships with firm and industry-level characteristics. Using Artificial Minus Human portfolios that are long firms with higher exposures and short firms with lower exposures, we show that higher exposure firms earned excess returns that are 0.4% higher on a daily basis than returns of firms with lower exposures following the release of ChatGPT. Moreover, we show that hiring activity by more exposed firms decreases after the ChatGPT release and shifts away from more exposed occupations, which, in turn, see relative wage declines at the national level, consistent with the substantive disruptive potential of Generative AI technologies.

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Digital Collaboration Technologies and Managerial Intensity in U.S. Corporations: An Examination

Host(s): Assistant Professor Luke Rhee
Speaker(s): Phanish Puranam, Professor of Strategy, and Roland Berger Chair of Strategy and Organizational Design
University:  INSEAD
Time: Friday, November 17, 2023; 2:00 PM - 3:30 PM PST
Location:  SB1 5200 (Lyman Porter Colloquia Room)

We argue that digital collaboration technologies (DCTs) reduce supervisory burden on managers and should therefore lower managerial intensity. To test our argument, we apply a differences-in-differences design on a novel dataset built from firms’ job listings (Lightcast) and employees’ social profiles (Revelio), which comprises 3,017 US public firms that we track in the period 2010-2019. We find that, over the observation window, DCT adopters indeed show a 0.8% reduction in managerial intensity on average. Consistent with our argument that DCTs reduce supervisory burden, adopters also show a 5-7% increase in decentralization related skills in their job postings in the years following adoption. We also find that DCT adopters scaled up with fewer and less skilled managers.

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Do Investors Value Workforce Gender Diversity?

Host(s): Associate Professor Chris Bauman
Speaker(s): David Daniels, Assistant Professor of Management and Organization
University:  National University of Singapore
Time: Friday, November 17, 2023; 10:30 AM - 12:00 PM PST
Location:  SB1 5100 (Corporate Partners Executive Boardroom)

We theorize that investors will respond positively to workforce gender diversity in major U.S. firms because they may believe that diversity has large upsides for such firms (e.g., reduced legal risks and increased creativity), whereas diversity’s potential downsides (e.g., increased conflict) can be mitigated if they are effectively managed. To test our predictions, we examine how investors respond to news about workforce gender diversity numbers, using financial event studies and randomized experiments. We find that U.S. technology firms and U.S. financial firms experience more positive stock price reactions when it is revealed that they have relatively higher (vs. lower) workforce gender diversity numbers. These stock price reactions are both economically and statistically significant. For example, we estimate that if a technology firm had revealed gender diversity numbers that were one standard deviation higher, its market valuation would have increased by $1.11 billion. Furthermore, we find parallel investor reactions in randomized experiments with investors, and these reactions seem to be mediated by investors’ beliefs about potential upsides of diversity for the firm (e.g., reduced legal risks; creativity) but not by investors’ beliefs about potential downsides of diversity for the firm (e.g., conflict). Our results point towards a new type of business case for diversity, driven by investors: if firms had more workforce gender diversity, then investors would likely “reward” them with substantially higher valuations

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Self-Adapting Network Relaxations for Weakly Coupled Markov Decision Processes

Host(s): Associate Professor John Turner
Speaker(s): Selvaprabu (Selva) Nadarajah, Associate Professor of Operations Management in the Department of Information and Decision Sciences
University:   University of Illinois Chicago, UIC College of Business Administration
Time:  Friday, November 17, 2023; 9:00 AM - 10:30 AM PST
Location:  SB1 5200 (Lyman Porter Colloquia Room)

High-dimensional weakly coupled Markov decision processes (WDPs) arise in dynamic decision making and reinforcement learning, decomposing into smaller MDPs when linking constraints are relaxed. The Lagrangian relaxation of WDPs (LAG) exploits this property to compute policies and (optimistic) bounds efficiently; however, dualizing linking constraints averages away combinatorial information. We introduce feasibility network relaxations (FNRs), a new class of linear programming relaxations that exactly represents the linking constraints. We develop a procedure to obtain the unique minimally sized relaxation, which we refer to as self-adapting FNR, as its size automatically adjusts to the structure of the linking constraints. Our analysis informs model selection: (i) the self-adapting FNR provides (weakly) stronger bounds than LAG, is polynomially sized when linking constraints admit a tractable network representation, and can even be smaller than LAG, and (ii) self-adapting FNR provides bounds and policies that match the approximate linear programming (ALP) approach but is substantially smaller in size than the ALP formulation and a recent alternative Lagrangian that is equivalent to ALP. We perform numerical experiments on constrained dynamic assortment and preemptive maintenance applications. Our results show that self-adapting FNR significantly improves upon LAG in terms of policy performance and/or bounds, while being an order of magnitude faster than an alternative Lagrangian and ALP, which are unsolvable in several instances

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Strategic Arbitrage in Segmented Markets

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Anna Pavlova, Professor of Finance
University:  London Business School
Time: Tuesday, November 14, 2023; 2:00 PM - 3:30 PM PST
Location:  SB1 5200 (Lyman Porter Colloquia Room)

We propose a model in which arbitrageurs act strategically in markets with entry costs. In a repeated game, arbitrageurs choose to specialize in some markets, which leads to the highest combined profits. We present evidence consistent with our theory from the options market, in which suboptimally unexercised options create arbitrage opportunities for intermediaries. Using transaction-level data, we identify the corresponding arbitrage trades. Consistent with the model, only 57% of these opportunities attract entry by arbitrageurs. Of those that do, 50% attract only one arbitrageur. Finally, our paper details how market participants circumvent a regulation devised to curtail this arbitrage strategy

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Post-Acquisition Human Capital Investment: Is it good to be targeted?

Host(s): Assistant Professor Luke Rhee
Speaker(s): Russell Coff, Thomas J. Falk Distinguished Chair in Business and Professor of Management and Human Resources
University:   University of Wisconsin-Madison, Wisconsin School of Business
Time: Friday, October 27, 2023; 2:00 PM - 3:30 PM PDT
Location:  SB1 5200 (Lyman Porter Colloquia Room)

Much of the M&A literature has focused on the negative consequences for target employees. They may anticipate layoffs, and cuts in pay, benefits, and training. While acquiring valuable human capital may be a central acquisition objective, post-acquisition turnover is often high, and the best people may be at the greatest risk of exiting. One might expect post-acquisition investments in human capital to be rare or unwise. We draw on a unique sample of Belgian M&A targets which includes social balance sheet accounts before and after mergers (formal and informal training, workforce composition, turnover, compensation, etc.). Findings indicate that post-acquisition investment increases (compensation and training) when the deal rationale involves revenue growth or buyers are in unrelated industries. We find increased compensation but reduced training in cross-border deals and for targets with highly educated workforces. Notably, in our sample, the vast majority of buyers seek growth-oriented objectives so human capital investment occurred most of the time. We also offer a more nuanced discussion breaking out different kinds of revenue growth strategies.

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The Economic Effects of Political Polarization: Evidence from the Real Asset Market

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Ran Duchin, Professor of Finance
University:   Boston College, Carroll School of Management
Time: Friday, October 27, 2023; 2:00 PM - 3:30 PM PDT
Location:  SB1 2321 (Judy Rosener Classroom)

The rise of political polarization affected the landscape of the U.S. real asset market. Mergers between politically divergent firms became less common over time, and those between firms from politically divergent states have virtually disappeared in recent years. We analyze deal-level data to consider confounding factors and explore the mechanisms underlying these dramatic trends. We find that the likelihood of merger announcement or completion, announcement returns, and post-merger operating performance are lower for politically divergent firms. The effects are stronger when political polarization is greater, when firms plan to integrate operations, and during economic expansions. These findings hold after controlling for geographical distance, product similarity, and existing measures of corporate culture.

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The Algorithm-Human Intermediary Tradeoff: A Study of Platform Orchestrator’s Learning from Influencers on the Instagram Platform

Host(s): Assistant Professor Luke Rhee
Speaker(s): PK Toh, Associate Professor of Management
University:  University of Texas at Austin, McCombs School of Business
Time: Friday, October 20, 2023; 2:00 PM - 3:30 PM PDT
Location:  SB1 5200 (Lyman Porter Colloquia Room)

For digital platform orchestrators, using algorithm to intermediate between complementors and users is a key way to generate revenue. Yet, they often allow third-party human intermediaries, e.g. influencers, to co-exist and perform similar tasks on the platforms. Why do they do so? How do human intermediaries benefit platforms? Using Instagram data and Sentiment Analysis technique, we demonstrate that human intermediaries offer different value-add to complementors than algorithm – while algorithm enables wider user-reach breadth, influencers provide greater user-reach depth which generates positive sentiments towards complementors. The latter do more than trigger indirect network effects benefitting platforms. We show that algorithm directly benefits from influencers – it learns from them over time and closes the gap in positive user sentiments generated towards complementors via finding appropriate new users. Findings join recent research in highlighting how platforms exploit participants for their own benefits and how value-capture concerns drive platforms’ strategies.

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Too Many Managers: The Strategic Use of Titles to Avoid Overtime Payments

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Umit Gurun, Ashbel Smith Professor of Accounting, and Finance and Managerial Economics
University:  University of Texas at Dallas, Jindal School of Management
Time: Friday, October 20, 2023; 2:00 PM - 3:30 PM PDT
Location:  SB1 2321 (Judy Rosener Classroom)

We find widespread evidence of firms appearing to avoid paying overtime wages by exploiting a federal law that allows them to do so for employees termed as “managers” and paid a salary above a pre-defined dollar threshold. We show that listings for salaried positions with managerial titles exhibit an almost five-fold increase around the federal regulatory threshold, including the listing of managerial positions such as “Directors of First Impression,” whose jobs are otherwise equivalent to non-managerial employees (in this case, a front desk assistant). Overtime avoidance is more pronounced when firms have stronger bargaining power and employees have weaker rights. Moreover, it is more pronounced for firms with financial constraints and when there are weaker labor outside options in the region. We find stronger results for occupations in low-wage industries that are penalized more often for overtime violations. Our results suggest broad usage of overtime avoidance using job titles across locations and over time, persisting through the present day. Moreover, the wages avoided are substantial - we estimate that firms avoid roughly 13.5% in overtime expenses for each strategic “manager” hired during our sample period.

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Personalized Pricing, Network Effects, and Corporate Social Responsibility

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Liyan Yang, Professor of Finance and Peter L. Mitchelson/SIT Investment Associates Foundation Chair in Investment Strategy
University:  University of Toronto, Rotman School of Management
Time: Friday, October 13, 2023; 2:00 PM - 3:30 PM PDT
Location:  SB1 5100 (Corporate Partners Executive Boardroom)

We propose a theory of corporate social responsibility (CSR) by linking it to a firm’s product market. In our model, the firm's product exhibits network effects whereby its value increases with the number of consumers who purchase it. Moreover, with advancements in technology and big data, the firm can adopt personalized pricing for each consumer. We show that such a firm could use CSR as a commitment device for low product prices, which helps overcome the coordination problem among consumers and increases firm profits, thus supporting the notion of “doing well by doing good.

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Cross-Cutting Ties among Polarized Political Elites

Host(s): Assistant Professor Noah Askin
Speaker(s): Minjae Kim, Assistant Professor of Management – Organizational Behavior
University:  Rice University, Jones Graduate School of Business
Time: Friday, October 13, 2023; 10:30 AM - 12:00 PM PDT
Location: SB1 5100 (Corporate Partners Executive Boardroom)

We develop and test a theory to address when and why political elites may build cross-partisan ties in times of polarization. Key to the theory are two points: (1) insofar as cross-partisan ties provide information and reputational benefits for individual politicians that are not attainable from co-partisan ties, politicians are more likely to cooperate with opposite-partisan members sharing the common “foci” (e.g., legislative priorities) than co-partisan members doing the same; and (2) such tendencies are more likely when polarization is higher (thus when information and coordination from opposite-partisans are overall harder to achieve) and politicians are shielded from consequences of co-partisan disapproval. We test these ideas by examining the US Senate from 1973 to 2017. Results show that when two senators’ speeches express similar legislative priorities, their tendency to co-sponsor a bill is stronger when the two are in different parties than when they are in the same party, but only in times of polarization and among re-elected senators. The upshot is an endogenous “brake” to structural divisions, where cross-cutting ties emerge due to—and not despite—polarization.

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Care More, Get More, and Give More—When Your Wallet Agrees: Resource Allocation Under Utility Heterogeneity and Income Disparity

Host(s): Assistant Professor Zuguang Gao
Speaker(s): Owen Wu, Associate Professor and Grant Thornton Scholar, Department of Operations & Decision Technologies
University:   Indiana University Bloomington, Kelley School of Business
Time: Friday, October 13, 2023; 10:00 AM - 11:30 AM PDT
Location: SB1 2200

Problem definition: The challenge of equitably allocating a divisible resource and its associated costs or savings among consumers with heterogeneous incomes and private levels of resource utility arises in many situations. The challenge lies in the dual dimensions of consumer characteristics and the coupled allocation problems. We devise and analyze various resource allocation schemes, using utility-led community solar as a focal application in this paper. Methodology/results: Our model incorporates consumer heterogeneity in both income levels and utility for the resource. We formulate the problem of allocating the resource and its associated cost or savings, with the objective of maximizing the aggregate welfare. We present lower and upper bounds for this problem, and study various alternative allocation schemes. The most sophisticated scheme offers consumers income-dependent menus (IDM) of quantity and cost options. We uncover various structural properties of these menus and analytically show their advantages over simpler alternatives. Using numerical studies calibrated by real-world community solar program data, we find that the IDM approach has remarkable performance, nearly achieving the first-best. Moreover, by endogenizing the size of the community solar program, we find that our IDM approach also promotes larger solar projects, enhancing both environmental and social benefits of solar energy. Managerial implications: In the realm of resource allocation where both income and resource utility levels are diverse, significant welfare gains can be realized by judiciously leveraging the dual dimensions of heterogeneity. Implementing our proposed IDM approach in the context of community solar allows environmentally conscious consumers to opt for greater capacity and contribute more, contingent on individual financial capacities. In simpler terms: “care more, get more, and give more—when your wallet agrees.”

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Fatal police shootings demotivate potentially lifesaving prosocial behaviors towards unrelated targets—when shooting victims are Black

Host(s): Associate Professor Chris Bauman
Speaker(s): Polly Kang, Post Doctoral Research Fellow
University:  INSEAD
Time: Tuesday, September 26, 2023; 10:30 AM - 12:00 PM PDT
Location: SB1 5100 (Corporate Partners Executive Boardroom)

Prosocial behaviors play a critical role in human groups, organizations, and societies, especially in response to harms like tragedies or crises. However, it remains controversial whether tragedies enervate or energize prosocial behaviors towards unrelated targets (i.e., targets unrelated to the original tragedies). We present large-scale quasi-experimental field evidence from the United States that fatal police shootings demotivate prosocial behaviors by volunteer crisis counselors towards targets experiencing personal crises (e.g., suicidal ideation) unrelated to the original shootings. Specifically, each fatal police shooting reduces potentially lifesaving prosocial behaviors by about 1%. This enervating impact of fatal police shootings is disproportionately driven by fatal police shootings of Black victims, which in turn is driven by shootings of Black victims in areas with high levels of racism. In contrast, fatal police shootings of non-Black victims do not reduce prosocial behaviors. Our results suggest prosocial behaviors are not demotivated by fatal police shootings in general, but specifically by fatal police shootings that can be construed as manifestations of racism – or racially motivated killings. Our findings illustrate how fatal police shootings of Black victims not only harm direct victims, their families, and their communities, but may also create spillover effects that put in motion a much broader set of harms – by widely sapping the prosocial motivation of critical volunteers across the country, and (in turn) ultimately harming many vulnerable people who suffer from unrelated personal crises. Although fatal police shootings are widely viewed as tragedies, they may be even more harmful than previously believed.

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Crowd-judging on Two-sided Platforms: An Analysis of In-group Bias

Host(s): Assistant Professor Zuguang Gao
Speaker(s): S. Alex Yang, Associate Professor of Management Science and Operations
University:  London Business School
Time: Tuesday, August 22, 2023; 9:00 AM - 10:30 AM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

Disputes over transactions on two-sided platforms are common and usually arbitrated through platforms’ customer service departments or third-party service providers. This paper studies crowd-judging, a novel crowdsourcing mechanism whereby users (buyers and sellers) volunteer as jurors to decide disputes arising from the platform. Using a rich data set from the dispute resolution center at Taobao, a leading Chinese e-commerce platform, we aim to understand this innovation and propose and analyze potential operational improvements with a focus on in-group bias (buyer jurors favor the buyer, likewise for sellers). Platform users, especially sellers, share the perception that in-group bias is prevalent and systematically sways case outcomes as the majority of users on such platforms are buyers, undermining the legitimacy of crowd-judging. Our empirical findings suggest that such concern is not completely unfounded: on average, a seller juror is approximately 10% likelier (than a buyer juror) to vote for a seller. Such bias is aggravated among cases that are decided by a thin margin and when jurors perceive that their in-group’s interests are threatened. However, the bias diminishes as jurors gain experience: a user’s bias reduces by nearly 95% as experience grows from zero to the sample median level. Incorporating these findings and juror participation dynamics in a simulation study, the paper delivers three managerial insights. First, under the existing voting policy, in-group bias influences the outcomes of no more than 2% of cases. Second, simply increasing crowd size through either a larger case panel or aggressively recruiting new jurors may not be efficient in reducing the adverse effect of in-group bias. Finally, policies that allocate cases dynamically could simultaneously mitigate the impact of in-group bias and nurture a more sustainable juror pool.

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Internal Redeployment Versus External Recruitment of Inventors

Host(s): Assistant Professor Luke Rhee
Speaker(s): Sea-Jin Chang, Lim Kim San Chair Professor of Business Administration, Strategy & Policy Department
University:  National University of Singapore, NUS Business School
Time: Friday, June 9, 2023; 2:00 PM - 3:30 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

Firms can both acquire new resources from external markets and optimize incumbent resources by redeploying them from one use to another. This study explores how firms can achieve balance between internal redeployment and external recruitment of resources by focusing on scientific and engineering human resources, i.e., inventors, in the global semiconductor industry. We find that externally recruited inventors tend to work in fewer technology areas but are more likely to enter new technology areas compared to incumbents. This is attributable to the fact that the former incur greater adjustment costs but lower opportunity costs compared to the latter. Furthermore, inventor productivity and knowledge similarity with targets facilitate redeployment but her central position in a firm’s knowledge base discourages it, which tendency is stronger for incumbents than externally recruited inventors, again due to lower opportunity cost. We further find that the lower performance of externally recruited inventors in the short-term improves to become comparable with incumbents in the long-run.

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The Fees Paradox: The Pain of Choice

Host(s): Professor Connie Pechmann
Speaker(s): Vicki Morwitz, Bruce Greenwald Professor of Business and Professor of Marketing
University: Columbia University, Columbia Business School
Time: Friday, June 2, 2023; 10:30 AM - 12:00 PM PDT
Location: SB1 2321 (Judy Rosener Classroom)

Consumers are increasingly subject to fees, often without knowing why they are charged. This fee growth is due partly to an increasingly complex and underregulated marketplace. In addition to annoying consumers, fees transfer wealth from consumers’ wallets to wealthy corporations and individuals. Aware of rising public concerns, many industries have adopted a la carte pricing, where consumers can choose options and associated fees. For example, at many hotels, guests can pay fees for early check-in or late check-out, for using the pool, Wi-Fi, and gym, and for breakfast. Other companies instead use all-inclusive pricing or assess mandatory fees (e.g., “resort fees”). In this talk, I first review prior research on how consumers react to different pricing models that involve fees (e.g., partitioned pricing, drip pricing). I then will present some research in progress that investigates consumers’ preference for the freedom to choose options and associated fees. We show in a series of studies involving different industries, options, and fee/additional charge structures, that consumers mispredict how much they like optional fees. While they prefer optional fees when comparing different pricing structures (all-inclusive, mandatory fees), as they might be asked to do in a marketing research pricing survey, they dislike optional fees in consumptions contexts that involve paying for optional items that have fees associated with them. We provide some initial evidence that this happens because consumers mispredict the pain of payment that comes with the freedom of choice.

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“Extortionality” and Public Policy: A Microeconomic Study of Ransomware Attacks

Host(s):  Associate Professor Mingdi Xin
Speaker(s): Debabrata Dey, Ronald G. Harper Professor of Artificial Intelligence and Information Systems
University: University of Kansas, KU School of Business
Time: Friday, May 26, 2023; 11:00 AM - 12:30 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

Ransomware, a digital form of extortion, has emerged as one of the biggest threats to cybersecurity. Faced with business disruptions, many organizations accede to ransom demands and, in doing so, they incentivize attackers to launch more attacks, elevating the chance of a future breach not just for themselves but for others as well. We study this externality using a multiperiod game among multiple firms, each of which has a choice to pay or not pay if breached in a particular period, its choice having implications for all of them in the future. How should a policymaker intervene to mitigate this externality, and is prohibition really necessary? Our study raises several important questions and provide practical insights. Specifically, what might work or how it might work as a policy depends critically on the behavior of a third party—ransomware attacker—an economic agent absent from a typical externality setup. Our model of “extortionality”—externality due to extortion—provides a framework for comparing different types of policy interventions and raises concerns for policymakers to pause and ponder.

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Regulating Powerful Platforms: Evidence from Commission Fee Caps

Host(s):  Assistant Professor Tingting Nian
Speaker(s): Allen Li, Michael and Mary Sue Shannon Professor and Associate Professor in Operations and Information Management
University: University of Wisconsin-Madison, Wisconsin School of Business
Time: Friday, May 19, 2023; 10:30 AM - 12:00 PM PDT
Location: SB1 2321 (Judy Rosener Classroom)

Platform giants typically possess strong power over other participants on the platforms. Such power asymmetry gives platform owners the edge on setting platform fees to capture the surplus created on their platforms. While there is a heated debate on regulating these powerful platforms, the lack of empirical studies hinders the progress towards evidence-based policymaking. This research empirically investigates this regulatory issue in the context of on-demand delivery. Delivery platforms (e.g., DoorDash) charge restaurants a commission fee, which can be as high as 30% per order. To support small businesses, recent regulatory scrutiny has started to cap the commission fees for independent restaurants. This research empirically evaluates the effectiveness of platform fee regulation, by investigating recent regulations across 14 cities and states in the United States. Our analyses show that independent restaurants in regulated cities (i.e., those paying reduced commission fees) experience a decline in orders and revenue, whereas chain restaurants (i.e., those paying the original fees) see an increase in orders and revenue. This intriguing finding suggests that chain restaurants, not independent restaurants, benefit from the regulations that were intended to support independent restaurants. We find that platforms’ discriminative responses to the regulation may explain the negative effects on independent restaurants. That is, after cities enact commission fee caps, delivery platforms become less likely to recommend independent restaurants to consumers, and instead turn to promote chain restaurants. Moreover, delivery platforms increase their delivery fees for consumers in regulated cities, suggesting that these platforms attempt to cover the loss of commission revenue by charging customers more.

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The Role of Cultural Capital in Hiring for Racial Diversity

Host(s):  Associate Professor Sharon Koppman
Speaker(s): Jeraul Mackey, President's Postdoctoral Fellow
University: University of California, San Diego, Rady School of Management and Department of Education
Time: Friday, May 19, 2023; 10:30 AM - 12:00 PM PDT
Location: SB1 5100 (Corporate Partners Executive Boardroom)

Researchers have studied how employers express a commitment to racial diversity in hiring practices. However, ensuring practices increase the proportion of workers of color remains challenging. Job seekers' understanding of the cultural norms that govern the hiring process may be crucial for successful implementation. This study examines how employers rely on job seekers' knowledge of the hiring process to achieve a diverse workforce. I argue that job seekers facilitate hiring outcomes by performing culturally laden job search practices that reduce search frictions. To develop this theoretical argument, I observe the hiring process for entry-level workers at two national nonprofit employers over 18 months. Through interviews and direct observations of candidate deliberations, I identify how employers consider job seekers' cultural knowledge and behavior in evaluation and selection decisions. Findings indicate that job seekers possessing high job search cultural capital — a strong understanding of normative job search rules and labor market knowledge — elicit positive hiring preferences from employers. Conversely, qualified candidates with low job search cultural capital garner less support during selection decisions. This study also reveals how employers' preference for candidates familiar with job search norms can weaken the effectiveness of diversity-minded hiring practices. More broadly, the results illuminate how cultural capital influences well-intentioned hiring processes and organizational outcomes at the microlevel.

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Change at Last, but When Does Change Last? Preserving Attentional Engagement around Past Failures and their Lessons

Host(s):  Assistant Professor Luke Rhee
Speaker(s): Peter Madsen, Professor of Organizational Behavior and Human Resources
University: Brigham Young University, Department of Management, Marriott School of Business
Time: Friday, May 19, 2023; 10:00 AM - 11:30 AM PDT
Location: Zoom

Although failures and other experiences can capture attention and motivate organizations to learn and improve, this knowledge is not always retained – leaving some organizations dangerously prone to repeat the same mistakes over time. We adapt theory on the Attention-Based View (ABV), and specifically on attentional engagement and vigilance, to shed new light on this process. While prior research has examined how competing events may draw attention away, our theory leads us to consider the circumstances that will motivate employees to push their attention right back, preserving or enhancing the learning that has already occurred. Our framework examines the conditions that turn attention back toward failures by raising the chances that related issues exist elsewhere, serving as continuing reminders or cues about the failure when attention begins to drifts away. We find support for related hypotheses involving a failure’s complexity, the firm’s culpability, and the use of related routines elsewhere in the firm. Our findings contribute to ABV by developing theory about attentional engagement and vigilance, and by emphasizing the conditions that can keep attention focused rather than drawing it away from a focal domain. We also contribute toward efforts to examine depreciation and forgetting in the organizational learning literature.

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The Driver-Aide Problem: Coordinated Logistics for Last-Mile Delivery

Host(s):  Associate Professor John Turner
Speaker(s): Rui Zhang, Assistant Professor of Strategy, Entrepreneurship and Operations
University: University of Colorado Boulder, Leeds School of Business
Time: Tuesday, May 16, 2023; 2:30 PM - 4:00 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

Problem definition: Last-mile delivery is a critical component of logistics networks, accounting for approximately 30-35% of costs. As delivery volumes have increased, truck route times have become unsustainably long. To address this issue, many logistics companies, including FedEx and UPS, have resorted to using a “Driver-Aide” to assist with deliveries. The aide can assist the driver in two ways. As a “Jumper”, the aide works with the driver in preparing and delivering packages, thus reducing the service time at a given stop. As a “Helper”, the aide can independently work at a location delivering packages, while the driver leaves to deliver packages at other locations and then returns. Given a set of delivery locations, travel times, service times, the jumper’s savings and the helper’s service times, the goal is to determine both the delivery route and the most effective way to use the aide (e.g., sometimes as a jumper and sometimes as a helper) to minimize the total delivery time. Methodology/results: We model this problem as an integer program with an exponential number of variables and an exponential number of constraints, and propose a branch-cut- and-price approach for solving it. Our computational experiments are based on simulated instances built on real-world data provided by an industrial partner and a dataset released by Amazon. More importantly, our results characterize the conditions under which this novel operation mode can lead to significant savings in terms of both the routing time and cost. Managerial implications: Our computational results show that the driver-aide with both jumper and helper modes is most effective when there are denser service regions and when the truck’s speed is higher (≥ 10 MPH). Coupled with an economic analysis, we come up with rules of thumb (that have close to 100% accuracy) to predict whether to use the aide, and in which mode. Empirically, we find that the service delivery routes with greater than 50% of the time devoted to delivery (as opposed to driving) are the ones that provide the greatest benefit. These routes are characterized by a high density of delivery locations.

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How Many Factors?

Host(s):  Assistant Professor Jinfei Sheng
Speaker(s): Jonathan Lewellen, Carl E. and Catherine M. Heidt Professor of Finance
University: Dartmouth College, Tuck School of Business
Time: Friday, May 12, 2023; 1:00 PM - 2:15 PM PDT
Location: Zoom

This paper studies the costs and benefits of adding factors to empirical asset-pricing models. I argue that, for many purposes, the literature’s preference for models with fewer factors is misplaced. Including extra factors in a model, even redundant ones, can improve estimates of individual alphas and increase the power of asset-pricing tests. I provide empirical examples to illustrate these results.

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The Value of External Data for Digital Platforms: Evidence from a Field Experiment on Search Suggestions

Host(s):  Professor Sanjeev Dewan
Speaker(s): Ananya Sen, Assistant Professor of Information Technology and Management
University: Carnegie Mellon University, Heinz College of Information Systems and Policy
Time: Friday, May 12, 2023; 11:00 AM - 12:30 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

Firms increasingly leverage external data with an aim to unlock improvements in their offerings, but it is challenging to measure the value of external data. Collaborating with a large Chinese technology company, we analyze a randomized field experiment where we manipulated access to the market leader’s application programming interface (API) to measure the causal impact of external data on the click-through rate (CTR) for the focal company's nascent search product. We report three main findings: First, compared to the baseline with access to the market leader’s API, API removal leads to a 4.6% decrease in CTR on average for search suggestions. Second, the negative effect due to API removal is more prevalent among heavy users, and it is driven by both mainstream and niche content. Third, the magnitude of this negative effect in the longer term is half as much as what we would have obtained with a short-term experiment. We provide suggestive mechanism evidence of the longer-term effect: the focal company's reliance on the market leader's data limits the development of its algorithmic system based on its internal data. This research informs managers of whether and how the market leader’s data affects a smaller player's product performance. It further sheds light on policies such as the Digital Markets Act that proposes data sharing by large digital platforms and a recent debate on whether big data undermines market competition.

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More Money, More Options? The Effect of Cash Windfalls on Entrepreneurial Activities in Small Businesses

Host(s):  Assistant Professor Jinfei Sheng
Speaker(s): Xing Huang, Assistant Professor of Finance
University: Washington University in St. Louis, Olin Business School
Time: Friday, May 5, 2023; 2:00 PM - 3:15 PM PDT
Location: SB1 2321 (Judy Rosener Classroom)

Using a novel setting in which retailers receive bonuses when selling jackpot winning lottery tickets, we show that large windfalls not only increase the revenue and employment of existing businesses but also spur serial entrepreneurship. Serial ventures occur mainly in nonretail industries. We document a pecking order in entrepreneurs’ responses: small windfalls increase revenue, whereas windfalls larger than $100,000 trigger business creation and employment growth. Consistent with wealth effects as an indispensable mechanism, the effects become larger still when cash windfalls far surpass the amount required to start new businesses. Finally, cash windfalls do not lead to financial distress.

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Knowledge Governance in Online Communities (with Shaoqin Tang and Zhiyi Wang)

Host(s):  Assistant Professor Luke Rhee
Speaker(s): Tony Tong, Professor of Strategy and Entrepreneurship
University: University of Colorado Boulder, Leeds School of Business
Time: Friday, April 28, 2023; 2:00 PM - 3:30 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

Firms increasingly engage in online communities to source external knowledge from voluntary contributors. Although prior literature has examined how to incentivize the crowd’s participation, limited research has focused on tensions between continued participation and contribution quality. We address this gap by studying how organizational gatekeepers interact with external contributors to shape contributors’ continued participation and subsequent contribution quality. We formalize our predictions on how input acceptance and knowledge sharing affect contributor behaviors in an analytical model with a belief updating framework. Utilizing a large dataset on newcomers’ contributions to firm-owned open source software products, we find that gatekeepers’ input acceptance and sharing of general knowledge increase continued participation, but decrease subsequent contribution quality. Only by sharing product-specific knowledge with newcomers can gatekeepers both motivate continued participation and improve contribution quality. We discuss the broader implications of our model and findings for the governance of online communities where participation and contribution are voluntary.

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Stablecoin Runs and the Centralization of Arbitrage

Host(s):  Assistant Professor Jinfei Sheng
Speaker(s): Yao Zeng, Assistant Professor of Finance
University: : University of Pennsylvania, The Wharton School
Time: Friday, April 28, 2023; 2:00 PM - 3:15 PM PDT
Location: SB1 2321 (Judy Rosener Classroom)

We analyze the run risk of USD-backed stablecoins and uncover a dilemma between stablecoins’ price stability and financial stability. Stablecoin runs bear important financial stability implications through the fire sale of US dollar assets like bank deposits, Treasuries, and corporate bonds. We show that panic runs exist even though general investors only trade stablecoins in secondary markets with flexible prices. Run incentives are reinstated by stablecoin issuers’ liquidity transformation and the fixed $1 at which arbitrageurs redeem stablecoins for cash in the primary market. We discover that more efficient arbitrage amplifies run risk. This explains why stablecoin issuers only authorize a small set of arbitragers even though it comes at the expense of maintaining a stable secondary price. In other words, the centralization of arbitrage embeds an inherent tradeoff between run risk and price stability. Our findings are based on a model and a novel dataset on stablecoin redemptions, trading, and reserve assets. Calibrating our model, we find a higher run risk for USDT, the largest stablecoin, compared to USDC, the second-largest stablecoin. However, even USDC bears significant run risk due to its less concentrated arbitrage and more concentrated deposit holdings.

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Clutch Performers

Host(s):  Associate Professor Patrick Bergemann
Speaker(s): Lamar Pierce, Professor of Organization and Strategy
University: Washington University in St. Louis, Olin Business School
Time: Friday, April 21, 2023; 10:30 AM - 12:00 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

There is a widespread belief that some employees exhibit the attribute of "clutch" or anti-clutch" performance, consistently raising or lowering their performance in pressure-filled periods. We subject this lay theory to the first empirical test in typical firms, using over one million new automobile sales by 21,896 salespeople at 1,034 franchised dealerships. Salespeople in these dealerships regularly face high month-end performance pressure due to lucrative manufacturer sales targets. We first establish common belief in a lay theory of clutch performers using an online study, then employ multiple analytical techniques to show clutch and anti-clutch performers to be rare and of limited economic importance in our setting. Employees' average performance under pressure closely mirrors their low-pressure performance, with the few clutch performers that do exist having little economic importance to the firm and being unidentifiable to management. We conclude that the ability to respond to pressure is not a meaningful source of employee heterogeneity in our setting. Star salespeople are consistently stars, while average employees are consistently average. We caution researchers and managers against categorizing employees as "clutch performers" or "anti-clutch" performers, given the risk that anecdotal or small-sample performance differences under pressure might reflect random chance and not underlying employee contribution or value. Doing so not can hurt organizational performance, but can also increase inequity if the categorization is based in stereotypes and other cognitive biases.

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Inflation Forecasting from Cross-Sectional Stocks

Host(s):  Assistant Professor Jinfei Sheng
Speaker(s): Jun Pan, SAIF Chair Professor of Finance
University: Shanghai Jiao Tong University, Shanghai Advanced Institute of Finance
Time: Friday, April 14, 2023; 5:00 PM – 6:15 PM PDT
Location: Zoom

We document strong and unique inflation forecastability using the relative pricing between stocks with high- and low-inflation exposures. We construct the stock-level headline and core-focused inflation betas by taking advantage of the fact that stock returns exhibit persistent sensitivity to headline-CPI shocks during the calendar month of CPI, and to core-CPI news on CPI announcement days. Above and beyond the existing forecasting methods, our stock-based portfolios contain fresh and non-redundant predictive information, indicating active price discovery on inflation in cross-sectional stocks. The core-focused forecasting portfolio emerges as a unique and unparalleled predictor for core inflation, whose predictive power and economic significance increase dramatically during the inflation surge of 2021 and 1973. Moreover, our stock-based information is not incorporated by economists in their inflation forecasts, whose room for improvement is especially large during 2021-22. We also find stronger predictability under Fed’s QE and when the Fed is behind-the-curve in fighting inflation.

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Programs of Experimentation and Pivoting for (Overconfident) Entrepreneurs

Host(s): Assistant Professor Luke Rhee
Speaker(s): Hart Posen, Professor in Management and Human Resources
University: University of Wisconsin-Madison, Wisconsin School of Business
Time: Friday, March 17, 2023; 2:00 PM – 3:30 PM PDT
Location: SB1 2200

The Lean Startup has brought a sea-change in conventional wisdom to the practice of entrepreneurship: rather than commit and persevere, the advice is now that experimenting and pivoting is the key to success. Emerging scholarship suggests an entrepreneur should experiment, and examines the implications of pivoting; however, this literature has yet to fully articulate the conceptual logic underlying how much to experiment and its implications for how frequently to pivot. We focus on the design of what we call the program of experimentation — a sequentially interdependent set of experiments and pivot decisions undertaken as an entrepreneur seeks to develop a viable business idea. We conceptualize the program along two design dimensions: the number of experiments to run and the pivot threshold for evaluating experimental outcomes. We address two critical issues. First, how much should an entrepreneur experiment and what are the implications for when to pivot? Second, how is the design of the program of experimentation conditioned by the nature of an entrepreneur’s behavioral biases? Our computational model suggests that while experimenting and pivoting can improve new venture performance, it can also be taken too far. Programs of experimentation that generate frequent and early pivots may impede learning and underperform more conservative programs that generate fewer pivots. We also show that an effectively designed program of experiments can partially remedy entrepreneurs’ behavioral bias. Overconfidence (specifically, over-estimation bias) favors a program design with a more aggressive pivot threshold, though this may not necessitate an increase in the number of experiments.

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Preventing positive returns? How investors respond to executives’ regulatory-focus-related communication

Host(s): Assistant Professor Patrick Bergemann
Speaker(s): Elaine Wong, Associate Professor of Management
University: University of California, Riverside, UCR School of Business
Time: Friday, March 17, 2023; 10:30 AM – 12:00 PM PDT
Location: SB1 5100 (Corporate Partners Executive Boardroom)

Recent research has demonstrated that executives’ motivational orientations, as reflected in organizational communication (e.g., letters to shareholders), are strong predictors of important firm outcomes. Specifically, firms whose executives communicate a focus on growth and achievement (a promotion focus) pursue distinctly different strategies compared to firms whose executives communicate a focus on security and the avoidance of failure (a prevention focus). In this paper, we explore whether external stakeholders are sensitive to executives’ promotion focus and prevention focus communication and the degree to which these foci match the situation by examining investors’ reactions to communication during quarterly earnings calls. We find that external stakeholders appear responsive to executive communication such that stock market returns are higher when executives communicate a promotion focus. This relationship is stronger when past performance is positive. Additionally, we find evidence that prevention focus communication can ameliorate negative investor reactions following poor past financial performance. Our study has several theoretical implications for the study of regulatory focus and executive communication.

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Fragmentation and Visibility in Supply Networks

Host(s): Associate Professor John Turner
Speaker(s): Nikolay Osadchiy, Associate Professor of Information Systems and Operations Management
University: Emory University, Goizueta Business School
Time: Friday, March 10, 2023; 2:30 PM – 4:00 PM PST
Location: SB1 2200

This paper explores how firms' sourcing and customer acquisition decisions shape the structure of production network. We propose a measure fragmentation that is based on a notion of communities in the production network. A community represents a set of firms that trade mostly connected with each other. Using history of buyer-supplier relationships between firms we build a production network that evolves in time and identify communities in this time-dependent network. We find that while firms in the networks become more connected with time, i.e., have more customers and suppliers, the network also becomes more fragmented, i.e., the number of communities increases and the dominance of large communities decreases. We explore a plausible mechanism that reconciles the increased connectivity with fragmentation. Furthermore, we identify firms that link communities in the production network, and demonstrate importance of this firms for improving visibility into supplier and customer networks.

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Wisdom of the Institutional Crowd: Implications for Anomaly Returns

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Gerard Hoberg, Charles E. Cook Community Bank Professor of Finance and Business Economics
University: University of Southern California, Marshall School of Business
Time: Friday, March 10, 2023; 2:00 PM – 3:15 PM PST
Location: SB1 5200 (Lyman Porter Colloquia Room)

We hypothesize that when price correction requires more capital than any one investor can provide, institutions coordinate trading via crowd-sourcing in the media. When the crowd reaches a consensus, synchronized trading occurs, prices are corrected, and anomaly returns result. We use over one million Wall Street Journal articles from 1980 to 2020 to develop a novel textual measure of institutional investors making predictions in the media (InstPred). We show that (i) both value and momentum anomaly returns are 34% to 63% larger when InstPred is higher, and (ii) institutional investors collectively trade the anomalies more aggressively when InstPred is higher. Our results are reinforced by tests using quasi-exogenous variation in temporal investor-WSJ connections and cannot be explained by existing measures such as document tone.

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Learning Like A Pro: Evidence of Differential Learning from Industry Accidents by Individuals Within Organizations

Host(s): Assistant Professor Noah Askin
Speaker(s): Oliver Hahl, Associate Professor of Organization Theory, Strategy, and Entrepreneurship
University: Carnegie Mellon University, Tepper School of Business
Time: Friday, February 17, 2023; 10:30 AM – 12:00 PM PST
Location: SB1 5200 (Lyman Porter Colloquia Room)

Research on learning from failure has found that industry accidents can inspire organizations to learn, or improve performance, vicariously from other firms’ failures, but also that they soon forget what they have learned, regressing back to old patterns. This research, at the organizational level, obscures the fact that individuals inside of organizations might approach these opportunities to learn differently. We argue that an important difference between individual workers that can affect learning patterns is their level of professionalism, or the extent to which one is trained and/or identifies with one’s profession. This distinction allows us to explain why those more threatened by an accident caused by negligence (those with less professionalism) react more strongly to the accident, driving the observed organizational patterns. What is more, we argue that the patterns that look like learning at the organizational level are not actual learning because these less-professional workers a) cannot sustain the change in behaviors after the accident and b) tend to engage in more superficial learning behaviors induced by institutional pressures reacting to the large-scale accident. As a result when institutional pressures wane, the positive change in behavior drops, explaining the forgetting patterns found at the organizational level. Through analyses of behavior in the context of a large-scale accident in the maritime industry, we find support for this argument and highlight the value of understanding learning patterns at the micro foundational level. By extending theory to the individual level we can explain organizational level patterns in more detail and highlight how professionalism shapes learning behaviors for individuals within firms ultimately shaping organizational performance.

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Opening the aperture: Explaining the complementary roles of advice and Testing when forming entrepreneurial strategy

Host(s): Assistant Professor Travis Howell
Speaker(s): Siobhan O’Mahony, Feld Family Professor in Innovation and Entrepreneurship
University: Boston University, Questrom School of Business
Time: Friday, January 20, 2023; 2:00 PM – 3:30 PM PST
Location: Zoom

Forming entrepreneurial strategy is difficult as the future value of strategy alternatives is uncertain. To create and capture value, firms are advised to consider and test multiple alternative strategy elements. Yet, how firms generate and test alternatives remains understudied. As entrepreneurial firms lack resources for broad search, they often draw upon advisory resources from outside the firm. However, advice can be difficult to extract, absorb and apply. While scholars have examined static attributes of the entrepreneur or advisor to explain if advice is used, a dynamic explanation of how advice is produced and informs strategy testing and formation is missing. In an 11-month field study, we observed 25 founders of 12 food and agriculture firms interacting with a common pool of 34 advisors in an entrepreneurship training program. Leveraging the program’s structured design, we observed 165 advice interactions over three phases. No firm took advice and applied it directly to firm strategy. When entrepreneurs engaged literally with advice, they later discounted it – distancing advice from strategy. In contrast, entrepreneurs that co produced advice challenged advisors to craft novel advice relevant to their strategy, translated it to make it actionable, and tested it – integrating advice into strategy. Firms that distanced advice from strategy did not test strategy alternatives, while firms that integrated advice into strategy tested multiple alternatives, explored broader markets and adapted their strategies. We contribute a grounded process model that explains how coproducing advice opens firms’ apertures to consider strategy alternatives, while testing informs the strategy elements chosen.

Cognitive and Experiential Learning in Multi-Stage Problems

Host(s): Assistant Professor Travis Howell
Speaker(s): Christina Fang, Professor of Management and Organizations
University: New York University, Stern School of Business
Time: Friday, December 9, 2022; 2:00 PM – 3:30 PM PST
Location: SB1 5200 (Lyman Porter Colloquia Room)

We examine the roles of cognitive and experiential learning in a less explored, multi-stage problem context where actions and outcomes are separated across time and decision makers face the challenge of temporal myopia (Levinthal and March 1993). We combine two bases of learning – one guided by an external, cognitive template and the other guided by experiential learning from feedback. We find a U-shaped relationship between the fidelity of cognitive representations and organizational performance. In particular, even when it consists of correct clues, a partial cognitive representation may bias experiential learning, resulting in a negative impact on organizational performance. Only when cognition is sufficiently complete, does it reinforce experiential learning, leading to an overall positive impact on organizational performance. Our finding suggests that benefits of cognitive representation may be contingent on the environment in which experiential learning takes place, as well as the fidelity of the representation.

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Principal-versus-Agent Considerations in Revenue Recognition

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Henock Louis, Professor of Accounting
University: Penn State University, Smeal College of Business
Time: Friday, November 21, 2022; 3:30 PM – 4:45 PM PST
Location: SB1 5100 (Corporate Partners Executive Boardroom)

We examine the consequences of principal-versus-agent (PA) considerations and the new revenue standard (ASC 606). Using a data set compiled through textual analysis of SEC filings and manual collection, we provide evidence indicating that (i) firms with PA exposures face heightened compliance risk and audit fees; (ii) the effect of PA considerations on revenue quality is negligible; and (iii) investors attach greater weight to revenue surprises of agents and, with a delay, smaller weight to revenue surprises of principals. Evaluating the impact of the adoption of ASC 606, we find evidence suggesting that the adoption reduces compliance risk and audit fees for firms with PA considerations and alleviates the disparity in investors’ processing of revenue information based on firms’ PA classifications.

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Digital Lending and Financial Well-Being: Evidence from a Randomized Controlled Trial in a Developing Economy

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Regina Wittenberg-Moerman, Professor of Accounting
University: University of Southern California, Marshall School of Business
Time: Friday, November 18, 2022; 10:45 AM – 12:00 PM PST
Location: SB1 5200 (Lyman Porter Colloquia Room)

We develop a model of the longitudinal unfolding of entrepreneurs’ experience of distress and their subsequent mobilization of relevant coping strategies, which we test with a five-wave survey of 574 entrepreneurs at the onset of the COVID-19 pandemic. We theorize and show that the more emotionally-exhausted entrepreneurs are at the crisis’ beginning, the more uncertainty they later perceive about their resources, and the more this hinders their subsequent mobilization of relevant coping strategies – namely, environmental scanning and reflexivity. In turn, we theorize and show that for environmental scanning to reap benefits in terms of reduced perceived uncertainty and emotional exhaustion, it must be accompanied by deliberate efforts in reflexivity. All in all, our work contributes new insights about the underlying psychological dynamics that explain the mobilization of relevant coping strategies – and of the effects these can have for becoming resilient.

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Coping with a pandemic: Unpacking the underlying dynamics of entrepreneurs’ resilience

Host(s): Assistant Professor Maritza Salazar Campo
Speaker(s): Jean-François Harvey, Associate Professor of Entrepreneurship and Innovation
University: HEC Montréal, Université de Montréal
Time: Friday, November 18, 2022; 10:30 AM – 12:00 PM PST
Location: SB1 5100 (Corporate Partners Executive Boardroom)

We develop a model of the longitudinal unfolding of entrepreneurs’ experience of distress and their subsequent mobilization of relevant coping strategies, which we test with a five-wave survey of 574 entrepreneurs at the onset of the COVID-19 pandemic. We theorize and show that the more emotionally-exhausted entrepreneurs are at the crisis’ beginning, the more uncertainty they later perceive about their resources, and the more this hinders their subsequent mobilization of relevant coping strategies – namely, environmental scanning and reflexivity. In turn, we theorize and show that for environmental scanning to reap benefits in terms of reduced perceived uncertainty and emotional exhaustion, it must be accompanied by deliberate efforts in reflexivity. All in all, our work contributes new insights about the underlying psychological dynamics that explain the mobilization of relevant coping strategies – and of the effects these can have for becoming resilient.

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Role of Innovation Valuation Uncertainty and Operational Cost Structure on Product Line Design

Host(s): Associate Professor John Turner
Speaker(s): Iva Rashkova, Assistant Professor of Supply Chain, Operations, and Technology
University: Washington University in St. Louis, Olin Business School
Time: Friday, November 4, 2022; 10:00 AM – 11:30 AM PDT
Location: SB1 2321(Judy Rosener Classroom)

The rise of innovation-conscious consumers has led to record demand for products with innovative attributes, such as low-sugar foods and sun-protective clothing. This market trend presents a profit-growth opportunity for the established companies, which have dominated the market based on traditional attributes, such as taste of food and the appearance of clothing. Yet, taking advantage of this opportunity is challenging due to the lack of information on consumers’ valuation of innovation and increased operational costs associated with delivering products with innovative attributes. We present a model of a monopolist developing and producing conventional and innovative products to serve a two-segment market consisting of innovation-conscious and innovation-neutral consumers. We use a two-dimensional differentiation-contingency framework to depict the rich set of the firm’s possible optimal strategies to segment the market and explore how the market environment and the firm’s operational environment affect the firm’s choice of the optimal product strategy. We find that while high innovation valuation drives the optimal strategy to be differentiated, variability in the innovation valuation drives contingency. The firm’s operational cost structure further leads to different prioritization within the innovative product’s quality dimensions: high development cost (resp. coupling cost between the two quality dimensions) induces prioritization of the traditional (resp. innovative) quality of an innovative product. We show the robustness of the framework developed to generalized valuation distribution and cost structures.

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Frontline Professionals in the Wake of Social Media Scrutiny: Examining the Processes of Obscured Professional Accountability

Host(s): Associate Professor Sharon Koppman
Speaker(s): Arvind Karunakaran, Assistant Professor of Management Science and Engineering
University: Stanford University, Stanford School of Engineering
Time: Friday, October 21, 2022; 10:30 AM – 12:00 PM PDT
Location: SB1 5100 (Corporate Partners Executive Boardroom)

Professional accountability is considered important to the sustenance of a profession. Prior research has examined the role that scrutiny by constituents, such as supervisors, regulators, auditors, and certification bodies, plays in improving professional accountability. With the advent of social media, a dispersed, diverse, and pseudonymous public can now scrutinize the actions of professionals, especially those at the frontline. In this research, I examine how social media scrutiny from the public impacts the professional accountability of frontline professionals and the consequences to the work of downstream professionals in the ecosystem. Based on an ethnography of 911 emergency management, I find that social media scrutiny of 911 call-takers—the frontline professionals in this setting—can obscure rather than improve professional accountability. I elaborate on the processes that produce these paradoxical outcomes and discuss their theoretical significance. Specifically, I unpack how and why social media scrutiny pushes frontline professionals to deviate from their professional mandate, which, in turn, obscures their sense of professional accountability. Beyond the frontline professionals, these processes also negatively affect the everyday work of downstream professionals (e.g., 911 dispatchers, police officers) in the professional ecosystem, thereby producing a cascading set of unintended consequences for multiple actors across the ecosystem.

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Central Bank Digital Currency and Banks

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Toni Whited, Dale L. Dykema Professor of Business Administration
University: University of Michigan, Ross School of Business
Time: Friday, September 30, 2022; 1:00 PM – 2:15 PM PDT
Location: Zoom

This paper studies how introducing a central bank digital currency (CBDC) can affect the banking system. We show that CBDC need not reduce bank lending unless frictions and synergies bind deposits and lending together. We then estimate a dynamic banking model to quantify the importance of these frictions and synergies for the impact of a CBDC on the banking system. Our counterfactual analysis shows that a CBDC can replace a significant fraction of bank deposits, especially when it pays interest. However, CBDC has a much smaller impact on bank lending because banks can replace a large fraction of any lost deposits with wholesale funding. Substitution to wholesale funding makes banks' funding costs more sensitive to changes in short-term rates, increasing their exposure to interest rate risk. We also show that a CBDC amplifies the impact of monetary policy shocks on bank lending.

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Co-evolutionary Lock-In in External Search: Selection Consistency and Idea Variety

Host(s): Assistant Professor Luke Rhee
Speaker(s): Linus Dahlander, Professor of Strategy and Lufthansa Group Chair in Innovation
University: European School of Management and Technology (ESMT Berlin)
Time: Friday, September 30, 2022; 10:00 AM – 11:30 AM PDT
Location: Zoom

External search allows organizations to source distant ideas from people outside the organization. We theorize that external search hinges upon the interplay between an organization’s selection of ideas and external contributors’ generation of ideas that, counterintuitively, narrows the ideas organizations gain access to. Specifically, an organization selects a subset of ideas generated by external contributors, who themselves strive to see their ideas implemented, and thus use this selection as a signal for the kinds of ideas the organization is looking for. Our hypothesis is that this results in a “co-evolutionary lock-in” where organizations with more selection consistency receive less future idea variety, which in turn limits the organizations’ future selection decisions. We find empirical support in an analysis of the crowdsourcing initiatives of 1,160 organizations. We leverage large-scale network analysis and natural language processing to examine the underlying mechanisms and contingencies. These findings have broader implications for the literatures on search, co-evolution, and crowdsourcing by demonstrating how selection consistency can result in co-evolution, and the underlying mechanisms for why this occurs.

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Can Social Media Inform Corporate Decisions? Evidence from Merger Withdrawals

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Tony Cookson, Associate Professor of Finance, Co-Director of the Center for Research on Consumer Financial Decision Making
University: University of Colorado Boulder, Leeds School of Business
Time: Friday, June 10, 2022; 11:00 AM – 12:15 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

This paper examines the role of social media in informing corporate decision-making by studying the decision of firm management to withdraw an announced merger. A standard deviation decline in abnormal social media sentiment following a merger announcement predicts a 0.73 percentage point increase in the likelihood of merger withdrawal (18.9% of the baseline rate). The informativeness of social media for merger withdrawals is not explained by abnormal price reactions or news sentiment, and in fact, it is stronger when these other signals disagree. Consistent with learning from external information, we find that the social media signal is most informative for complex mergers in which analyst conference calls take a negative tone, driven by the Q&A portion of the call. Overall, these findings imply that social media is not a sideshow, but an important aspect of firm information environment.

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Index Providers: Whales Behind the Scenes of ETFs

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Yang Song, Assistant Professor of Finance
University: University of Washington, Foster School of Business
Time: Friday, June 3, 2022; 11:00 AM – 12:15 PM PDT
Location: SB1 2200

Most ETFs replicate indexes licensed by index providers. We show that index providers wield strong market power and charge large markups to ETFs that are passed on to investors. We document three stylized facts: (i) the index provider market is highly concentrated; (ii) investors care about the identities of index providers, although they explain little variation in ETF returns; and (iii) over one-third of ETF management fees are paid as licensing fees to index providers. A structural decomposition attributes 60% of licensing fees to index providers’ markups. Counterfactual analyses show that improving competition among index providers reduces ETF fees by up to 30%.

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Why men and women provide sponsorship: Gendered mental models for navigating the "cost" of sponsorship

Host(s): Assistant Professor Patrick Bergemann
Speaker(s): Elizabeth Campbell, Assistant Professor of Management
University: University of California, San Diego, Rady School of Management
Time: Friday, June 3, 2022; 10:30 AM – 12:00 PM PDT
Location: SB1 2321 (Judy Rosener Flexible Classroom)

Disparities in accruing social capital contribute to persistent gender gaps in career trajectories. Processes like sponsorship, or when senior colleagues (sponsors) lend their social capital to facilitate the career advancement of junior colleagues (proteges), are critical to bypassing barriers to women's advancement. But how and why do sponsors decide to use their social capital, especially considering it is a valuable resource for facilitating their own advancement? Drawing from an inductive qualitative investigation of equity partners at a multinational consulting and accounting firm, I find men and women both recognize a potential cost of providing sponsorship but make decisions about using their social capital through different, gendered mental models of sponsorship. Men are more likely than women to display a transactional mental model: focusing on self-interested reciprocal exchanges, men treat social capital as a resource to be invested in high-potential proteges who "fit" consulting work, with the goal of proteges' future high performance yielding reputational benefits for sponsors. Women are more likely than men to display a relational mental model: driven by an intrinsic motivation to reciprocate their prior experiences receiving sponsorship, women view social capital as a valuable resource they have the responsibility to spend to help proteges perceived to be highly committed to the work. Drawing from this evidence, I introduce a process model for understanding how gendered mental models for sponsorship function as vehicles for the unequal reproduction of sponsors' social capital.

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Return Extrapolation and Day/Night Effects

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Christopher Jones, Associate Professor of Finance and Business Economics
University: University of Southern California, Marshall School of Business
Time: Friday, May 27, 2022; 11:00 AM – 12:15 PM PDT
Location: SB1 2321 (Judy Rosener Flexible Classroom)

We propose that differences between overnight and daytime returns are the result of return extrapolation. After high daytime returns, morning order imbalances are high in the first 15 minutes of regular trading the next day, which is consistent with higher overnight returns. The effect is asymmetric, with positive returns having larger response than negative returns, and it is stronger in more overpriced stocks. At the portfolio level, extrapolative effects can explain most of the cross-sectional variation in the “tug of war” between overnight and daytime returns. Extrapolative trading is also consistent with the upward sloping relation between market beta and average overnight returns.

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Anti-Corruption Laws and Geographic Segment Reporting

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Heemin Lee, Assistant Professor of Accounting
University: CUNY Baruch College, Zicklin School of Business
Time: Friday, May 27, 2022; 11:00 AM – 12:15 PM PDT
Location: Zoom

This study analyzes the effects of increased exposure to anti-corruption laws on firms’ geographic segment reporting. Using the 2010 adoption of the U.K. Bribery Act (UKBA) and its significant extraterritorial reach for identification, we conduct difference-in-differences analyses comparing changes in the segment reporting of U.S. multinational firms with and without a material business presence in the U.K. We find that exposure to the UKBA leads to less transparent geographic segment reporting with respect to a firm’s perceived corruption exposure. Unlike prior studies that focus on firms’ explicit changes in reported segments (i.e., re-segmenting), we find that these results are mostly attributable to a more subtle mechanism—specifically, without re-segmenting, firms change the mix of their revenues among existing segments. Our findings have implications for segment reporting research and the ongoing debate regarding the efficacy of the current management approach to segment reporting under ASC 280 and IFRS 8.

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Toward a Measure of Online Review Quality

Host(s): Assistant Professor Tingting Nian
Speaker(s): De Liu, Professor of Information and Decision Sciences
University: University of Minnesota, Carlson School of Management
Time: Friday, May 20, 2022; 11:00 AM – 12:30 PM PDT
Location: Zoom

Online reviews are crucial for consumer decision making but there has not been a canonical, widely accepted measure for review quality. This absence hinders efforts to promote high-quality reviews and results in over-reliance on proxies such as the number of “helpfulness” votes received by reviews in both practice and academic research. Our study addresses this gap by developing a measure of online review quality using the Delphi method. Our Delphi study results in a measure of online review quality as an aggregation of five underlying aspects – relevant, trustworthy, comprehensive, well-written, and timely. Our empirical evaluation demonstrates that the measure has good inter-rater reliability and is substantially different from helpfulness votes. Interestingly, review quality is highly correlated with helpfulness, suggesting the divergence between helpfulness votes and review quality is operational rather than conceptual. We demonstrate that consumers overwhelmingly prefer review quality to helpfulness votes. Furthermore, the review quality measure can be accurately predicted using textual features extracted using BERT, suggesting a potential for large-scale deployment of the measure.

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Designing School Choice for Diversity in the San Francisco Unified School District

Host(s): Associate Professor Luyi Gui
Speaker(s): Irene Lo, Assistant Professor of Management Science and Engineering
University: Stanford University, Stanford School of Engineering
Time: Friday, May 20, 2022; 10:00 AM – 11:30 AM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

More than 65 years after the "Brown v. Board of Education" ruling that school segregation is unconstitutional, public schools across the U.S. are resegregating. In attempts to disentangle school segregation from neighborhood segregation, many cities have adopted policies for city-wide choice. However, these policies have largely not improved patterns of segregation. From 2018-2020, we worked with the San Francisco Unified School District (SFUSD) to design a new policy for student assignment system that meets the district’s goals of diversity, predictability, and proximity. To develop potential policies, we used optimization techniques to augment and operationalize the district’s proposal of restricting choice to zones. We compared these to district-wide choice approaches typically suggested by the school choice literature. We find that appropriately-designed zones with minority reserves can achieve all the district’s goals, at the expense of choice, and choice can resegregate diverse zones. Using predictive choice models developed using historical choice data, we show that a zone-based policy can decrease the percentage of racial minorities in high-poverty schools from 29% to 11%, decrease the average travel distance from 1.39 miles to 1.29 miles, and improve predictability, but reduce the percentage of students assigned to one of their top 3 programs from 80% to 59%. Traditional district-wide choice approaches can improve diversity and choice at the expense of proximity. Our work informed the design and approval of a zone-based policy for use starting the 2024-25 school year.

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Social Media Disclosure of Political Ideology

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Jean Zeng, Assistant Professor of Accounting
University: University of Singapore, NUS Business School
Time: Friday, May 13, 2022; 11:00 AM – 12:15 PM PDT
Location: Zoom

Corporate America is increasingly taking public stances on divisive sociopolitical issues via social media. We investigate the consequences of such disclosure due to its revelation of information about the company’s political ideology. Exploring S&P 1500 firms’ responses to the Black Lives Matter (BLM) movement, we first document a positive association between liberal-leaning proxies at firm-level and the likelihood for a firm to support BLM. We proceed to examine the consequences and show that liberal-leaning mutual funds and hedge funds exhibit abnormal purchases of responding firms’ shares whereas conservative-leaning funds exhibit abnormal sales relatively. The share turnover rates of responding firms increase but the share prices remain unchanged due to simultaneous increases in both investor purchases and sales. Furthermore, subsample evidence based on banks’ depositors shows that customers in liberal-leaning counties significantly increase deposits in the local branch of responding banks. Overall, our results suggest that firm disclosures on sociopolitical issues lead to a more ideologically-aligned investor and customer base.

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Institutional Corporate Bond Pricing

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Lukas Schmid, Professor of Finance and Business Economics
University: University of Southern California, Marshall School of Business
Time: Friday, May 13, 2022; 11:00 AM – 12:15 PM PDT
Location: SB1 2321 (Judy Rosener Flexible Classroom)

We estimate an equilibrium demand-based corporate bond pricing model linking institutional holdings to bond characteristics. Our estimates show heterogeneity in demand elasticities across institutions, with elastic mutual funds demanding liquidity, akin to reaching for yield, and inelastic insurance companies. Moreover, we document stark differences in preferences for maturity, credit risk, and liquidity across institutions. In counterfactuals, we evaluate the pricing implications of credit quality migration, mutual fund fragility, monetary policy tightening, and a tapering of the Fed's corporate credit facility. Our model predicts substantial disruptions in bond prices through shifts in institutional demand and identifies the composition of institutional demand as an important state variable for corporate bond pricing.

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Misconceiving Merit: Paradoxes of Excellence and Devotion in Academic Science and Engineering

Host(s): Assistant Professor Patrick Bergemann
Speaker(s): Mary Blair-Loy, Professor of Sociology, Co-Director of the Center for Research on Gender in STEMM
University: University of California, San Diego, Department of Sociology
Time: Friday, May 13, 2022; 10:30 AM – 12:00 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

In Misconceiving Merit, sociologists Mary Blair-Loy and Erin A. Cech uncover the cultural foundations of a paradox. On one hand, academic science, engineering, and math revere meritocracy, a system that recognizes and rewards those with the greatest talent and dedication. At the same time, women and some racial and sexual minorities remain underrepresented and often feel unwelcome and devalued in STEM. How can academic science, which so highly values meritocracy and objectivity, produce these unequal outcomes?

Blair-Loy and Cech studied more than five hundred STEM professors at a top research university to reveal how unequal and unfair outcomes can emerge alongside commitments to objectivity and excellence. The authors find that academic STEM harbors dominant cultural beliefs that not only perpetuate the mistreatment of scientists from underrepresented groups but hinder innovation. They show how two sets of cultural schemas – cognitive and moral preconceptions -- about what work devotion is and what scientific excellence should look like—function quietly in the background to shape interactions, downplay the contributions of underrepresented faculty, and legitimize this unfair treatment. Underrepresented groups –including women from all racial/ethnic backgrounds, Black and Latinx men, and LBGTQ- identifying faculty -- are often seen as less fully embodying merit compared to equally productive white and Asian heterosexual men. These negative career consequences persist regardless of professors’ actual academic productivity. These judgements help undermine scientific innovation.

This book advances the state of play in social science research on inequality in STEM, and in professional occupations more broadly, by taking seriously cultural beliefs and practices within the profession as mechanisms of inequality. The book is filled with insights for higher education administrators working toward greater equity as well as for scientists and engineers striving to understand and change entrenched patterns of inequality in STEM.

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When Uber Eats its own business, and its competitors’ too: Platform diversification and cross-platform cannibalization

Host(s): Assistant Professor Luke Rhee
Speaker(s): Maggie Zhou, Associate Professor of Strategy
University: University of Michigan, Ross School of Business
Time: Friday, May 6, 2022; 2:00 PM – 3:30 PM PDT
Location: Zoom

How does a platform firm’s diversification influence its existing business? We conjecture that a diversifying platform firm faces a unique challenge in allocating complementors’ resources between businesses due to its lack of ownership over them. At the same time, the potential synergy from serving multiple businesses in a diversifying platform firm can divert ownership-free complementors away from competing platform firms. We analyze changes in the rideshare business in Manhattan, New York City after Uber launched Uber Eats in the city. We find that the launch of Uber Eats was associated with a reduction in trip numbers for both Uber and Lyft. Both effects were weakened during rush hours, when the opportunity costs of resource redeployment to Uber Eats were higher for the rideshare drivers.

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Robots at Work in China

Host(s): Assistant Professor Tingting Nian
Speaker(s): Robert Seamans, Associate Professor of Management and Organizations
University: New York University, Stern School of Business
Time: Friday, May 6, 2022; 11:00 AM – 12:30 PM PDT
Location: Zoom

We construct a unique firm-level dataset to study the effect of robot adoption on productivity and employment in China. We find that robot adoption leads to higher levels of productivity and employment, on average. However, Chinese state-owned enterprises (SOEs) do not exhibit the same productivity boost as private firms when adopting robots. We also find some evidence that: (1) Chinese SOEs don't appear to hire the appropriate human capital necessary to take advantage of investment in robots and (2) Chinese SOEs don't appear to make the investments in complementary assets needed to obtain productivity improvements. Moreover, these effects appear to be mitigated in conditions where market pressures prevail. To explain these results, we propose that SOEs lack the market-based incentives needed to identify and invest in the complementary assets necessary to take full advantage of robots. Our findings highlight the role that organizational forms and institutional settings can play in enabling and constraining the use of new technologies.

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Service Delivery Strategies for Alleviating Pandemic Suffering while Maintaining Profitability

Host(s): Professor Shuya Yin
Speaker(s): Nagesh Gavirneni, Professor of Operations Management
University: Cornell University, Johnson Graduate School of Management
Time: Friday, May 6, 2022; 10:00 AM – 11:30 AM PDT
Location: Zoom

The post-pandemic world requires a renewed focus from service providers in ensuring that all customer segments receive the essential services (food, healthcare, housing, education, etc.) they need. Philanthropic service providers are unable to cope with the increased demands caused by the social, economic, and operational challenges induced by the pandemic. Customer self-selecting no-pay service strategies are becoming popular in various settings. Obtaining insights into how they can efficiently balance societal and financial goals is critical for a for-profit service provider. We develop and analyze a quantitative model of customer utilities, vertically-differentiated product assortment, pricing, and market size to understand how service providers can effectively use customer segmentation and serve the poor at the bottom of the pyramid. We identify conditions under which designing the service delivery to be accessible to the poor can simultaneously benefit the for-profit service provider, customers, and the entire society. Our work provides a framework to obtain operational, economic, and strategic insights into socially responsible service delivery strategies.

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Can Crowdsourcing Cure Misinformation? The Impact of Twitter's Birdwatch Program on Content Generation

Host(s): Assistant Professor Tingting Nian
Speaker(s): Karthik Kannan, Thomas Howatt Chaired Professor in Management
University: Purdue University, Krannert School of Management
Time: Friday, April 29, 2022; 11:00 AM – 12:30 PM PDT
Location: SB1 2321 (Judy Rosener Flexible Classroom)

All content-sharing sites, including social media platforms, face the creation and spread of misinformation, which leads to wrong beliefs, a hyper-partisan atmosphere, and public harm by the users. Given the dire consequences of the misinformation on society, government agencies, academic researchers, and industrial entities address misinformation creation and distribution on social media platforms. Experts have suggested leveraging the "wisdom of crowds" to identify misinformation to address the scalability issue in other solutions such as professional fact-checking. However, the implication of such crowdsourcing programs on its participants is not carefully studied in the field. We take the first step and leverage the quasi-field experiment of Twitter's Birdwatch program to investigate the causal effect of participating in the crowdsourcing program on the subsequent activities of the participants, especially on the propensity to generate content and create misinformation. We use cognition in writing to reflect the misinformation given the well-documented strong correlation between cognition and the lessened generation or spread of misinformation and the absence of a direct misinformation measure. Our results show a positive treatment effect on such cognition, suggesting the success of the program in dampening the generation of content with misinformation. However, we find that the users decrease the volume of content creation and the diversity of the content. Also, more importantly, we find a lowered average content engagement from other users, suggesting that the diminished misinformation is built on a cost of lowered volume, diversity, and interestingness of the user-generated content. All these results would be of concern to the platform owners. Our empirical research contributes to the literature on crowdsourcing and misinformation and provides significant implications for social media platform managers.

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The career consequences of performance-enhancing misconduct for front-line workers, their peers, and their managers: Evidence from the professional cycling industry

Host(s): Assistant Professor Patrick Bergemann
Speaker(s): Don Palmer, Professor of Management
University: University of California, Davis, Graduate School of Management
Time: Friday, April 29, 2022; 10:30 AM – 12:00 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

We investigate how the continuity of organizational participants’ careers is affected by their own, their peers’, and their subordinates’ detected misconduct. We also investigate the extent to which the effects of detected misconduct on organizational participants’ careers operate via the impact that detected misconduct has on the fate of their organizations. We explore these two questions using a comprehensive data set on performance enhancing drug (PED) use in the global professional cycling industry between 1999 and 2011. In this period, this industry consisted of 7,193 workers (competitive cyclists in different performance categories) and 1,751 managers (both senior and assistant managers) who were citizens of 25 nations and employed by 420 organizations (teams) based in 11 countries. Our analyses focus on career interruptions experienced by riders, their teammates, and their managers following riders’ variously definitive linkages to PED use (i.e., linkages that ranged from suspicion of PED use to conviction for PED use). We conclude by discussing how our results contribute to a more comprehensive theoretical understanding of the effects of detected organizational misconduct.

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A New Era of Care Delivery: Machine-learning Enhanced Hospital Workload Prediction and Resource Allocation

Host(s): Associate Professor Luyi Gui
Speaker(s): Pengyi Shi, Associate Professor of Operations Management
University: Purdue University, Krannert School of Management
Time: Friday, April 29, 2022; 10:00 AM – 11:30 AM PDT
Location: SB1 2200

The COVID-19 pandemic has created new opportunities to develop and deploy high-impact analytics to combat severe resource shortages in a rapidly evolving environment. Nursing organizations suffered both during and in the aftermath of the pandemic from excess demand for and diminishing supply of nurses. Staffing inadequacy leads to high nurse burnout and turnover, decreased quality of care, worse patient outcomes, and enlarged disparity in health access. At the core of solving these issues are comprehensive, data-based analytics and predictions to understand: (i) the patient workload in real-time; (ii) how to most efficiently allocate resources to all patients; and (iii) how to effectively create surge capacity in response to resource shortage. In this research, we leverage a suite of analytics tools to develop an integrated, comprehensive solution to support decisions on all these aspects. Specifically, we develop novel machine-learning-based occupancy forecasting models that account for different patient acuity levels. Using distributional information from this forecast, we generate workload scenarios for the hospital network, which then are fed into a two-stage stochastic program to support nurse deployment and surge planning decisions. Based on a close partnership with IU Health System, the largest health system in Indiana with 16 hospitals, we launched an academia-industry venture to implement and deploy our data-driven solution. The tool was gone live as a pilot in October 2021. We logged the performance of the recommendations from October 2021 to March 2022 as proof of value. Analysis indicates system-wide improvements in all metrics: with reductions of 5% understaffing, 3% misallocation of resource nurses, and 1% overstaffing, with an estimated annual savings of over $300K.

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Data at LinkedIn and a few case studies

Host(s): Associate Professor Mingdi Xin
Speaker(s): Dr. Sofus Macskassy, Head of Data Science Research and Productivity at LinkedIn
Company: LinkedIn
Time: Friday, April 22, 2022; 11:00 AM – 12:30 PM PDT
Location: SB1 2321 (Judy Rosener Flexible Classroom)

In this talk I will provide an overview of LinkedIn, its enterprise products and where Data Science and AI provide business value. The talk will then go into more detail in a number of specific use cases where AI is used in these products, discussing not only the modeling details but also how AI is situated and used within these products and how different integration points in the system provide different types of business value.

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The complex materiality of ESG ratings: Evidence from ESG funds

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): K.J. Martijn Cremers, Bernard J. Hank Professor of Finance
University: University of Notre Dame, Mendoza College of Business
Time: Friday, April 22, 2022; 11:00 – 12:15 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

We propose Active ESG Share, a novel metric that evaluates how a fund’s ESG strategy differs from that of its benchmark. Rather than focus on a fund’s Directional ESG—i.e., how does the fund’s average ESG rating compare to its benchmark’s average?—our metric compares the full distribution of a fund’s ESG rating to that of its benchmark. This approach allows us to capture the extent of a fund manager’s use of ESG information in portfolio construction. A relation between Active ESG Share and performance exists only for ESG funds, which we attribute to the effects of managerial specialization. Our results suggest that, while ESG ratings are financially material, that materiality is too complex to be operationalized by simply purchasing stocks with relatively high or low ESG ratings. Investors, nonetheless, disfavor high Active ESG Share when allocating capital.

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A New Wave of Talent: The Effect of Mandatory Local Licensing for Big 4 Partners in China

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Miguel Minutti-Meza, Associate Professor of Accounting
University: University of Miami, Miami Herbert Business School
Time: Friday, April 22, 2022; 9:30 AM – 10:45 AM PDT
Location: Zoom

In 2012, the Chinese Ministry of Finance issued a rule mandating that at least 80% of the Big 4 firms’ engagement partners must have CICPA qualifications by 2017. This rule required a reorganization of the firms’ human capital. We examine fourteen years around the implementation of the rule and rely on a difference-in-differences research design, comparing several outcomes between Big 4 and top-10 audit firms in China. We demonstrate that the Big 4 met the rule by promoting local talent, increasing the number of incoming partners with CICPA qualifications occupying junior roles, and diluting each partner’s share of the total firm’s clients. However, we do not find evidence that the rule influenced audit quality or had negative externalities for top-10 audit firms. Our findings suggest that the regulation achieved its intended objectives, primarily developing local human capital, without impairing audit quality.

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Agency MBS as Safe Assets

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Zhiguo He, Fuji Bank and Heller Professor of Finance
University: University of Chicago, Booth School of Business
Time: Friday, April 15, 2022; 11:00 AM – 12:15 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

Measured as yield spreads against AAA corporate bonds, the convenience premium of agency MBS averages 47 basis points over 1995 - 2021, about half of the long-term-Treasury convenience premium. Both MBS convenience premium and issuance amount depend on mortgage rate negatively, consistent with a prepayment-driven demand channel. This negative dependence contrasts strikingly with the positive dependence of the MBS-repo convenience premium on the level of interest rates as implied by the “opportunity cost of money” hypothesis. The placing of agencies into conservatorship in 2008 and introduction of liquidity coverage ratio in 2013 affect convenience premium significantly, consistent with the safety and regulatory-constraint channels of MBS demand. Based on “structural” restrictions in standard models, the ratio of MBS to Treasury convenience premia pinpoints the time-varying MBS-specific safe asset demand empirically.

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From the Job’s Worth to the Person’s Price: The Transformation of Organizational Pay Practices since 1950

Host(s): Associate Professor Ming Leung
Speaker(s): Laura Adler, PhD Candidate in Sociology (expected 2022)
University: Harvard University, Harvard Graduate School of Arts and Sciences
Time: Friday, April 15, 2022; 10: 30 AM – 12:00 PM PDT
Location: SB1 2321 (Judy Rosener Flexible Classroom)

This article examines a major historical change in employers’ pay-setting practices. In the postwar decades, most U.S. employers used bureaucratic tools to measure the worth of each job. Starting in the 1980s, employers abandoned these practices and relied instead on external market data to assess the price of a candidate. In doing so, organizations tied employee pay more tightly to the external labor market. This presents a puzzle for organizational theories, which propose that organizations aim to buffer internal functions from the environment. To describe this shift, I use a new database of 1,059 publications from the Society of Human Resources Management and 83 interviews with compensation professionals. These data highlight the role of law. When the U.S. courts rejected comparable worth lawsuits in the 1980s, their decisions created an opportunity for employers to reduce liability for discrimination by relying on external, market data. Those legal decisions encouraged employers to abandon bureaucratic methods. The analysis identifies market coupling—using the market to distance organizations from discriminatory outcomes—as a response to the law and highlights how the comparable worth movement backfired by facilitating a change in organizational practices that entrenched inequalities.

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Achieving Reliable Causal Inference with Data-Mined Variables: A Random Forest Approach to the Measurement Error Problem

Host(s): Assistant Professor Tingting Nian
Speaker(s): Edward McFowland III, Assistant Professor of Business Administration in the Technology and Operations Management Unit
University: Harvard University, Harvard Business School
Time: Friday, April 8, 2022; 11:00 AM – 12:30 PM PDT
Location: SB1 5200 (Lyman Porter Colloquia Room)

Combining machine learning with econometric analysis is becoming increasingly prevalent in both research and practice. A common empirical strategy involves the application of predictive modeling techniques to "mine" variables of interest from available data, followed by the inclusion of those variables into an econometric framework, with the objective of estimating causal effects. Recent work highlights that, because the predictions from machine learning models are inevitably imperfect, econometric analyses based on the predicted variables are likely to suffer from bias due to measurement error. We propose a novel approach to mitigate these biases, leveraging the ensemble learning technique known as the random forest. We propose employing random forest not just for prediction, but also for generating instrumental variables to address the measurement error embedded in the prediction. The random forest algorithm performs best when comprised of a set of trees that are individually accurate in their predictions, yet which also make "different" mistakes, i.e., have weakly correlated prediction errors. A key observation is that these properties are closely related to the relevance and exclusion requirements of valid instrumental variables. We design a data-driven procedure to select tuples of individual trees from a random forest, in which one tree serves as the endogenous covariate and the other trees serve as its instruments. Simulation experiments demonstrate the efficacy of the proposed approach in mitigating estimation biases, and its superior performance over an alternative method (simulation-extrapolation), which has been suggested by prior work as a reasonable method of addressing the measurement error problem.

Link to events page here.

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Innovation Strategy After IPO: How AI and Data Analytics Mitigate the Post-IPO Decline in Innovation

Host(s): Assistant Professor Tingting Nian
Speaker(s): Lynn Wu, Associate Professor of Operations, Information and Decisions
University: University of Pennsylvania, Wharton School of Business
Time: Friday, April 1, 2022; 11:00 AM – 12:30 PM PDT
Location: SB1 2321 (Judy Rosener Flexible Classroom)

We examine how data analytics can facilitate innovation in firms that have gone through an initial public offering (IPO). It has been documented that an IPO is associated with a decline in innovation despite the infusion of capital from the IPO that should have spurred innovation. By assembling and analyzing multi-year panel data at the firm level, we find that firms that possess or acquire data analytics capability has sustained the rate of innovation compared to similar firms that have not acquired that capability. This effect is even greater when only machine learning capabilities are considered. Moreover, we find this sustained rate of innovation is driven principally by the continued development of innovations that combine existing technologies into new ones – the form of innovation that are especially well-supported by analytics. By examining the three main mechanisms that inhibit firm innovation after IPO—short-term financial pressure, cost of disclosure requirements, and managerial incentives, we find that data analytics can ameliorate the pressure from meeting short-term financial goals and disclosure requirements, but analytics is limited in addressing managerial incentives. Overall, our results suggest that the increased deployment of analytics may reduce some of the innovative penalties of IPOs, and that investors and managers can potentially mitigate post-IPO reductions in innovative output by directing newly acquired capital to the acquisition of analytics capabilities.

Link to events page here.

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Internal Network Structure as a Knowledge Protection Mechanism

Host(s): Assistant Professor Luke Rhee
Speaker(s): Brian Silverman, Professor of Strategic Management
University: University of Toronto, Smeal College of Business
Time: Friday, March 11, 2022; 2:00 PM – 3:00 PM PST
Location: SB1 5200 (Lyman Porter Colloquia Room)

How can firms protect new technological knowledge, and for how long? Although a considerable body of strategy research has explored mechanisms that support knowledge appropriation, this has typically focused on exogenous institutional factors such as the effectiveness of patent and contract enforcement, or on the characteristics of the technology itself. In this paper we call attention to a potential knowledge-protection mechanism that has received scant attention: a highly connected (or cohesive) intrafirm inventor network structure. Drawing on social network theory, we propose that organizations whose inventor networks are more connected enjoy greater appropriation through faster follow-on innovation relative to their rivals. Using patent data on nearly 1,400 large corporations over 33 years, we find evidence consistent with our hypotheses. We discuss implications for future research.

Link to events page here.

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Monthly mutual fund portfolio disclosures and the efficiency of portfolio firms’ investment decisions

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Henock Louis, Professor of Accounting
University: Penn State University, Smeal College of Business
Time: Friday, March 4, 2022; 9:30 AM – 10:45 AM PST
Location: Zoom – https://uci.zoom.us/j/99180945369?pwd=L2JHVlJyRlNReWhwbjJxY2pQVkNzUT09

Mutual funds’ switches to monthly holding disclosures reduce the efficiency of corporate investments. Consistent with a crowding-out mechanism, the evidence suggests that monthly portfolio disclosures discourage information production activities by other market participants and, consequently, reduce corporate managers’ ability to learn from prices. This effect increases with managers’ incentives to learn from prices and investors’ potential use of monthly fund disclosures. The study sheds light on the regulatory debate on the efficacy of making monthly holdings disclosures available to the public.

Link to events page here.

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Sophisticated Consumers with Inertia: Long-Term Implications from a Large-Scale Field Experiment

• Host(s): Associate Professor Vibhanshu Abhishek
• Speaker(s): Navdeep Sahni, Associate Professor of Marketing
• University: Stanford University, Stanford Graduate School of Business
• Time: Friday, February 25, 2022; 10:00 AM – 11:30 AM PST
• Location: Zoom – https://uci.zoom.us/j/93417550211

Consumer inertia is a well documented phenomenon that effectively creates market power for firms over their existing customer base. However, it is unknown how self-aware consumers are about their inertia and how they preemptively respond to their future inertia. We quantify actual inertia, consumer anticipated inertia, and their responses to it using a large-scale field experiment with a leading European newspaper. We vary the price, duration, and whether a contract is automatically canceled or renews after a promotional period. We document higher subscription rates after the promo among those offered an auto-renewal contract, and at the same time find 24% fewer takers of any contract during the promotional period, and 9% fewer subscribers at any point in the two years that follow. Leveraging the price and duration treatments we quantify that the average consumer predicts a 13% chance of being inert within a month, versus an actual inertia of 36%. In a complementary approach of classifying potential subscribers to different types, we classify more than a third as sophisticates who avoid subscribing, a third as time-consistent who cancel immediately after the promo, and only a tenth as naive enough to remain subscribed for more than three months due to inertia. Our results imply that more consumers avoid these mildly exploitative contracts than fall prey to them.

Link to events page here.

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“Alexa, Audit Loan Grades!”: Does Humanizing Artificial Intelligence Enhance Auditor Reliance?

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Jennifer R. Roe, Professor of Accounting
University: University of Delaware, Lerner College of Business and Economics
Time: Friday, February 25, 2022; 11:00 AM – 12:15 PM PST
Location: Zoom - https://uci.zoom.us/j/95728446138?pwd=SU1BZGJkb0FSY3U0NjRQaDFLR3VvZz09

We examine whether humanizing artificial intelligence (AI) systems enhance auditor reliance on the specialist evidence they produce. Auditors’ use of specialist evidence continues to be a source of regulatory concern and audit firms are making substantial investments in AI systems that will generate specialist evidence. The firms hope that these systems, like human specialists, will provide evidence that will be used by auditors and will improve audit outcomes. However, even the most reliable AI systems will not be perfect, and auditors will inevitably encounter AI systems that make errors. Consistent with prior research, we demonstrate that when the specialist is known to have made an error, auditors more heavily discount the evidence from the AI system than from the human specialist. This tendency to discount computer-based advice more heavily than identical human advice is referred to as “algorithm aversion” and auditor susceptibility to algorithm aversion can negatively impact on audit quality. Accordingly, we investigate whether humanizing the AI system mitigates algorithmic aversion effects on auditors’ judgments. We find that adding humanizing elements to an AI system facilitates auditors’ reliance on the evidence these systems, particularly after observing the system err. Our findings suggest that design choices around the AI systems being implemented can impact their usefulness and ultimately audit quality.

Link to events page here.

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Impact of Privacy Data Breaches on Customer Mind-Set Metrics: Mitigating Role of Firm Recovery Strategies

Host(s): Associate Professor Tonya Bradford
Speaker(s): André Martin, Marketing PhD Student
University: University of North Carolina, Kenan-Flagler Business School
Time: Friday, February 25, 2022; 10:00 AM – 11:30 AM PST
Location: SB1 5200 (Lyman Porter Colloquia Room)

As agile marketing firms increasingly invest in MarTech (Marketing Technology) infrastructure to gather and analyze customer data to spot opportunities and trends, the responsibility to protect these customer data becomes all the more important. Inadequately protecting data can have longlasting negative consequences, not only for the affected customers, but also for the affected firms. In 2021, the overall number of data compromises went up by more than 68 percent compared to the previous year (2021 Annual Data Breach Report). On average, each of these data breaches costed firms $8.64 million in damages (Varonis.com 2021). Factoring in the cost of reputation damage, these losses can swell considerably as exemplified by Citi Group’s losses of $836 million following a data breach (Martin, Borah, and Palmatier 2017). The extent of this problem is so pervasive that former FBI Director Robert Muller (2012) stated that “I am convinced that there are only two types of companies: those that have been hacked and those that will be.”

Overall, the negative consequences of data breaches go well beyond the immediate fines and legal actions and lawsuits, and extend to loss of customer trust, brand equity damages, and eventually detrimental financial consequences. Prior research has made first steps to capture and measure the extent of these losses. As such, extant literature established the negative impact of data breaches on the firm’s market value (Malhotra and Malhotra 2011), on risk perceptions (Aivazpour, Valecha, and Chakraborty 2018), on word-of-mouth (Martin, Borah, and Palmatier 2017), on customer trust (Martin, Borah, and Palmatier 2017), and on customer spending (Janakiraman, Lim, and Rishika 2018).

Given the potential for negative implications of data breaches, the natural question to ask is what firms can do to mitigate the impact and recover from the crisis. Martin, Borah, and Palmatier (2017) find that the transparency of firms’ data use and customers’ ability to control information flow affect trust and consumer behavior, thereby emphasizing the role of a firm’s pre-crisis efforts and policy investments. To provide first insights in effective actions once and after breaches occur, Rasoulain et al. (2017) look into the role of compensation, improving processes, and apologies to minimize the negative impact of data breaches on firms’ idiosyncratic risk. In our study, we further explore and dig deeper into data breach recovery options by systematically analyzing the short- and long-term impact of multiple crisis recovery communication options. Specifically, we use the typology, as proposed by Diesterhöft et al. (2020) that combines elements of blame attribution theory (Coombs 2007) into eight response categories: Offering Compensation, Offering Apology, Engaging in Whitewash, Taking Objective Actions, Reinforcing Value Commitment, Highlighting Customer Relationship, Transparently Informing on Type of Information Disclosed, and Offering Customer Advise. We study to what extent each of these crisis communication elements manages to mitigate data breach harm.

To gauge data breach harm we look at its impact on a wide set of consumer mind-set metrics.

Customer mind-set metrics track brand health and allows firms to track consumers on their path on the brand funnel toward brand advocacy. As such, they measure ‘what a customer thinks’, and are leading indicators of their future behavior (Srinivasan, Vanhuele, and Pauwels 2010). This gives firms advanced notice to act appropriately to minimize the impact of MarTech crises. To this effect, we examine the impact on seven mind-set metrics: two top of the funnel recall metrics (Buzz and Impression); four middle of the funnel evaluation metrics (Quality, Value, Reputation, and Satisfaction), and one bottom of the funnel commitment metric (Recommendation).

Empirically, we study the impact of data breaches using high frequency (daily) data, for a variety of product and service categories and a broad set of several brands. Specifically, we use daily brand level customer mind-set metric data from YouGov between 2012 and 2021. Our data allows us to track over 2,000 brands in the US in a wide variety of industries (Financial Services, Hospitality, Travel, Retail, Healthcare, Consumables, and Durables). This permits us to examine brand and industry level heterogeneity and thus offer empirically generalizable implications. The high frequency and long-time series permit us to model not just the short-term impact of MarTech crises, but also the long-term impact, which no research to the best of our knowledge has examined to date. The real-time nature of the data gives managers instant access to decision dashboards to make fast mitigation decisions.

To assess the firm’s crisis communication styles we focus on the direct communication the firm provides to its consumers following a data breach. Specifically, in the US market, state laws regulate privacy breaches and require the affected firms to inform victims via a letter from the firm. This creates a direct communication channel between the firm and customer, which captures firms’ intentions, without any interpretation and perceptions of news media. In our ten-year observation window, 198 brands were embroiled in a data breach. Of these, 130 brands sent out a letter to their consumers. We do a text-analysis of these letters to measure different communication recovery strategies. Next, we use dynamic panel data models, which control for firm and temporal unobserved heterogeneity, potential endogeneity biases, and several other sources of observed heterogeneity to isolate the direct impact of data breaches and the moderating effect of firm communication strategies on customer mind-set metrics.

We find that privacy breaches negatively affect all seven dimensions of our customer mindset metrics, and surprisingly, that some firm recovery strategies exacerbate the adverse effects of the privacy data breach. Moreover, using our parameter estimates we assess to what extent and how long the potential negative effects linger, and to what extent communication strategies speed up the path towards recovery.

Link to events page here.

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Strategic Problem Engagement: A Multi-Level Perspective on Strategic Planning and Redirection Toward Discovery

Host(s): Assistant Professor Luke Rhee
Speaker(s): Laura Poppo, Professor of Management
University: University of Nebraska-Lincoln, Nebraska College of Business
Time: Friday, February 18, 2022; 2:00 PM – 3:30 PM PST
Location: SB1 5200 (Lyman Porter Colloquia Room)

Over the decades, strategic management has evolved from an emphasis on simply adaptation – modifying the organization to better fit, or close the gap, between the organization and the changes in the environment – to that of finding and seizing of opportunities that have the potential to create value. How organizations go about this remains undertheorized. The most rigorously theorized is problem-solving, problematic search.  Left largely unaddressed is how do managers go about ‘formulating’ a problem when the external environment is changing in novel and unsettled ways and the decision-making process is both unstructured and ambiguous.  To explore this gap, we question: what process supports the discovery and formulation of problems as well as enables the generation of useful and novel (e.g. creative) solutions? To ground this research, one co-author spent several years exploring broadly and then narrowly, through interviews and several organizational sites, the practice of strategic planning and corporate entrepreneurship. Based on themes identified in this qualitative work, we developed a multi-level perspective, strategic problem engagement.  A service organization volunteered to participate in our academic, empirical study.  Critical to its selection was that the top management (CEO, corporate staff) was currently undertaking a system-wide strategic planning initiative focused on adapting the organization to novel, unsettled changes in the external environment and generating novel solutions.

Our results follow. First, we illustrate a multi-level approach to strategic problem engagement, as both the TMT as well as teams of knowledge-diverse lower-level employees can be integral to strategic formulation process and the generation of creative solutions.  This multi-level approach helps overcome the cognitive limitations of bounded rationality that impedes decision makers’ abilities to identify and construct the right problem.

Second, we empirically demonstrate formulation as a process of strategic problem engagement, involving simultaneously two activities:  1) problem engagement, the process of discovering the problem through exploring, identifying, defining, and reconstructing it, and 2) strategic engagement, the process of recognizing the factors that create organizational value and using them to further explore the problem. This extends prior conceptualizations of formulation as a sensing or an awareness of a potential problem followed by the second stage, formulating a causal logic for how the issue in the environment relates to organization.

Third, our results show that strategic engagement, not problem engagement, leads to the generation of more novel and useful solutions. This finding helps to uncover the black box of creative synthesis. Finally, we examine additional factors that impact the cognitive and motivation challenges associated with complex problem solving.

Link to events page here.

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Costs and Benefits of a Risk-Based PCAOB Inspection Regime

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Brant Christensen, Associate Professor of Accounting, Glen McLaughlin Chair in Business Ethics
University: University of Oklahoma, Price College of Business
Time: Friday, February 18, 2022; 11:00 AM – 12:15 PM PST
Location: Zoom - https://uci.zoom.us/j/96996574801

This study investigates how auditors respond to engagement-level PCAOB inspection risk. Using an inspection selection model developed from proprietary data, we find that auditors are more conservative when auditing clients with elevated inspection risk. Specifically, we observe an increased propensity to report material weaknesses, a decreased propensity to assert that previous material weaknesses have been remediated, increased audit effort, a decreased likelihood of subsequent restatement, and an increased likelihood of resignation from the client. Importantly, several tests provide evidence that auditors’ response to inspection risk is distinct from and incremental to their response to misstatement risk. Further, auditors’ response to inspection risk facilitates more accurate evaluations of internal controls and tends to be stronger when the inspection threat is more salient. We also find, however, that auditors’ anticipation of PCAOB inspection may have negative spillover effects for clients with low inspection risk when auditor resources are most constrained. Overall, our findings suggest that there are potential benefits and potential costs associated with the PCAOB’s risk-based selection approach.

Link to events page here.

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Right to Repair: Pricing, Welfare, and Environmental Implications

Host(s): Associate Professor John Turner
Speaker(s): Luyi Yang, Assistant Professor of Operations & IT Management
University: University of California, Berkeley, Haas School of Business
Time: Friday, January 28, 2022; 10:00 AM - 11:30 AM PST
Location: Zoom - https://uci.zoom.us/j/95146558263?pwd=TUY2Zy9VaVlVV0RlR2pRalNUaHdHUT09

The "right to repair" (RTR) movement calls for government legislation that requires manufacturers to provide repair information, tools, and parts so that consumers can independently repair their own products with more ease. The initiative has gained global traction in recent years. Repair advocates argue that such legislation would break manufacturers’ monopoly on the repair market and benefit consumers. They further contend that it would reduce the environmental impact by reducing e-waste and new production. Yet, the RTR legislation may also trigger a price response in the product market as manufacturers try to mitigate the profit loss. This paper employs an analytical model to study the pricing, welfare, and environmental implications of RTR. We find that as the RTR legislation continually lowers the independent repair cost, manufacturers may initially cut the new product price and then raise it. This non-monotone price adjustment may further induce a non-monotone change in consumer surplus, social welfare, and environmental impact. Strikingly, the RTR legislation can potentially lead to a "lose-lose-lose" outcome that compromises manufacturer profit, reduces consumer surplus, and increases the environmental impact, despite repair being made easier and more affordable.

Link to events page here.

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Cheap Talk Messages for Market Design: Theory and Evidence from a Labor Market with Directed Search

Host(s): Assistant Professor Tingting Nian
Speaker(s): John Horton, Associate Professor of Information Technologies
University: Massachusetts Institute of Technology, Sloan School of Management
Time: Friday, January 14, 2022; 11:00 AM - 12:30 PM PST
Location: Zoom - https://uci.zoom.us/j/95502043865

In a model with cheap talk, employers can send messages about their willingness to pay for higher ability workers, which job-seekers can use to direct their search and tailor their wage bid. Introducing such messages leads—under certain conditions—to an informative separating equilibrium which affects the number of applications, types of applications, and wage bids across firms. This model is used to interpret an experiment conducted in a large online labor market: employers were given the opportunity to state their relative willingness to pay for more experienced workers, and workers can easily condition their search on this information. Preferences were collected for all employers, but only treated employers had their signal revealed to job-seekers. In response to revelation of the cheap talk signal, job-seekers targeted their applications to employers of the right “type” and they tailored their wage bids, affecting who was matched to whom and at what wage. The treatment increased measures of match quality through better sorting, illustrating the power of cheap talk to improve market outcomes.

Link to events page here.

 

Trading Flexibility for Adoption: Dynamic vs Static Walking in Ridesharing

Host(s): Associate Professor John Turner
Speaker(s): Julia Yan, Assistant Professor of Operations and Logistics
University: University of British Columbia, Sauder School of Business
Time:Friday, December 3, 2021; 10:00 AM - 11:30 AM – 11:30 AM
Location: SB1 5200 (Lyman Porter Colloquium Room)

On-demand ridesharing aims to fulfill riders' transportation needs whenever and wherever they want. Although this service level is appealing for riders, overall system efficiency can improve substantially if riders are willing to be flexible. Here, we explore riders' flexibility in space via walking to more accessible pickup locations. Ridesharing platforms have traditionally implemented dynamic walking, which jointly optimizes rider-driver assignment with rider pickup locations. We propose the new paradigm of static walking, which communicates a predetermined pickup location to the rider, and then optimizes rider-driver assignment. On its surface, dynamic walking appears to be the gold standard; the flexibility of optimization as compared to the restriction of a predetermined pickup location makes the viability of static walking far from a foregone conclusion. However, a major drawback of dynamic walking is that riders are deterred by the associated uncertainty. Static walking aims to mitigate this uncertainty, as a semi-flexible approach that achieves the value of flexibility without burdening riders. We study characteristics of networks on which static walking can be viable and propose algorithms to generate fixed pickup locations. In simulations on Lyft data in Manhattan, we found that static walking achieved up to 94-95% of the value of dynamic walking; static walking can therefore overcome dynamic walking's advantages with just a modest relative increase in rider adoption of as low as 5-6%. We support our simulations with empirical evidence that static walking has substantial value using data from hundreds of thousands of Lyft rides.

Link to events page here.

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Improving Farmers’ Welfare on Online Agri-Platforms

Host(s): Associate Professor John Turner
Speaker(s): Somya Singhvi, Assistant Professor in Data Sciences and Operations
University: University of Southern California, Marshall School of Business
Time:Friday, November 19, 2021; 10:00 AM – 11:30 AM
Location: Zoom

Multiple developing countries have launched online platforms to unify geographically dispersed agriculture markets with the goal of improving smallholder farmers’ welfare, but very little is known about the resulting impact of such platforms. In this talk, we describe a body of work that provides the first rigorous impact assessment of such a platform, and highlight how innovative designs of price discovery mechanisms could be enabled by online agri-platforms in resource-constrained environments. The work is in close collaboration with the state government of Karnataka, India, and is focused on the state's online agri-platform, the Unified Market Platform (UMP). By November 2019, approximately 62.8 million metric tons of commodities valued at $21.7 billion (USD) had been traded across 162 markets on the UMP. Leveraging both public data and detailed bidding data from the platform, a difference-in-differences analysis suggests that the implementation of the UMP has significantly increased modal prices of certain commodities (5.1%-3.5%), while prices for other commodities have not changed. Furthermore, the analysis provides evidence that logistical challenges, bidding efficiency and low competition are important factors affecting the impact of UMP.

In order to further increase competition on UMP, we adopt a multi-method approach to design, implement, and evaluate the impact of a new two-stage auction on UMP. The design of the two-stage auction is informed by operational constraints and guided by theory-informed, semi-structured interviews with traders in the field. A new behavioral auction model is developed to determine when the two-stage auction can generate a higher revenue for farmers than the traditional single-stage, first-price, sealed-bid auction. The two-stage auction was implemented on the UMP for a major lentils market in February 2019. By June 2019, commodities worth more than $6 million (USD) had been traded under the new auction design. A difference-in-differences analysis demonstrates that the implementation has yielded a significant 4.7% price increase, representing profit improvement of 60%-158% for over 10,000 farmers who traded in the treatment market. The detailed auction data provides empirical validation of the behavioral auction model.

Link to events page here.

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Information Design and Relational Contracting

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Jonathan Glover, James L. Dohr Professor of Accounting
University: Columbia University, Columbia Business School
Time: Friday, November 19, 2021; 11:00 AM – 12:15 PM
Location: Zoom

Hold-up problems in buyer-supplier relationships can inhibit relation-specific investments, including supplier innovations aimed at cost reductions or quality improvements. One solution to such hold-up problems is to install an information system as a substitute for commitment, limiting the buyer's ability to extract rents from the supplier. Another solution is trust, i.e., a self-enforcing promise to let the supplier keep some of the rents created by innovation. The promise is made self-enforcing via a relational contract enforced by repeated play. On the surface, these two solutions appear to be substitutes for each other. We study a model in which both tools are available and find instead that trust and information system design are complements (holding innovation constant). The intuition is that the information system design solution is itself constrained by trust. Creating trust via a relational contract enables the buyer to use the information system more aggressively.

Link to events page here.

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Earnings Announcements Guiding Job Seekers (with Sara Malik)

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Jung Ho Choi, Assistant Professor of Accounting
University: Stanford University, Graduate School of Business
Time: Friday, June 11, 2021, 3:15 PM - 4:30 PM
Location: Zoom

Using half a million anonymous job seekers' detailed search data, we study the information content of earnings announcements for job seekers. In the spirit of Beaver (1968), we find first evidence of a substantial increase in on-the-job-search activities around earnings announcements. Job seekers search more actively for employers with earnings growth. Peer firm employees search for employers more actively than own firm employees around earnings announcements. Job seekers search for information about employers' potential offers & salaries, interview questions, and hiring situations. Finally, financial information is predictive of future job prospects including job growth and career growth. Overall, our paper suggests that earnings announcements guide job seekers' search activities by providing them with information about employers' job prospects.

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From Man vs. Machine to Man + Machine: The Art and AI of Stock Analyses

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Sean Cao, Assistant Professor of Accounting
University: Georgia State University, J. Mack Robinson College of Business
Time: Friday, June 4, 2021, 3:15 PM - 4:30 PM
Location: Zoom

An AI analyst we build to digest corporate financial information, qualitative disclosure and macroeconomic indicators is able to beat the majority of human analysts in stock price forecasts and generate excess returns compared to following human analyst. In the contest of "man vs machine," the relative advantage of the AI Analyst is stronger when the firm is complex, and when information is high-dimensional, transparent and voluminous. Human analysts remain competitive when critical information requires institutional knowledge (such as the nature of intangible assets). The edge of the AI over human analysts declines over time when analysts gain access to alternative data and to in-house AI resources. Combining AI’s computational power and the human art of understanding soft information produce the highest potential in generating accurate forecasts. Our paper portraits a future of "machine plus human" (instead of human displacement) in high-skill professions.

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On Agency and its Limits: The Asymmetric Effects of Offsites on Network Tie Formation

Host(s): Assistant Professor Luke Rhee
Speaker(s): Adam M. Kleinbaum, Associate Professor of Business Administration
University: Dartmouth College, Tuck School of Business
Time: Friday, May 21, 2021, 10:00 AM - 11:30 AM
Location: Zoom

Social networks are integral to the performance of collaborative work, but research on network change has shed little light on the tactics professionals use to deliberately stimulate collaborative network ties. In this paper, we empirically examine one such tactic, corporate offsites, as opportunity shocks for intra-organizational networking. We find that attending an offsite leads participants to significantly increase the number of new network ties that they initiate. But surprisingly, people who do not attend the offsite similarly increase their network outreach, consistent with deliberate compensatory behavior on the part of non-attendees. However, attendees also receive more incoming requests from new collaborators following offsites, a benefit that does not accrue to non-attendees. These results are consistent with a conceptualization of opportunities as affecting network change in two distinct ways: through the changes the individual makes in her own network, which are subject to individual agency and through the decisions made by others, which also shape the focal individual’s network, but which fall outside of the focal individual’s agency. Integrating the traditional egocentric perspective with an altercentric perspective moves us closer to understanding both an individual’s agency to shape her evolving network and the limits on that agency.

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Wine Analytics

Host(s): Assistant Professor Ken Murphy
Speaker(s): Burak Kazaz, Professor of Supply Chain Management
University: Syracuse University, Whitman School of Management
Time: Friday, May 14, 2021, 1:00 PM - 2:30 PM
Location: Zoom

Among agricultural goods, wine is a specialty product. Fine wine grapes require exceptional care and attention. After the harvest, grapes are crushed and the wine goes through a long aging process. In the case of Bordeaux-style wines, for example, the aging process in barrels can last 18 to 24 months. The aging continues for another 20 to 30 years in the bottle. This long aging process makes wine production a risky venture. Consumers follow the evolution of these fine wines closely, track their corresponding tasting reviews and scores and are often informed about climatic conditions during the growing seasons. Thus, wine is one of the most heavily tracked and publicized agricultural products. Considering the long production time, winemakers can mitigate their operational and financial risks by selling their wines in advance in the form of wine futures. In this talk, I will describe predictive and prescriptive analytical methods that assist primary enterprises that produce and distribute wine in their decision-making processes. The seminar will begin with predictive models that estimate the true value of wine futures prices. These estimation models are essential to the financial exchange known as the London International Vintners Exchange (Liv-ex) where wine futures contracts are traded. Coined as “realistic prices” by Liv-ex, these predictive models assist buyers in their purchasing decisions as they can determine whether a futures contract is underpriced or overpriced. Next, I will develop risk mitigation models to assist winemakers in mitigating uncertainty in weather conditions and tasting expert reviews. These prescriptive models rely on predictive analytics which help determine consumers’ utilities from buying the wine in advance, or later or not purchasing it at all. Prescriptive models such as a multinomial logit model focus on determining how much of the wine should be sold in advance in order to reduce risk exposure and maximize the expected profits of the winemaker. On the buyer side, the talk will introduce stochastic portfolio optimization models for both wine distributors and importers in their decision regarding how to allocate limited budgets between wine futures contracts and bottled wine. These prescriptive models are, once again, built on predictive analytics that estimate the evolution of futures and bottle prices over time under fluctuating market and weather conditions. Wine is an exemplary agricultural product; its production and quality perceptions are widely tracked by businesses and consumers. The predictive and prescriptive models of this tutorial help create transparency in this largely opaque market. They assist the industry in its drive towards market efficiency. The tutorial also offers future research directions in wine analytics and describes how these techniques can be beneficial for the production and distribution of other agricultural products.

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Lighting the Way: Illuminating How New Ventures in Nascent Industries Experiment (with Hyeonsuh Lee, Ph.D. Candidate)

Host(s): Assistant Professor Travis Howell
Speaker(s): Sonali Shah, Associate Professor
University: University of Illinois at Urbana-Champaign, Geis College of Business
Time: Friday, May 14, 2021, 10:00 AM - 11:30 AM
Location: Zoom

Experimentation enables new ventures to illuminate areas of uncertainty and leads to improved decision-making and performance. Experiments are often studied as stand-alone actions, however, scholars are increasingly interested in understanding how experiments are supported by organizational characteristics and choices. Using an inductive, theory-building approach, we seek to illuminate the organizational models that accompany and support experiments, as well as their antecedent conditions and performance effects. We find that new ventures follow one of two strikingly different experimentation models: “generative” and “focused” experimentation. Generative experimentation involves knowledge sharing and collaborative experimentation with external actors, the creation of an idea-centered organization, conducting experiments across multiple knowledge domains (technological, market and business model) and external experiments. In contrast, focused experimentation tends to involve little knowledge exchange with external actors, a focus on executing a specific idea and conducting experiments focused on the technology in controlled settings. Generative experimentation is more likely to result in pivoting and better performance than focused experimentation for the new ventures in our sample. Three antecedent conditions––having at least one serial entrepreneur on the founding team, knowledge of multiple industries and an orientation towards technologies (rather than products)––are associated with new ventures’ decision to pursue generative, rather than focused, experimentation. This study examines new ventures in the nascent smart lighting industry and is grounded in detailed interview data collected from founders.

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AlphaPortfolio: Direct Construction Through Reinforcement Learning and Interpretable AI

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Will Cong, Associate Professor
University: Cornell University, Johnson College of Business
Time: Friday, April 23, 2021, 1:00 PM - 2:00 PM
Location: Zoom

We directly optimize the objectives of portfolio management via reinforcement learning---an alternative to conventional supervised-learning-based paradigms that entail first-step estimations of return distributions, pricing kernels, or risk premia. Building upon breakthroughs in AI, we develop multi-sequence neural network models tailored to distinguishing features of economic and financial data, while allowing training without labels and potential market interactions. The resulting AlphaPortfolio yields stellar out-of-sample performances (e.g., Sharpe ratio above two and over 13% risk-adjusted alpha with monthly re-balancing) that are robust under various economic restrictions and market conditions (e.g., exclusion of small stocks and short-selling). Moreover, we project AlphaPortfolio onto simpler modeling spaces (e.g., using polynomial-feature-sensitivity) to uncover key drivers of investment performance, including their rotation and nonlinearity. More generally, we highlight the utility of deep reinforcement learning in finance and invent "economic distillation" tools for interpreting AI and big data models.

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“We value diversity but...”: Organizational Responses to “comply-or-explain” Regulation for Women on Boards

Host(s): Assistant Professor Luke Rhee
Speaker(s): Sarah Kaplan, Professor of Strategy and Management
University: University of Toronto, Rotman School of Management
Time: Friday, April 16, 2021, 10:00 AM - 11:30 AM
Location: Zoom

Many environmental and social regulations emphasize disclosures as a means to hold organizations accountable for their progress. Strategically, organizations may want to comply with the regulations or not. To mitigate the negative impacts of non-compliance, organizations may use strategic obfuscation tactics in their disclosures. This paper investigates how organizations make disclosures about social issues and whether their disclosure behavior is associated with change. We address this question by examining disclosures that respond to a mandatory “comply-or-explain” regulation for women’s representation on boards and executive levels in which organizations must disclose their practices and targets or provide reasons (explanations) for not doing so. We find that disclosures from organizations that do not comply substantively are more obfuscating. Further, organizations with harder-to-read disclosures do not significantly improve women’s representation on their board in the ensuing years. Second, we explore how the legal liability of transparency shapes which practices are adopted. We find that organizations using legal templates in their disclosures are associated with adopting a written policy to identify and select women candidates for their top positions but not with the adoption of more binding constraints such as targets for women on their boards. This paper contributes to the literatures on decoupling and diversity by suggesting that external pressures solely based on transparency are not sufficient to improve on the status quo.

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Human Versus Machine: A Comparison of Robo-Analyst and Traditional Research Analyst Investment Recommendations

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Joseph Pacelli, Assistant Professor
University: Indiana University, Kelley School of Business
Time: Friday, April 9, 2021, 3:15 PM - 4:30 PM
Location: Zoom

We provide the first comprehensive analysis of the properties of investment recommendations generated by “Robo-Analysts,” which are human-analyst-assisted computer programs conducting automated research analysis. Our results indicate that Robo-Analyst recommendations differ from those produced by traditional “human” research analysts across several important dimensions. First, Robo-Analysts produce a more balanced distribution of buy, hold, and sell recommendations than do human analysts and are less likely to recommend “glamour” stocks and firms with prospective investment banking business. Second, automation allows Robo-Analysts to revise their recommendations more frequently than human analysts and better incorporate information from complex period filings. Third, while Robo-Analysts’ recommendations exhibit weak short-window return reactions, they have long-term investment value. Specifically, portfolios formed based on the buy recommendations of Robo-Analysts significantly outperform those of human analysts. Overall, our results suggest that Robo-Analysts are a valuable, alternative information intermediary to traditional sell-side analysts for investment advice.

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Expert Opinions and Consumer Reviews: Evidence from the Michelin Guide

Host(s): Associate Professor Kevin Bradford
Speaker(s): Yiting Deng, Assistant Professor of Marketing
University: University College of London, School of Management
Time: Friday, April 9, 2021, 2:00 PM - 3:00 PM
Location: Zoom

The consumer purchase journey is influenced by both expert opinions and consumer reviews. However, it is not clear whether favorable expert opinions improve or hurt consumer evaluations of quality. On the one hand, positive expert opinions can enhance the reputation of a business and lead to higher consumer ratings; on the other hand, they may raise consumer expectations and lead to lower consumer ratings. This paper explores the effect of expert opinions on consumer reviews in the context of Michelin stars in the restaurant industry. We constructed a data set based on the Michelin Guide for Great Britain & Ireland from 2010 to2020. For each restaurant that was awarded Michelin stars during these 11 years, we collected online consumer reviews from TripAdvisor, OpenTable, and Yelp and retrieved relevant historical menus from the restaurant’s official website. Based on the data, we first estimate the effect of Michelin star changes on the valence of consumer reviews. We find that decreases in Michelin star status improve consumers’ star ratings. Next, we estimate a Bayesian topic model and analyze the effects of changes in Michelin star status on review topics, and we find service to be the main driver of customer satisfaction. Finally, we analyze how restaurants respond to changes in Michelin star status by analyzing the relevant historical menus, and we show that in response to Michelin star awards, restaurants modify their menu structure to achieve higher consumer satisfaction.

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Premium for Heightened Uncertainty: Explaining Pre-Announcement Market Returns

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Haoxiang Zhu, Associate Professor of Finance
University: Massachusetts Institute of Technology, Sloan School of Management
Time: Friday, April 9, 2021, 1:00 PM - 2:00 PM
Location: Zoom

We find large overnight returns, with no abnormal variance, before the release of nonfarm payrolls, ISM, and GDP, similar to the pre-FOMC returns. To explain this common pattern, we propose a two-risk model with the uncertainty about the magnitude of the impending news’ market impact as an additional risk, and link there-announcement return directly to the accumulation of heightened uncertainty and its later resolution prior to the announcement. We empirically test and verify the model’s distinct predictions on the joint intertemporal behavior of return, variance, and particularly VIX – a gauge of impact uncertainty by our model, surrounding macroeconomic announcements.

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The Career Consequences of Employee Activism: Evidence from the NFL Take a Knee Protest Movement (with Alexandra Rheinhardt & Ethan Poskanzer)

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Forrest S. Briscoe, Professor of Management
University: Pennsylvania State University, Smeal College of Business
Time: Friday, April 9, 2021, 10:30 AM - 12:00 PM
Location: Zoom

Despite recognizing the potential risks for employees who choose to participate in protest at the workplace, researchers have rarely explored the actual career consequences that stem from such activism. We integrate research on employee activism and worker norms to theorize that workplace protest represents a perceived violation of idealized norms for professional employees that can lead to negative responses in the organization and labor market. We investigate this premise with the 2016 National Football League (NFL) “Take a Knee” protests as a strategic research setting. Constructing a matched sample of comparable protesting and non-protesting NFL players, we then use a difference-in-difference approach to causal identification. The results indicate that protesting is associated with negative consequences for subsequent compensation, as well as an increase in the probability of exiting from the occupational labor market. We further find that the negative effect of protesting on compensation is reduced for employees who have a potential managerial ally in their organization, in the form of a Black head coach. Overall, the findings offer contributions for research on employee activism, careers and inequality.

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Blinded by Perception? The Stock Market’s Reaction to a Perceived Political Bias in the News (with Mancy Luo & Massimo Massa)

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Alberto Manconi, Associate Professor of Finance
University: Bocconi University, Finance Department
Time: Friday, April 2, 2021, 2:00 PM - 3:00 PM
Location: Zoom

We use the 2007 acquisition of Dow Jones & Co. by News Corporation to study whether the perception of a news source’s political affiliation affects its credibility and financial market impact. Following 2007, the price of Republican- (Democrat-) aligned stocks becomes less sensitive to positive (negative) Dow Jones Newswires (DJNW) sentiment, consistent with the market perceiving a pro-Republican bias. There is, however, no evidence of an actual bias in DJNW, suggesting a loss of price informativeness. Consistent with this view, a trading strategy exploiting the attenuated reaction to DJNW news earns abnormal returns following 2007.

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Contractual Complexity in Debt Agreements: The Case of EBITDA

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Robert Hills, Assistant Professor of Accounting
University: Pennsylvania State University, Smeal College of Business
Time: Friday, March 26, 2021, 3:15 PM - 4:30 PM
Location: Zoom

We examine the definition of EBITDA in private credit agreements. Using textual analysis and supervised learning, we assess a permissiveness score associated with EBITDA definitions based on the number of adjustments included in an EBITDA computation. We find that permissiveness is greater for larger deals, deals with pledged collateral and deals with larger spreads. Permissiveness in EBITDA definitions is also positively (negatively) related to accrual (cash flow) volatility, suggesting that accruals are not as informative as cash flows to lenders about borrowers’ underlying ability to meet obligations. Because EBITDA is included in the definition of many financial covenants, we investigate the relation between permissiveness and both covenant slack and violations. We find that permissiveness is associated with less covenant slack, yet fewer violations; however, market responses to violations are more negative when permissiveness is higher. Altogether, our findings suggest that the permissiveness of EBITDA definitions enhances contracting efficiency by removing variation in contractual EBITDA that is less reflective of the true state of the world, thereby enhancing the informativeness of covenant realizations.

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Face Value: Analysts’ Facial Appearance, Forecasts and Career and Market Outcomes

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Siew Hong Teoh, Dean’s Professor of Accounting
University: University of California, Irvine, The Paul Merage School of Business
Time: Friday, March 19, 2021, 3:15 PM - 4:30 PM
Location: Zoom

Using machine learning-based algorithms, we extract key impressions about personality traits from the LinkedIn profile photos of sell-side analysts. We find that these face-based factors are associated with analyst behavior, performance, and capital- and labor-market outcomes. The trustworthiness (TRUST) and dominance (DOM) factors are positively associated with analyst forecast accuracy and report length. Analysts with high TRUST scores tend to herd with managerial guidance forecasts; those with high DOM scores actively participate in conference calls. The positive association of the attractiveness (ATTRACT) factor on forecast accuracy diminishes with market learning and after Reg-FD. Forecasts from analysts with higher TRUST and DOM scores generate stronger price reactions. High DOM scores help male analysts but hurt female analysts to attain All-Star status. These findings suggest that impressions formed from observing analysts’ physical facial attributes are associated with analysts’ economic behaviors. Some of the investor and peer responses to these impressions seem to reflect societal biases and gender stereotypes.

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Analyst Information about Rival Firms During the IPO Quiet Period

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Kimball Chapman, Professor of Accounting
University: Washington University in St. Louis, Olin School of Business
Time: Friday, March 12, 2021, 3:15 PM - 4:30 PM
Location: Zoom

The SEC limits sell-side analysts’ research activities on IPO firms both before and immediately after going public (the IPO quiet period). We examine whether, in spite of these restrictions, analysts serve an indirect information role during the quiet period through their research of rival firms in the IPO firm’s industry. Our evidence suggests analysts provide informative signals about IPO firms during the quiet period through their stock recommendation revisions of rival firms. In particular, we find that analysts revise the stock recommendations of rival firms in response to IPO news and that these recommendation changes are predictive of future IPO performance. We also find that IPO investors trade on this information on the IPO date. However, we find that only institutional investors make use of this information, and that retail investors are inattentive to information in analyst research of rival firms, except when the analyst is affiliated with the IPO firm or when the rival firm is highly visible. Our findings suggest that, even during the IPO quiet period, analysts provide informative signals about IPO firms through their coverage of rival firms.

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Prevalence and Propagation of Fake News

Host(s): Assistant Professor Ken Murphy
Speaker(s): Banafsheh Behzad, Associate Professor
University: California State University at Long Beach, College of Business Administration
Time: Friday, March 12, 2021, 10:00 AM - 11:30 AM
Location: Zoom

In recent years, scholars have raised concerns on the effects that unreliable news, or `fake news', has on our political sphere, and our democracy as a whole. For example, the propagation of fake news on social media is widely believed to have influenced the outcome of national elections, including the 2016 U.S. Presidential Election and the 2016 British Brexit referendum. What drives the propagation of fake news on an individual level, and which interventions could effectively reduce the propagation rate? Our model disentangles bias from truthfulness of an article and examines the relationship between these two parameters and a reader's own beliefs. Using the model, we create policy recommendations for both social media platforms and individual social media users to reduce the spread of fake news. We recommend that platforms sponsor unbiased truthful news, focus fact-checking efforts on mild to moderately biased news, recommend friend suggestions across the political spectrum and provide users with reports about the political alignment of their feed. We recommend that individual social media users fact check news that strongly aligns with their political bias and read articles of opposing political bias.

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Deference and Asymmetric Alliance Formation Between Ventures

Host(s): Assistant Professor Travis Howell
Speaker(s): Emily Cox Pahnke, Associate Professor
University: University of Washington, Michael G. Foster School of Business
Time: Friday, March 5, 2021, 10:00 AM - 11:30 AM
Location: Zoom

Although partnering with higher status industry players can be especially critical for ventures seeking to establish themselves in a network, it is unclear what actions these firms can take to facilitate such relationship formation. Building on theories of interorganizational tie formation, we explore how a venture can take strategic actions—in the form of public acts of deference toward higher-status potential partners—to make such asymmetric alliance formation more likely. Empirical results from a 11-year panel dataset of 2,436 firms in the medical device industry suggest that a venture engaging in proactive acts of deference toward a higher-status firm significantly increases the likelihood of their alliance formation. In addition, we find evidence suggesting that the effectiveness of deference on asymmetric alliance formation can be stronger or weaker depending on other characteristics of the exchange parties, such as their relative age and rounds of venture capital funding.

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Fundamental Analysis of XBRL Data: A Machine Learning Approach

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Yiwei Dou, Professor of Accounting
University: New York University, Stern School of Business
Time: Friday, February 26, 2021, 3:15 PM - 4:30 PM
Location: Zoom

Since 2012, all U.S. public companies must tag quantitative amounts in financial statements and footnotes of their 10-K reports using the eXtensible Business Reporting Language (XBRL). We conduct a fundamental analysis of this large set of detailed financial information to predict earnings. Using machine learning methods, we combine the XBRL data into a summary measure for the direction of one-year-ahead earnings changes. Hedge portfolios are formed based on this measure during the period 2015-2018. The annual size-adjusted returns to the hedge portfolios range from 5.02 to 9.7 percent. These returns persist after accounting for transaction costs and risk. Our strategies outperform those of Ou and Penman (1989), who extract the summary measure from 65 accounting variables using logistic regressions. Additional analyses suggest that the outperformance stems from both nonlinear predictor interactions missed by regressions and more detailed financial data in XBRL documents.

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Scope, Scale and Competition: The 21st Century Firm

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Gordon M. Philips, Professor of Finance
University: Dartmouth College, Tuck School of Business
Time: Friday, February 26, 2021, 1:00 PM - 2:00 PM
Location: Zoom

We provide evidence that over the past 30 years, U.S. firms have expanded their scope of operations. Increases in scope and scale were achieved largely without increasing traditional operating segments. Scope expansion significantly increases valuation and is primarily realized through acquisitions and investment in R&D, but not through capital expenditures. We show that traditional concentration ratios do not capture this expansion of scope and are upward biased. After accounting for scope, we do not find evidence that industry concentration is increasing. Our findings point to a new type of firm that increases scope through related expansion, which is highly valued by the market.

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Balancing Cost and Profit in the Public Sector Vaccine Market: Case Studies of DTaP and COVID-19

Host(s): Assistant Professor Kenneth Murphy
Speaker(s): Susan Martonosi, Professor of Mathematics
University: Harvey Mudd College, Department of Mathematics
Time: Friday, February 26, 2021, 10:00 AM - 11:30 AM
Location: Zoom

Vaccine markets in the United States are vulnerable to the development of monopolies due to few manufacturers and high research and development costs. This work addresses how the government can ensure the cost-effective procurement of pediatric vaccines and the new COVID-19 vaccine from private manufacturers. The Centers for Disease Control and Prevention’s (CDC) significant patronage of vaccines affords them leverage in negotiating public-sector prices that prevent the formation of monopolies, but existing vaccine pricing literature excludes the CDC as a rational player. We combine optimization and game theoretic techniques to address cost-effective immunization. We present two case studies, one of the pediatric diphtheria-tetanus-pertussis vaccine (DTaP) and one of the recently developed COVID-19 vaccine. The talk then concludes with reflections on supervising research with undergraduate students. [Joint work with Banafsheh Behzad and Kayla Cummings.]

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Racialized Markets: A Theoretical Framework

Host(s): Associate Professor Kevin Bradford
Speaker(s): David K. Crockett, Professor Moore Fellow
University: University of South Carolina, Darla Moore School of Business
Time: Monday, February 22, 2021, 1:30 PM - 2:30 PM
Location: Zoom

Marketing and consumer researchers have studied race, racialization, and racism in markets since at least the mid-20th century. Yet the discipline has not aggregated and integrated that knowledge into the same conceptual whole, which is necessary for knowledge-building. To correct this, I propose a theoretical framework that synthesizes racial formation theoretic approaches from sociological and Black history to account for racialized markets. The goal is to build knowledge about how market systems perpetuate and/or challenge ideas of race, processes of racialization, and the persistence of racial inequality.

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Blockchain-Drive Deep-Tier Supply Chain Financing

Host(s): Assistant Professor Kenneth Murphy
Speaker(s): Lingxiu Dong, Professor of Operations and Manufacturing Management
University: Washington University in St. Louis, Olin School of Business
Time: Friday, February 12, 2021, 10:00 AM - 11:30 AM
Location: Zoom

For many supply chains, deep-tier suppliers, due to their small sizes and lack of access to capital, are most vulnerable to disruptions. Traditionally, because of the limited visibility in the deep-tiers, powerful downstream manufacturers’ financing schemes offered to their immediate upstream suppliers are not effective in instilling capital into the deep-tiers. Advancements in blockchain technology improve supply chain visibility and enable manufacturers to better devise deep-tier supply chain financing (SCF) to improve supply chain resilience. In this paper, we study the use of advance payment (AP) as a financing instrument in a multi-tier supply chain to mitigate the supply disruption risk. We compare the traditional system (deep-tier financing with limited visibility) and the blockchain-enabled system (financing with perfect visibility) to shed light on how blockchain adoption impacts agents’ operational and financial decisions and profit levels in a multi-tier supply chain environment. Our study of SCF in a three-tier supply chain finds that the improved supply chain visibility (by blockchain adoption) always benefits the manufacturer by enabling her to induce the desired operational risk-mitigation investment from the tier-1 and tier-2 suppliers. However, depending on the directional change in the operational risk-mitigation investment, which depends on the suppliers’ initial wealth levels, the tier-1 and tier-2 suppliers can be worse off. The “win-win-win” outcome takes place only when all operational risk-mitigation measures increase. Comparing the two types of blockchain-enabled SCF, delegated financing versus cross-tier direct financing, the manufacturer strictly prefers the latter. In contrast, the tier-1 supplier strictly prefers the former because the former endows the tier-1 with financial leverage over the manufacturer.

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Input Markets and the Strategic Actions of Firms

Host(s): Assistant Professor Chenqi Zhu
Speaker(s): Anil Arya, Professor of Accounting and MIS
University: Ohio State University, Fischer College of Business
Time: Friday, February 5, 2021, 3:00 PM - 4:30 PM
Location: Zoom

The typical view of firm actions and structure emphasizes enhancing efficiency by fully aligning incentives of all internal participants to achieve a common objective. Over the years, research in accounting, economics, and marketing has stressed how competition in output markets can alter this view. More recently, there has been an emphasis on how a firm’s concurrent participation in input markets, wherein strategic supplier considerations are in play, can further change the traditional view of firm actions. The seminar will seek to synthesize such results and present key considerations and conclusions that can be gleaned from this research. In particular, the emphasis will be on implications for decentralized organizational structure, transfer pricing, performance measurement, and cause marketing.

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The Gender Gap in Housing Returns (Joint with Paul Goldsmith-Pinkham)

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Kelly Shue, Professor of Finance
University: Yale University, Yale School of Management
Time: Friday, January 15, 2021, 1:00 PM - 2:00 PM
Location: Zoom

Housing wealth represents the dominant form of savings for American households. Using detailed data on housing transactions across the United States since 1991, we find that single men earn 1.5 percentage points higher unlevered returns per year on housing relative to single women. If homeowners use leverage via a standard 30-year fixed rate mortgage, the gender gap grows significantly larger: men earn 7.9 percentage points higher levered returns per year relative to women. Approximately 45% of the gap in housing returns can be explained by gender differences in the location and timing of transactions. The remaining gap arises primarily from gender differences in execution prices: data on repeat sales reveal that women buy the same property for approximately 2% more and sell for 2% less. Women experience worse execution prices because of differences in the choice of initial list price and negotiated discount relative to the list price. Gender differences in liquidity, upgrade and maintenance rates, and preferences for housing characteristics and listing agents appear to be less important factors. Overall, the gender gap in housing returns is economically large and can explain 30% of the gender gap in wealth accumulation at retirement for the median household.

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Social Proximity to Capital: Implications for Investors and Firms (Joint with Theresa Kuchler, Yan Li, Lin Peng & Dexin Zhou)

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Johannes Stroebel, Professor of Finance
University: New York University, Stern School of Business
Time: Friday, January 8, 2021, 1:00 PM - 2:00 PM
Location: Zoom

We use social network data from Facebook to show that institutional investors are more likely to invest in firms from regions to which they have stronger social ties. This effect of social proximity on investment behavior is distinct from the effect of geographic proximity. Social connections have the largest influence on investments of small investors with concentrated holdings as well as on investments in firms with a low market capitalization and little analyst coverage. We also find that the response of investment decisions to social connectedness affects equilibrium capital market outcomes: firms in locations with stronger social ties to places with substantial institutional capital have higher institutional ownership, higher valuations, and higher liquidity. These effects of social proximity to capital on capital market outcomes are largest for small firms with little analyst coverage. We find no evidence that investors generate differential returns from investments in locations to which they are socially connected. Our results suggest that the social structure of regions affects firms’ access to capital and contributes to geographic differences in economic outcomes. 

How to Conclude a Suspended Sports League? Joint with Mojtaba Hosseini & John Turner

Host(s): Assistant Professor Ken Murphy
Speaker(s): Ali Hassanzadeh, PhD Student
University: University of California, Irvine, The Paul Merage School of Business
Time: Friday, December 4, 2020, 10:00 AM - 11:30 AM
Location: Zoom

Professional sports leagues may be suspended due to various reasons such as the recent COVID-19 pandemic. A critical question the league must address when re-opening is how to appropriately select a subset of the remaining games to conclude the season in a shortened time frame. Despite the rich literature on scheduling an entire season starting from a blank slate, concluding an existing season is quite different. Our approach attempts to achieve team rankings similar to that which would have resulted had the season been played out in full. We propose a data-driven model which exploits predictive and prescriptive analytics to produce a schedule for the remainder of the season comprised of a subset of originally-scheduled games. Our model introduces novel rankings-based objectives within a stochastic optimization model, whose parameters are first estimated using a predictive model. We present simulation-based numerical experiments from previous National Basketball Association (NBA) seasons 2004-2019, and show that our models are computationally efficient, outperform a greedy benchmark that approximates a non-rankings-based scheduling policy, and produce interpretable results. Our data-driven decision-making framework may be used to produce a shortened season with 25-50 % fewer games while still producing an end-of-season ranking similar to that of the full season, had it been played. We also suggest how to conclude the 2019-20 NBA season.

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The Hedge Fund Industry is Bigger (and has Performed Better) Than You Think Joint with Daniel Barth, Juha Joenvaara and Mikko Kauppila

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Russell Wermers, Professor of Finance 
University: University of Maryland, Robert H. Smith School of Business
Time: Friday, November 20, 2020, 1:00 PM - 2:00 PM
Location: Zoom

Of first-order importance to the study of potential systemic risks in hedge funds is the aggregate size of the industry. The worldwide hedge fund industry has been estimated by regulators and industry experts as having total net assets under management of $2.3 – 3.7 trillion as of the end of 2016. Using a newly combined database of several hedge fund information vendors, augmented by the first detailed, systematic regulatory collection of data on large hedge funds in the United States, we estimate that the worldwide net assets under management were at least $5.2 trillion in 2016, over 40% larger than the most generous estimate. Gross assets, which represent the balance sheet value of hedge fund assets, exceed $8.5 trillion. We further decompose hedge fund assets by their self-reported strategy and by fund domicile. We also show that the total returns earned by funds that report to the public databases are significantly lower than the returns of funds that report only on regulatory filings, both in aggregate and within nearly every fund strategy. This difference appears to be driven entirely by alpha, rather than by differences in exposures to systematic risk factors. In fact, we find that market beta is substantially higher for publicly reporting funds. However, net investor flows are considerably higher for funds reporting publicly. Regression results show that previous estimates of the flow-performance relationship are likely biased. Our new, and much larger, estimates of the size of the hedge fund industry should help regulators and prudential authorities to better gauge the systemic risks posed by the industry, and to better evaluate potential data gaps in private funds. Our results also suggest that systematic risk is roughly similar in publicly and non-publicly reporting funds.

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Designs for Mobile Apps: Implications and Learnings from Three Studies

Host(s): Assistant Professor Tingting Nian
Speaker(s): Jason Chan, Associate Professor
University: University of Minnesota, Carlson School of Management
Time: Friday, November 20, 2020, 10:30 AM - 12:00 PM
Location: Zoom

With over 2.7 billion smartphone users globally, who checks their phone every 12 minutes, mobile applications are in a unique position to inform, influence, and improve individuals’ lifestyle in various ways. Mobile apps are developed for a wide variety of purposes, from entertainment to work, health management to online commerce, and social networking to useful tools. Despite its pervasive presence and usage, it is common knowledge that many apps suffer from design issues that render them less effective than desired for engaging users and assisting them. At the same time, because the app market is often congested with similar offerings from competing firms, feature copying is a prevalent practice. Reacting to this competitive environment, app companies devote large amounts of resources to implement and integrate features present in competing apps to their own offerings. This is often done without assessing whether these features are truly beneficial for the users. In this talk, I present three separate studies (that are at various stages of the review process) that look at various design aspects of mobile apps. In the first study, coauthors and I attempted to implement crowdsourcing features in a mobile game and test whether they improve engagement and retention. Specifically, we look at co-creation and content access features as these form the pillars of crowdsourcing. Interestingly, we found that these two features have a negative effect on usage outcomes when offered jointly. We offer theoretical explanations for these unexpected results. In the second work, my colleagues and I assessed two feedback features that are common in exercise apps, namely performance and social feedback. We find nuanced insights on how these two feedback features operate separately and jointly. It appears that the joint offering of these features is not helpful in enhancing run performance. Additionally, social feedback while helpful in the beginning, begin to deteriorate, as users do not get as much social feedback from their friends via the app. In the third study, my coauthors and I look at how the geolocation information captured by mobile apps can be harnessed to provide meaningful interventions to promote healthy behaviors. Specifically, we partnered with an app company to provide positive- and negative-framed messages on different days, depending on the weather conditions users experience for that day. We found that users react to positively framed messages better on cloudy days, while negatively framed messages were more effective in inducing behavioral changes on sunny days. Implications for these study findings will be discussed in the talk.

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Organizational Learning and Decision Support Technology in U.S. Hospitals

Host(s): Assistant Professor Luke Rhee
Speaker(s): Isin Guler, Associate Professor
University: University of North Carolina, Kenan-Flagler Business School
Time: Friday, November 20, 2020, 10:00 AM - 11:30 AM
Location: Zoom

Organizational learning is widely studied in strategy and organization theory literatures, but we know little about how decision technologies influence the rate at which organizations learn. Given the widespread and increasing adoption of technologies as decision aids in professional tasks, we aim to examine how organizational learning is altered with the use of decision support technologies. We tackle this question by examining changes in organizational learning rates in US hospitals with the adoption of clinical decision support (CDS) systems with a staggered adoption model. We use panel data from all US hospitals between 2005 and 2014 as well as detailed data on hospital emergency rooms in California between 2009 and 2016 to examine both financial and mortality outcomes as a function of cumulative experience before and after CDS system adoption. We find that CDS system adoption strengthens the relationship between experience and financial performance but weakens the relationship between experience and clinical performance. Moreover, the adverse effect of CDS system adoption on learning from experience is especially pronounced for hospitals with high accumulated experience and those handling low-severity cases. These preliminary results invite further investigation of higher-order effects of decision support systems and other technologies on organizational processes such as learning.

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Sustainability in the fast fashion industry

Host(s): Assistant Professor Kenneth Murphy
Speaker(s): Xiaoyang Long, Assistant Professor
University: University of Wisconsin, Madison, Wisconsin School of Business
Time: Friday, November 20, 2020, 10:00 AM - 11:30 AM
Location: Zoom

A fast fashion system allows firms to react quickly to changing consumer demand by replenishing inventory (via quick response) and introducing more fashion styles. In this paper, we study the environmental impact of the fast fashion business model by analyzing its implications for product quality, variety, and inventory decisions. Our results show that the fast fashion model is conducive to low quality products. In particular, we find that a key driver of low product quality in the fast fashion industry is the firm's incentive to offer variety to hedge against uncertain fashion trends. When variety is endogenous, quality decreases as consumers become more sensitive to fashion or as the cost of introducing new styles decreases. We also identify conditions under which expected leftover inventory increases as the firm's fast fashion capabilities increase. To counter the environmental impact of the fast fashion business model due to low quality and overproduction, we assess the effectiveness of three environmental initiatives (waste disposal regulations, consumer education, and post-consumer recycling programs). We show that waste disposal policies are effective in reducing the firm's leftover inventory---but may have the unintended consequence of lowering product quality. We also compare firm-owned versus third-party recycling programs and propose a revenue-sharing scheme which could induce higher levels of recycling rate and product quality while increasing the system's total profit.

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To Give and Give Not: Corporate Philanthropy, Government Aid, and Political Polarization

Host(s): Assistant Professor Luke Rhee
Speaker(s): Aseem Kaul, Associate Professor
University: University of Minnesota, Carlson School of Management
Time: Friday, November 13, 2020, 10:00 AM - 11:30 AM
Location: Zoom

In this study, we examine the distributional consequences of corporate philanthropy. We argue that the strategic nature of corporate philanthropy means that corporate donations will go disproportionately to the more economically influential sections of society who constitute key stakeholders for for-profit firms. Private provision to these influential communities will tend to crowd out government transfers however, with this reduction in government aid affecting even those communities that do not directly benefit from corporate philanthropy. As a result, corporate philanthropy will have a socio-politically polarizing effect. We test and find support for our arguments by examining corporate foundation giving in the US from 2003 to 2011. In particular, we show that increasing differences in corporate donations are associated with increasing political differences, as reflected in US presidential elections from 2004 to 2012. Our study thus suggests that corporate philanthropy may act as a regressive and polarizing force, and highlights the need to think more carefully about who corporate philanthropy benefits and how the gains from it are distributed.

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The Spin of Finance TV (Joint with Ryan Lewis)

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Diego Garcia, Professor of Finance
University: University of Colorado Boulder, Leeds School of Business
Time: Friday, October 23, 2020, 1:00 PM - 2:00 PM
Location: Zoom

We document sentiment and content differences across Bloomberg TV, CNBC and Fox Business, the market leaders in providing business information to investors via TV broadcasting. Market events taint the coverage, but show/network fixed effects have more bite predicting content. CNBC spins market returns more than the rest, while Fox Business saliently focuses on political news. Our analysis explores the way business journalism has changed during the last two presidential cycles (2012--2019).

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Tokens at the Top: How Existing Ethnic Diversity Influences Entrances to Top Management Teams (Joint with John Morton, Ben Lourie & Philip Bromiley)

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Christopher W. Bauman, Associate Professor of Organization and Management
University: University of California, Irvine, The Paul Merage School of Business
Time: Friday, November 6, 2020, 10:30 AM - 12:00 PM
Location: Zoom

Top management teams (TMTs) remain considerably less ethnically diverse than other employees and the general public. Drawing from theories of diversity, we generate and test predictions about how representation of a given ethnic group on a TMT influences the likelihood that the TMT adds a member of the same ethnic group. Supporting a tokenism account of diversity on TMTs, results provide consistent evidence across ethnic groups that representation associates negatively with subsequent additions of members of the same ethnic group. Similarly, the departure of a member of a given ethnic group from a TMT increases the likelihood of appointing someone from that ethnic group. In contrast, CEO ethnicity associates positively with the likelihood of adding another individual of that ethnicity.

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Category Kings or Commoners? Market-Shaping and its Consequences in Nascent Categories

Host(s): Assistant Professor Travis Howell
Speaker(s): Rory McDonald, Associate Professor of Business Administration
University: Harvard Business School
Time: Friday, October 23, 2020, 10:30 AM - 12:00 PM
Location: Zoom

For a new market category to materialize, someone must actively bring it into existence. Yet it remains a mystery how entrepreneurs, whose resources are stretched thin, can accomplish this task. Prior research emphasizes the importance of market-shaping efforts—evangelism—but overlooks its impact on ventures. Through an inductive multiple-case study of a new financial-technology category, I develop theory centered on how entrepreneurs use cultural resources during category formation. My framework describes how the use of such resources co-evolves with the nascent category, influencing ventures’ own trajectories. I also identify ways in which market-shaping activities can rebound back at a venture unexpectedly, contributing to organizational inertia and inflexibility. I pursue the contributions of the framework and discuss its implications for research on category-creating innovations, cultural entrepreneurship, and strategy in nascent markets.

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Strategic Intermediation in Liquidity Markets joint with Shawn O'Donoghue and Uday Rajan

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Christine Parlour, Professor of Finance
University: University of California, Berkeley, Haas School of Business
Time: Friday, October 16, 2020, 1:00 PM - 2:00 PM
Location: Zoom

We develop a model of competition between two exchanges, which we view as platforms on which liquidity is demanded and supplied. The model has a single financial asset, and features competitive liquidity suppliers, a liquidity demander, and two kinds of strategic intermediaries. The first kind is an HFT that can act as a strategic intermediary between the competitive suppliers and the liquidity demander. The second kind is a broker who has the technology to determine optimal order routing across the exchanges. Each exchange earns revenue by charging make fees to liquidity suppliers and take fees to liquidity demanders. We highlight how the make-take fees on each exchange affect the strategies of the HFT and the broker, and thus the properties of each exchange such as volume and spread. We present empirical evidence on the importance of fee splits.

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From Dreams of the Overworked to Behind the Ideal Worker

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Melissa Mazmanian, Associate Professor of Informatics
University: University of California, Irvine, The Paul Merage School of Business
Time: Friday, October 16, 2020, 10:30 AM - 12:00 PM
Location: Zoom

In their recently published book Dreams of the Overworked: Living, Working, and Parenting in the Digital Age, Melissa Mazmanian and co-author Christine Beckman offer vivid sketches of daily life for nine families in Southern California, capturing what it means to live, work, and parent in a world of impossible expectations–expectations amplified by smart devices. In this book, the reader is invited into the homes and offices of these working professional in order to witness the crushing pressure of unraveling plans and celebrate how people—through a web of social “scaffolding”—support each other’s dreams. This book challenges the seductive myth of the individual with phone in hand, doing it all on their own. This ideal didn’t capture the reality of everyday life, even before the pandemic hit. In truth, beneath the veneer of technology is a complex, hidden system of support—our dreams have always been scaffolded by retired in-laws, friendly neighbors, spouses, schools, and paid help. This book makes the case for celebrating the structures that allow us to strive for our dreams by supporting new public policies, challenging workplace norms, reimagining family and community, and valuing invisible work on the home front. In this talk, Dr. Mazmanian will provide an overview of the book and preview a journal article that examines how families respond to work demands that assume everyone should be an Ideal Worker.

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Redrawing the Map of Global Capital Flows: The Role of Cross-Border Financing and Tax Havens

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Matteo Maggiori, Associate Professor of Finance
University: Stanford University, Graduate School of Business
Time: Friday, October 9, 2020, 1:00 PM – 2:00 PM
Location: Zoom

Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their nationality in aggregate statistics. We associate the universe of traded securities with their issuer’s ultimate parent and restate bilateral investment positions to better reflect the true financial linkages connecting countries around the world. We find that portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly 600 billion dollars, while China’s official net creditor position to the rest of the world is overstated by about 50 percent. We additionally show how taking account of offshore issuance is important for our understanding of the currency composition of external portfolio liabilities, the nature of foreign direct investment, and the growth of financial globalization.

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What’s My Share? Information Acquisition by Loan Syndicate Participants

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Sabrina Chi, Assistant Professor of Accounting
University: Texas Tech University, Rawls College of Business
Time: Friday, March 13, 2020, 3:30 PM – 4:30 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Participant lenders in syndicated loans generally rely on the lead arranger for borrower screening and monitoring because the lead arranger is primarily responsible for interactions with the borrower. This gives rise to both moral hazard and adverse selection concerns. We investigate whether participant lenders independently acquire borrower accounting reports to help mitigate these information frictions. We find that participant lenders’ SEC EDGAR searches of borrower filings are positively associated with their shares of the syndicated loan, consistent with mitigation of intra-syndicate information asymmetry. This association is weaker when the lead arranger has a better reputation, when participant lenders have a prior lending relationship with the borrower, and when the borrower’s information environment is richer, suggesting information frictions are less acute in such cases. This novel direct evidence enhances our understanding of the role of accounting information in facilitating deal formation in syndicated loan markets.

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What’s My Share? Information Acquisition by Loan Syndicate Participants

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Sabrina Chi, Assistant Professor of Accounting
University: Texas Tech University, Rawls College of Business
Time: Friday, March 13, 2020, 12:00 PM – 1:00 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Participant lenders in syndicated loans generally rely on the lead arranger for borrower screening and monitoring because the lead arranger is primarily responsible for interactions with the borrower. This gives rise to both moral hazard and adverse selection concerns. We investigate whether participant lenders independently acquire borrower accounting reports to help mitigate these information frictions. We find that participant lenders’ SEC EDGAR searches of borrower filings are positively associated with their shares of the syndicated loan, consistent with mitigation of intra-syndicate information asymmetry. This association is weaker when the lead arranger has a better reputation, when participant lenders have a prior lending relationship with the borrower, and when the borrower’s information environment is richer, suggesting information frictions are less acute in such cases. This novel direct evidence enhances our understanding of the role of accounting information in facilitating deal formation in syndicated loan markets.

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DIL – A Conversational Agent for Heart Failure Patients

Host(s): Director, Center for Digital Transformation, Professor, Information Systems, and Taco Bell Chair, Vijay Gurbaxani
Speaker(s): Sanjoy Moulik, Lecturer of Information Systems
University: University of California, Irvine, the Paul Merage School of Business
Time: Friday, February 28, 2020, 11:00 AM – 12:30 PM
Location: SB1 2200 Experian Case Study Classroom

There is an exceptionally high rate of readmissions and rehospitalizations for patients suffering from chronic diseases especially Heart Failure. Best efforts to address this alarming problem from the Care giver community have fallen short due to a number of factors most notably resource constraints like shortage of trained clinical staff, and money. Using a Design Science Research framework, this work designed and evaluated "DIL", a Conversational Agent that complements the work of clinicians in achieving the desired behavioral and clinical outcomes. The aim is to provide the hospital with an information system that could bridge the current gap in care that occurs when the patient transitions from the hospital environment to the home environment. The expected contribution is to produce a novel artifact and demonstrate the efficacy and utility of the tool to assist patients with heart failure in improving their self-care. The study conclusions were extremely positive. DIL scored high on User engagement and satisfaction. Every patient felt significantly more positive after their interaction with DIL during the trial period, and had a positive outlook on their quality of life going forward. The patients in the trial found DIL to be helpful in keeping them motivated to follow a healthy lifestyle by controlling their diet, and adhering to clinical guidelines of regular exercise, and taking medications on a timely manner. Given the extremely positive experience of the patients, there is definitely room for such an IT artifact in supporting patients as they make the transition from hospital to the home setting.

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Innovation with Chinese Characteristics: The Evolving Effects of Political ties

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Heather Haveman, Professor of Sociology and Management
University: University of California, Berkeley, Haas School of Business
Time: Friday, February 28, 2020, 10:30 AM – 12:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

In emerging economies, the development of the rule of law and other market-supporting institutions protects intellectual property and so creates opportunities and incentives for innovation. Because governments in emerging economies have considerable power to intervene in business, firms often develop ties to political authorities to overcome weak institutions. We argue that the effect of such political ties on innovation hinges on two factors: (1) the nature of the ties, and thus what is exchanged, and (2) the strength of market-supporting institutions, and thus opportunities and incentives for innovation. We focus two types of political tie: state control through ownership, which brings firms under state authority, and having former bureaucrats serve as CEO or chairman, which can fill the void left by weak institutions. To test our arguments, we study firms in the largest emerging economy, China. Our analysis reveals that when and where market-supporting institutions were stronger, state control fostered innovation, but having former bureaucrats serve as CEO or chairman impeded innovation. These results demonstrate the importance of specifying the nature of political ties and considering the local heterogeneity and dynamics of institutions, which in emerging economies vary greatly across regions and over time.

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Peak-Bust Rental Spreads

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Christopher Parsons, Professor of Finance and Business Economics
University: Foster School of Business
Time: Wednesday, February 26, 2020, 11:00 AM – 12:00 PM
Location: SB1 3410 Elisabeth and Paul Merage Conference Room

Landlords appear to use stale information when setting rents. Among over 43,000 California rental houses in 2018-2019, those last purchased during 2005-2007 (the peak) rent for 2-3% more than those purchased during 2008-2010 (bust). Neither house nor landlord characteristics explain this “peak-bust rental spread.” To clarify the mechanism, we test cross-sectional predictions from a simple theory of rent-setting. We find empirical support for both anchoring and prospect theory. In the first, past sales prices distort landlords’ current estimates of house values/rents. In the second, monthly payments establish (recurring) reference points, against which gains or losses are measured.

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Assortment Auctions: A Mysersonian Characterization for Markov Chain Based Choice Models

Host(s): Associate Professor John Turner
Speaker(s): Will Ma, Assistant Professor of Decision, Risk, and Operations
University: Columbia University, Columbia Business School
Time: Monday, February 24, 2020, 10:00 AM – 11:30 AM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

In this paper, we introduce the concept of an assortment auction, where a seller is selling substitute products/services with fixed prices (as in assortment optimization), and buyers compete for a limited supply of these products in an auction. Each buyer reports a ranked list of products she is willing to purchase, after which the seller allocates products to buyers using a truthful mechanism, subject to a supply constraint on the total number of products allocated. The seller collects revenues equal to the prices of the products allocated, and would like to design a mechanism to maximize total revenue, when the buyers' lists are drawn independently from known distributions.

When there is one buyer, our mechanism design problem reduces to the assortment optimization problem, which is known to be tractable for lists drawn from a Markov Chain choice model. We extend this result and compute the optimal auction, when there are multiple buyers with heterogeneous Markov chains. Moreover, we show that the optimal auction is structurally "Myersonian'', in that each buyer is assigned a virtual valuation based on her report and distribution, after which the mechanism maximizes virtual surplus. Since Markov chains capture the classical notion of a valuation distribution, our optimal assortment auction generalizes the classical Myerson's auction. Finally, we show that without the Markov chain assumption, the optimal assortment auction may be structurally non-Myersonian.

To conclude, we apply our theory in online assortment problems. First, we use the virtual valuations for Markov Chain choice models to derive personalized assortment policies. Moreover, we show that the optimal assortment auction provides a tighter benchmark than the commonly-used ``deterministic LP'' for online assortment, leading to the first approximation guarantees for these problems which break the "barrier" of 1-1/e.

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Designing Promotional Incentives to Promote Social Sharing: Evidence from Field and Lab Experiments

Host(s): Assistant Professor Mingdi Xin
Speaker(s): Siva Viswanathan, Professor of Information Systems and Digital Innovation
University: University of Maryland, Robert H. Smith School of Business
Time: Friday, February 21, 2020, 10:30 AM – 12:00 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Despite the increasing connectivity between consumers and the large volume of social shares supported by digital technologies, there is an absence of research systematically investigating how firms can design promotional incentives that jointly consider their consumers as both purchasers and sharers. In this study, we examine whether and how firms can leverage consumers’ social connections and engage consumers to share promotional incentives. In collaboration with a leading online deal platform, we report a large-scale randomized field experiment to test the effectiveness of different incentive designs (varying in the shareability and scarcity of promotion codes) in driving social sharing senders’ purchases and successful referrals. We find that the different incentive designs have distinct impacts on the purchase and referral outcomes. Specifically, providing senders with one non-shareable promo code significantly increases their own purchase likelihood, compared to the other experimental groups. In contrast, the senders who receive one shareable promo code are less likely to purchase themselves yet are more likely to make successful referrals. Surprisingly, the incentive design with two promo codes containing one non-shareable code and one shareable code increases neither the senders’ purchase nor their successful referrals. Managerially, we estimate that although the one non-shareable promo code group derives the highest net revenue for the experimental period, the one shareable promo code group derives the highest customer lifetime value for the firm from the new customers acquired through the successful referrals. We further conducted two online experiments on Amazon Mechanical Turk that replicate the field experiment’s findings and explore the underlying mechanisms of the observed relationships. We find that exclusivity perception and social motives triggered by the incentive designs with one promo code mediate their effects on senders’ self-purchases and successful referrals, respectively, and explain the ineffectiveness of two promo codes. Our study contributes to the bodies of literature on IT-enabled social sharing and social promotions, providing implications for firms on how to design promotional incentives that accommodate the dual role of consumers as purchasers and sharers.

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Ecosystems of IoT Platforms

Host(s): Professor Vijay Gurbaxani
Speaker(s): Francis MacCrory, Assistant Professor of Information, Technology and Operations
University: Fordham University, Gabelli School of Business
Time: Wednesday, February 19, 2020, 10:30 AM – 12:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

Emerging consumer Internet of Things (IoT) devices, such as smartwatches and smart speakers, promise the establishment of new ubiquitous app platforms that may supplant smartphones. We propose a novel model of two firms that compete by each offering a “system of platforms”, or a multi-platform based ecosystem. In particular, we model two competing firms each offering a system of two horizontally-differentiated platforms, i.e. a smartphone and another smart device. We characterize strategic behavior in this setting and show how ecosystem design choices, and the digital transformation of ecosystems over time, affect consumer choices and competition outcomes. Among other results, we show that the degree of a smart device’s differentiation is the prime factor determining if it is profitable to deepen integration between a smart device with the incumbent smartphone platform. We also show that it is possible for a networked complement to become a networked substitute for the incumbent platform. We provide managerial insights on technology platform strategy in the IoT context and platform bundling more broadly.

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Can unpacking risk information in a group audit engagement increase auditors’ sensitivity to qualitative risk?

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Steve Glover, Professor of Accounting
University: Brigham Young University, Marriott School of Business
Time: Friday, February 7, 2020, 3:15 – 4:30pm
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Audit engagements that involve multiple client components, subsidiaries, or geographic locations (i.e., group audits) are becoming increasingly common. However, auditors do not always sufficiently assess and respond to qualitative risks of material misstatement that arise in group audit engagements. In this study, we investigate whether an unpacked risk assessment process, in which quantitative and qualitative risk factors are separately considered, increases an auditor’s sensitivity to qualitative risk during the audit planning phase compared to a holistic approach, in which quantitative and qualitative risks are jointly considered. We find that auditors following an unpacked approach are more likely to categorize qualitatively risky components as individually significant, plan to perform more substantive tests on these risky components (but a similar amount of planned work overall), and set component and group materiality at significantly lower levels. In other words, we find that an unpacked risk assessment approach results in more effective group planning decisions. Our findings should assist standard setters in their current revisions of group audit standards.

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Priming and Stock Preferences: Evidence from IPO Lotteries (joint with Conghui Hu, Yu-Jane Liu and Xin Xu)

Host(s): Host: Assistant Professor Jinfei Sheng
Speaker(s): JianFeng Yu, Jianshu Chair Professor of Finance
University: Tsinghua University, PBC School of Finance
Time: Monday, February 3, 2020, 11:00 AM – 12:00 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Existing studies in social psychology have found that priming has pervasive effects, mostly in laboratory settings and over short periods of time. This study investigates the priming effect in the real financial world and over longer periods of time. We hypothesize that successful lottery-like experiences raise investors’ subsequent demand for other lottery-like stocks by increasing the accessibility of tail events. By exploiting the randomized distribution of IPO shares in China as a natural experiment, we find that, compared with matched control investors, the investors who were allocated IPO shares (lottery winners) substantially shift their non-IPO portfolios toward lottery-like stocks over the three months subsequent to the distribution. This effect is more pronounced for investors winning IPO lotteries with lower winning rates or larger issueprice discounts. Moreover, lottery winners experience a decrease in their overall portfolio return by more than 1% within the three months subsequent to the distribution relative to matched control investors, which is largely in proportion to the increases in their subsequent demand for lottery-like stocks. Our findings are not explained by the house money effect or the wealth effect. Overall, our study suggests that lottery-like cues play a critical role in shaping investors’ gambling preferences in stock markets, providing field-based evidence for the long-term priming effect.

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Bank Transparency and Deposit Flows

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Itay Goldstein, Professor of Finance
University: University of Pennsylvania, The Wharton School of Business
Time: Friday, January 31, 2020, 2:00 PM – 3:15 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

How much information bank depositors should have on the assets of banks is a hotly debated issue. On the one hand, information allows depositors to monitor banks’ actions, but on the other hand, it might interfere with banks’ liquidity-transformation role. We provide, for the first time, empirical evidence that links transparency to deposit flows, deposit rates, banks’ investments and profitability. We demonstrate that uninsured deposits respond more strongly to performance when banks are more transparent, and provide other evidence consistent with the idea that transparency adversely affects banks’ unique role in creating safe assets for depositors.

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Extrapolative Beliefs in the Cross-Section: What Can We Learn from the Crowds?

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Zhi Da, Professor of Finance
University: University of Notre Dame, Mendoza College of Business
Time: Thursday, January 23, 2020, 2:00 PM – 3:15 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Using novel data from a crowdsourcing platform for ranking stocks, we investigate how individuals form expectations about future stock returns in the cross-section. We find that investors extrapolate from stocks' recent past returns, with more weight on more recent returns, especially when recent returns are negative or salient. Such extrapolative beliefs are stronger among non-professionals. Moreover, consensus rankings negatively predict future stock returns, more so among stocks with low institutional ownership and high degree of extrapolation, consistent with the asset pricing implications of extrapolative beliefs. A trading strategy that sorts stocks on investor beliefs generates an economically significant profit.

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Regional Divergence and House Prices

Host(s): Professor Ed Coulson
Speaker(s): C. Jack Liebersohn, Assistant Professor of Finance
University: Ohio State University, Fischer College of Business
Time: Friday, January 17, 2020, 10:30 AM – 12:00 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

A simple measure of regional income divergence explains much of the variation in U.S. house prices since 1939. We develop an urban and asset-pricing theory to explain why. House prices reflect the discounted value of expected rents, which reflect expected incomes. Higher expected regional income divergence increases the house price premium in rich areas. This raises average prices because house prices in poor areas are largely determined by construction costs. In addition to explaining average prices, our model explains several facts about the housing market, including regional variation in rents and prices, differing house price sensitivities to national trends, the time series and cross-section of the price-rent ratio, and patterns of net inter-state migration.

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Tainted Executives as Outside Directors

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Yonca Ertimur, Professor of Accounting
University: University of Colorado Boulder, Leeds School of Business
Time: Friday, January 10, 2020, 3:15 PM – 4:30 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

We find that executives allegedly involved in governance failures (“tainted” executives) continue to gain outside directorships. Firms with greater advising needs tend to appoint tainted executives to their boards. Relative to non-tainted executives, tainted executives are less (more) likely to join board committees whose primary function is monitoring (advising). Appointing firms subsequently experience higher sales growth and lower incidence of litigation. Overall, evidence suggests that firms appoint tainted executives to boards for these individuals’ advising reputation and not in a conspicuous attempt to weaken monitoring. Our results also highlight the limitations of ex-post settling up in the director labor market. (coauthored with Leah Baer and Jingjing Zhang)

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Assortment Planning for Recommendations at Checkout under Inventory Constraints

Host(s): Assistant Professor Luyi Gui
Speaker(s): Linwei Xin, Assistant Professor of Operations Management
University: The University of Chicago, Booth School of Business
Time: Friday, January 10, 2020, 10:00 AM – 11:30 AM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

In this paper, we consider a personalized assortment planning problem under inventory constraints, where the type of each arriving customer is defined by a primary item of interest. As long as that item is in stock, the customer adds it to her shopping cart, at which point the retailer can recommend to the customer an assortment of add-ons to go along with her primary item. This problem is motivated by the new "recommendation at checkout'' systems that have been deployed at many online retailers, and also serves as a framework which unifies many existing problems in online algorithms (personalized assortment planning, single-leg booking, online matching with stochastic rewards). In our problem, add-on recommendation opportunities are eluded when primary items go out of stock, which poses additional challenges for the development of an online policy. We overcome these challenges by introducing the notion of an inventory protection level in expectation, and derive an algorithm with a 1/4 competitive ratio guarantee under adversarial arrivals. This is joint work with Xi Chen (NYU), Will Ma (Columbia), and David Simchi-Levi (MIT).

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Painting a Clear Picture While Seeing the Big Picture: How Leaders Reconcile the Tradeoff Between Concreteness and Scale

Host(s): Assistant Professor Maritza Salazar
Speaker(s): Andrew Carton, Associate Professor of Management
University: University of Pennsylvania, Wharton School of Business
Time: Wednesday, January 8, 2020, 1:00 PM – 2:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

One of the most effective ways leaders can promote change is by communicating visions with image-based rhetoric (“make children smile”). By conveying visual snapshots of the future, leaders paint a portrait of what their organizations can one day achieve. It would thus stand to reason that leaders who naturally think and communicate in terms of picture-like detail (a concrete orientation) would promote more change than those who are inclined to think and communicate abstractly (an abstract orientation). Yet research has established that people with a concrete orientation focus on short-term, narrow details rather than long-term, organization-wide strategy (e.g., a leader who focuses on one small feature of a single product rather than long-term strategy requiring the coordinated effort of all employees). We integrate theory on construal, roles, and motivation to predict that if a team’s highest-ranking leader has a concrete orientation, he/she will focus on large-scale change if there is a “second-in-command” whose role is to oversee the implementation of operational details (an operations specialist). We predict that the presence of an operations specialist will have no effect on abstract thinkers. We find general support for these predictions in two archival studies and two experiments.

Data Integrated Operations Management with Operational Data Analytics

Host(s): Professor Shuya Yin
Speaker(s): J. George Shanthikumar, Professor of Management
University: Purdue University, Krannert School of Management
Time: Friday, December 13, 2019, 10:00 AM – 11:30 AM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

This talk will review the current data integrated approaches for prescriptive solution to stochastic optimization problems in operations management. In particularly we will review approaches such as Multi-Armed Bandit, Regularization in Sample Average Approximation and Data Driven Robust Optimization for generating prescriptive solutions to operations management problems. We will then provide a framework for data integrated methodology for prescriptive analytics for stochastic systems. Specific attention will be paid to overcoming structural and statistical errors. This is achieved through Operational Statistics and Objective Operational Learning which are built on the basis of data integration and cross validation. We will illustrate how, 1) regularization in sample approximation approaches and data driven robust optimization with cross validation relates to Operational Statistics, and 2) multi-armed bandit and machine learning approaches compares to Objectives Operational Learning. Applications in pricing and revenue management, inventory control, queueing systems design and staffing in service systems will be demonstrated.

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Why Are Investors Paying More Attention to Free Cash Flows?

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Sarah McVay, Professor of Accounting
University: University of Washington, Foster School of Business
Time: Friday, December 6, 2019, 3:15 PM – 4:30 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

We document an upward trend in investor responsiveness to free cash flow surprises over time. We investigate whether the information content of free cash flow increases for the entire market or only various subsets of firms and whether the responsiveness varies with the voluntary disclosure of free cash flow in the earnings announcement. Although we provide some evidence of a general increase in the information content of free cash flow for all firms, the market response is especially strong for firms with high levels of goodwill. Finally, we provide some evidence that the market response is incrementally associated with a firm’s decision to disclose free cash flow, where the proportion of firms disclosing free cash flow is increasing over time.

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Proactive and Reactive Cost Cutting: International Evidence on Modern Cost Management

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Shannon W. Anderson, Professor of Management
University: University of California, Davis, Graduate School of Business
Time: Friday, November 22, 2019, 3:15 PM – 4:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

This paper examines cost management practices using survey data collected in 2016 from 1023 senior managers with primary cost management responsibility in large companies in 20 countries. The study is descriptive, but guided by economic theory of adjustment costs and prior studies of cost behavior. The survey focuses on cost reduction associated with efficiency improvement. Fewer than two percent of firms have no annual cost reduction target and most report targets of 5 to 20 percent. Thus, cost reduction is a continual rather than an episodic activity. Cost reduction targets exhibit a U-shape relation with revenue change in the prior 24 months; that is, targets are highest for firms that have experienced steep revenue decreases or increases. The U-shape relation is striking in light of classical economics’ fixed and variable cost function and in relation to prior research that finds that costs are less responsive to revenue decline than growth. Revenue changes are associated with different motivations for and modes of cost cutting: 1) reactive cost reduction, to “right-size” in the face of diminished demand, and 2) proactive cost reduction, to fund growth that is expected to persist. Firms with revenue declines often institute mandatory across-the-board, fixed-percentage cost reduction, and focus more on reducing operating and administrative costs. Growing firms instead employ targeted and enterprise-wide cost reduction programs and focus more on reducing working capital. Target achievement is unrelated to target level, approaches undertaken, or costs targeted, but relates positively to investments in capabilities that facilitate cost reduction.

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The Earnings Announcement Return Cycle

Speaker(s): Juhani Linnainmaa, Professor of Business Administration
University: Dartmouth College, Tuck School of Business
Time: Friday, November 22, 2019, 2:00 PM – 3:30 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Stocks earn significantly negative abnormal returns before earnings announcements and positive after them. This “earnings announcement return cycle" (EARC) is unrelated to the earnings announcement premium, and it is a feature of stocks widely covered by analysts. Analysts’ forecasts follow the same pattern as returns: analysts' forecasts become more optimistic after an earnings announcement and more pessimistic as the next one draws near. We attribute one-half of the earnings announcement return cycle to this optimism cycle. The EARC may stem from mispricing: both the return and optimism patterns are stronger among high-uncertainty and difficult-to-arbitrage stocks, and the EARC strategy is more profitable on days when it would accommodate larger amounts of arbitrage capital.

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ENGINEERING VALUE: THE RETURNS TO TECHNOLOGICAL TALENT AND INVESTMENT IN ARTIFICAL INTELLIGENCE

Host(s): Associate Professor Vibhansu Abhishek
Speaker(s): Daniel Rock, PhD Candidate
University: Massachusetts Institute of Technology, Initiative on the Digital Economy
Time: Thursday, November 21, 2019, 10:30 AM – 12:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

Engineers, as implementers of technology, are highly complementary to the intangible knowledge assets that firms accumulate. This paper seeks to address whether technical talent is a source of rents for corporate employers, both in general and in the specific case of the surprising open-source launch of TensorFlow, a deep learning software package, by Google. First, I present a simple model of how employers can use job design as a tool to exercise monopsony power by partially allocating employee time to firm-specific tasks. Then, using over 180 million position records and over 52 million skill records from LinkedIn, I build a panel of firm-level investment in technological human capital (information technology, research, and engineering talent quantities) to measure the market value of technological talent. I find that on average, an additional engineer at a firm is correlated with approximately $854,000 more market value. Firm fixed effects and instrumental variables analyses provide mixed evidence on the marginal causal value of engineers in general. Specifically for AI talent, the value of engineering skills is clearer. AI skills are strongly correlated with market value, though variation in AI skills from 2014-2017 does not explain contemporaneous revenue productivity within firms. AI-intensive companies rapidly gained market value following the launch of TensorFlow, while companies with opportunities to automate relatively larger quantities of labor with machine learning did not. Using a differencein-differences approach, I show that the TensorFlow launch is associated with an approximate market value increase of 4-7% for AI-using firms. Firms outside the top quintile of AI use (as measured by skill counts on LinkedIn) grow by approximately $3.56 million for a 1% increase in AI skill. AI superstar firms in the top quintile also appear to benefit, but show pre-trends in market value growth.

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Firms of a Feather Merge Together: The Coordination Benefits of Compatible Cultures

Host(s): Assistant Professor Luke Rhee
Speaker(s): Arianna Marchetti, PhD Candidate in Strategy
University: INSEAD Knowledge
Time: Wednesday, November 20, 2019, 10:30 AM – 12:00 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

In this paper, I argue that the culture compatibility acquirer and target exhibit at the time of a deal announcement—defined as the strength of the overall culture they would form, if combined—entails coordination benefits, positively affecting M&A outcomes. By parsing the recombination and coordination effects of an organizational culture and theorizing about the coordination benefits that strong cultures engender (while controlling for the recombination potential), this paper reconciles the mixed evidence found so far when studying the effect of cultural differences on M&A performance. I measure organizational culture using text reviews employees post on Glassdoor.com about their companies. I develop an approach based on topic modeling, a machine learning algorithm for natural language processing, to measure culture compatibility based on the distribution of reviews in the space of topics that individuals consider important when writing about their companies. Using a sample of 349 technology acquisitions, matched to counterfactual “pseudo-deals,” and about 780,000 Glassdoor text reviews, I find that pre-deal acquirer-target culture compatibility is positively associated with the likelihood of a deal to be announcement and with superior stock returns. The effect is stronger for crossborder deals, in which coordination is more challenging to achieve than in domestic deals.

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Which Of These Things Are Not Like The Others? Comparing The Rational, Emotional, And Moral Aspects of Reputation, Status, Celebrity And Stigma

Host(s): Assistant Professor Luke Rhee
Speaker(s): Jung-Hoon Han, PhD Student
University: Pennsylvania State University, Smeal College of Business
Time: Wednesday, November 20, 2019, 10:30 AM – 12:00 PM
Location: SB1 4410 Center for Global Leadership Room (CGL)

In this review of the literature on reputation, status, celebrity, and stigma we develop an overarching theoretical framework based on the rational, emotional, and moral aspects of each construct’s unique sociocognitive content and the mechanisms through which it affects audience evaluations. We use this framework to assess the construct definitions and empirical measures used in existing research and offer our assessments of how well they reflect each construct’s sociocognitive content, distinguish the constructs from other constructs, and distinguish the constructs from their antecedents and consequences. We then articulate the implications of our framework and analyses for future research.

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Co-Creators Vs. Co-Founders: How Solo-Founded Ventures Can Perform As Well As Or Even Better Than Co-Founded Ventures

Host(s): Assistant Professor Luke Rhee
Speaker(s): Travis Howell, PhD Candidate
University: University of North Carolina, Strategy and Entrepreneurship
Time: Monday, November 18, 2019, 2019, 10:30 AM – 12:00 PM
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

The choice of whether to remain solo or find co-founders is one of the most important and fundamental decisions each entrepreneur must make. Yet, while past empirical research finds that larger founding teams outperform smaller teams on average, the existing literature is not clear regarding how and when solo founding might be possible or even preferable to finding cofounders. Using in-depth qualitative data on 70 entrepreneurial ventures, I address this gap. My findings reveal how solo-founders strategically use co-creators rather than co-founders to overcome liabilities, retain control, and mobilize resources in unique and unexpected ways. Further, my findings reveal how co-founders, though often beneficial, are not always necessary (and sometimes even detrimental) to building a successful venture. More broadly, my findings add fresh contributions to the fields of entrepreneurship and strategy.

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Discipline Audiences: The Demand for Disinterestedness in the Market for Contemporary Art

Host(s): Associate Professor Ming Leung
Speaker(s): James Riley, PhD Candidate
University: Massachusetts Institute of Technology, Sloan School of Management
Time: Monday, November 18, 2019, 2:30 PM – 4:00 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Art worlds have strong norms that enjoin artists to avoid the naked pursuit of profit and instead affect an air of “disinterestedness” (Bourdieu 1993). But why might art dealers and collectors similarly face such norms? This paper draws on 18 months of ethnographic fieldwork to examine the puzzle of why galleries discipline collectors – who provide much-needed financial capital – for appearing too motivated by profit. The fieldwork also suggests a paradoxical resolution. Galleries enforce conformity to the norm of disinterestedness among collectors as part of an array of tactics they deploy to “protect” their artists from price volatility that could depress demand for the artist’s work. Although galleries framed such discipline as a moral imperative, a key implication of this study is that enforcing a norm that disavows extrinsic rewards such as fortune and fame ultimately supports a profitable business and investment strategy.

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Text Selection

Host(s): Assistant Professor Jinfei Sheng
Speaker(s): Asaf Manela, Assistant Professor of Finance
University: Washington University in St. Louis, Olin Business School
Time: Friday, November 15, 2019, 2:00 PM – 3:30 PM
Location: SB1 5200 Porter Colloquia & Executive Terrace

Text data is inherently ultra-high dimensional, which makes machine learning techniques indispensable for textual analysis. Text also tends to be a highly selected outcome—journalists, speechwriters, and others carefully craft messages to target the limited attention of their audiences. We develop an economically motivated high dimensional selection model that improves machine learning from text (and from sparse counts data more generally). Our model is especially useful in cases where the cover/no-cover choice is separate or more interesting than the coverage quantity choice. Our design allows for parallel estimation, making the model highly computationally scalable. We apply our framework to backcast, nowcast, and forecast financial variables using newspaper text, and find that it substantially improves out-of-sample fit relative to alternative state-of-the-art approaches.

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The Ambassador Effect: How Inducing an Ambassador Role Increases Consumers’ Prosocial Behavior

Host(s): Associate Professor Kevin Bradford
Speaker(s): Maura Scott, Madeline Duncan Rolland Professor of Business Administration
University: Florida State University, College of Business
Time: Friday, November 15, 2019, 9:15 AM – 10:45 AM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

This research introduces the ambassador effect as a novel, socially-induced form of pre-commitment that influences consumers’ prosociality and patronage intentions. A series of experiments demonstrates that inducing an ambassador role (by asking consumers to both (a) engage in a prosocial behavior and (b) to involve another person in the same prosocial behavior) increases consumers’ prosocial behavior, beyond what mere personal pre-commitments can achieve. This research also examines the moderating role of environmental consciousness, demonstrating that inducing an ambassador role increases real prosocial behavior among consumers low (vs. high) in environmental consciousness.

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Pride Without Prejudice: The Unbearable Burden Of Under-Recognition

Host(s): Associate Professor Ming Leung
Speaker(s): Brittany Bond, PhD Candidate
University: Massachusetts Institute of Technology, Sloan School of Management
Time: Thursday, November 14, 2019, 10:30 AM – 12:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

Public recognition is a powerful motivator. High status recognition derives its desirability from scarcity. Thus public recognition inevitably invites social comparisons. Since status recognition commonly corresponds with performance and accompanies tangible rewards, it is challenging to isolate pure social comparison costs. Leveraging a natural experiment in a large multinational organization, I provide novel evidence that employees are distinctly sensitive to status recognition beyond any material, career, or reputation concerns. Rather, the preservation of self-image motivates seemingly self-damaging reactions to nominal status under-recognition. When denied status recognition, employees are much more likely to exit the organization, despite receiving higher monetary rewards as recompense for nominal under-recognition. This study demonstrates the serious productivity risks of using status recognition as an employee performance motivator. The analysis, more broadly, holds implications for understanding how status conferral affects motivation and how organizations should manage reward systems.

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Going Off Script: The Level of Spontaneity of Executive Talks and Divergence of Investors’ Opinions

Host(s): Assistant Professor Luke Rhee
Speaker(s): Metin Sengul, Assistant Professor of Management and Organization
University: Boston College, Carroll School of Management
Time: Friday, November 8, 2019, 2:15 PM – 3:45 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

This study examines the influence of executives’ verbal communications on the divergence of investors’ opinions. Prior research has shown that publicly available information about a company increases investors’ ability to assess the company’s fundamental value and reduces differences in investors’ valuations. Hence, opinions of investors converge (diverge) when differences of opinion decrease (increase) with more (less) publicly available information. Whether and to what extent the manner in which executives deliver their talks influences investor opinion divergence remains unexplored. Focusing on the spontaneity of talks delivered by executives, we argue that greater spontaneity increases the chances of inadvertent information disclosure to investors and hence is negatively associated with investor opinion divergence. We also argue that the effect of talk spontaneity on investors’ opinion divergence will be amplified when investors have a greater demand for information (as would be the case for firms with higher earnings uncertainty), but the opposite will be true if there are other reliable sources of information (as would be the case for firms covered by more analysts). Using a unique research design and second-by-second intraday stock trading data from 10,642 conference calls of publicly listed firms between 2002 and 2012, we found strong support of our predictions.

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Title Cultural Code Switching In A Post-Merger Organization

Host(s): Associate Professor Ming Leung
Speaker(s): Anjali Bhatt, PhD Candidate
University: Stanford University, Graduate School of Business
Time: Friday, November 8, 2019, 10:30 AM – 12:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

What explains differences in how individual employees culturally adapt following an organizational merger? While prior research on post-merger integration has largely focused on organizational characteristics that foreshadow post-merger cultural dynamics and performance, this paper explores individual-level variation in cultural adaptation following mergers. I propose that individuals’ post-merger cultural adaptation— specifically, the tendency to switch cultural codes—can be explained by the combination of their pre-merger conformity, which reflects their dexterity with perceiving and enacting multiple cultural codes, and their social status, which determines the rewards to code switching. I test these ideas by applying the tools of computational linguistics to a unique dataset of 1.5 million employee emails and personnel records from an organizational merger of two U.S. regional banks. I develop a novel approach to measuring cultural code switching by exploiting a machine learning classifier to categorize the linguistic styles of messages as either breaching or conforming to existing cultural codes. Consistent with predictions, across five theoretically distinct sources of status, I find that lower status individuals are more likely to culturally code switch than higher status individuals. Moreover, greater pre-merger conformity is associated with higher rates of cultural code switching for low status individuals, but lower rates of code switching for high status individuals. I discuss implications for status-based theories of cultural boundary work, socialization processes in polycultural contexts, and post-merger cultural dynamics.

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Withholdings Taxes and Foreign Portfolio Investment (Joint with Martin Jacob, WHU)

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Maximilian Todtenhaupt, Assistant Professor of Management Science
University: Norwegian School of Economics
Time: Friday, October 25, 2019, 3:30 PM – 4:30 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

We examine the role of the dividend withholding tax system for Foreign Portfolio Investment (FPI). Overpayments for withholding taxes must often be reclaimed by investors from foreign tax authorities. Building on a large data set of bilateral withholding and dividend tax rates from 2008-2015 and bilateral FPI data from the Coordinated Portfolio Investment Survey, we show that there are substantial compliance hurdles in claiming tax credits across borders around which has a negative effect on FPI. Using pricing data on American Depositary Receipts (ADRs) we also show that, before the ex-dividend day, withholding tax reclamations are reflected in the return spread between ADRs and the underlying stock in its respective home market. In the final step, we show that FPI is important domestic corporate investment.

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Estimating the Cost of Control Rights in the Corporate Loan Market

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Thomas Ruchti, Assistant Professor of Accounting
University: Carnegie Mellon University, Tepper School of Business
Time: Friday, October 18, 2019, 3:00 PM – 4:30 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Financial covenants transfer control rights to lenders when borrowers’ metrics breach pre-set thresholds. Contingent control rights allow lenders to extract monetary concessions (e.g., fees and renegotiation) and behavioral concessions (e.g., CEO turnover and reduced investment, R&D, and payroll). We develop a simple tradeoff theory that allows us to estimate the cost of control. Our estimates suggest that the cost of control is 46.1 basis points. On average, control payments correspond to a 13.4% discount on the total cost of borrowing (Berg, Steffen, and Saunders 2016). This finding has implications for our understanding of loan pricing and the value of control rights in the private loan market.

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Transfer Learning for Predictive Analytics and Pricing

Host(s): Assistant Professor Luyi Gui
Speaker(s): Hamsa Bastani, Assistant Professor of Operations, Information, and Decision
University: University of Pennsylvania, The Wharton School
Time: Friday, October 11, 2019, 10:00 AM – 11:30 AM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Despite the big data revolution, “small data” problems are ubiquitous in healthcare, marketing, and pricing. Transfer learning is a promising approach to improve prediction accuracy by incorporating data from closely related proxy outcomes. For example, e-commerce platforms often use abundant customer click data (proxy) to make product recommendations rather than sparse customer purchase data (true outcome of interest); firms may use price/demand data from related products (proxy) to set prices for new products (true outcome of interest). I will discuss two papers addressing the challenge of efficiently combining true and proxy data to improve decision-making.

The first paper considers personalized recommendations in high dimension, with a large amount of proxy data and a small amount of true data. We propose a novel two-step estimator that provably achieves the same accuracy as common heuristics used by data scientists with exponentially less true data. We demonstrate its effectiveness on e-commerce and healthcare datasets. The second paper considers personalized dynamic pricing across many related products, where the demand parameters for each product come from an unknown distribution that is shared across products. We propose a meta dynamic pricing algorithm that learns this distribution online while solving a sequence of Thompson sampling pricing experiments. Numerical experiments demonstrate that our algorithm significantly speeds up learning.

Based on joint work with David Simchi-Levi (MIT) and Ruihao Zhu (MIT).

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Competition Network Lens on Competitor Awareness and New Product Innovation (Joint Work With Sruthi Thatchenkery)

Host(s): Assistant Professor Luke Rhee
Speaker(s): Riitta Katila, Professor of Management Science and Engineering
University: Stanford University
Time: Friday, September 27, 2019, 2:00 PM – 3:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

We extend the innovation-networks literature to examine how a firm’s positioning in competition networks relates to a significant organizational outcome, i.e. product innovation. Using a data set on 121 enterprise infrastructure software firms over an 18-year period, we find that selective awareness of competitors in competition networks is related with a firm’s ability to innovate: The focal firm’s positioning to span structural holes is positively associated with innovation. In contrast, network churn in which particular competitors are paid attention to, and the centrality of those competitors, is negatively associated with product innovation. Our findings contribute to competitive dynamics research by unpacking a networks perspective. We also show that not all competitor awareness is positive for innovation, and that watching particular competitors can lead the firm astray.

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Empirically Estimating Strategic Behavior for Hotel Standby Upgrade Programs

Host(s): Assistant Professor Luyi Gui
Speaker(s): Mark Ferguson, Professor of Management Science
University: University of South Carolina
Time: Friday, June 14, 2019, 10:00 AM – 11:30 AM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Problem Definition: Using a major hotel chain’s 16-month booking data, we empirically investigate the existence and extent of strategic customers in the context of standby upgrades, a popular program offering availability-based, discounted premium-room upgrades to customers. Academic/Practical Relevance: Customers, in particular loyalty members, may become knowledgeable about standby upgrades through repeated interactions with the hotel chain and act strategically, i.e., initially choose a standard room with the expectation of being offered a premium room discount through standby upgrades. Incorrect assumptions about customer behavior may have significant revenue implications. In order to adopt appropriate pricing strategies, hoteliers need to understand their customer mix. Methodology: Due to the sequential nature of customer decision-making for standby upgrades (original booking, clicking the standby upgrades banner ad, and requesting an upgrade), we first run a Sequential Logit Model to explore the differences between loyalty and non-loyalty customers. Next, we develop a Maximum Likelihood Estimator to estimate the percentage of customers who are strategic. Finally, we design and numerically test a new pricing policy based on our empirical findings. Results: We find evidence for strategic behavior in three (out of eight) hotels examined. Our estimates suggest that 22% to 42% of the loyalty customers (10% to 22% of the total customers) act strategically in these properties, which are close to major expressways or business areas. For these hotels, our pricing policy recommends a premium room discount for loyalty customers, but also a higher standby upgrade price, which can bring a revenue improvement of up to 19% over a policy ignoring the strategic behavior and 34% over a policy assuming that all customers are strategic. Managerial Implications: We provide empirical guidance for effective implementation of standby upgrade programs based on the customer mix that a hotel faces. Our numerical study further corroborates the importance of such empirical analysis before pricing the premium room differential and standby upgrades.

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Water Pipe (Hookah) Smoking and Cardiovascular Disease Risk A Scientific Statement From the American Heart Association

Host(s): Associate Professor of Teaching, Marketing Kevin Bradford
Speaker(s): Merlyn Griffiths, Associate Professor of Marketing
University: University of North Carolina, Greensboro, Bryan School of Business and Economics
Time: Friday, May 24, 2019, 2:00 PM – 3:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

Tobacco smoking with a water pipe or hookah is increasing globally. There are millions of water pipe tobacco smokers worldwide, and in the United States, water pipe use is more common among youth and young adults than among adults. The spread of water pipe tobacco smoking has been abetted by the marketing of flavored tobacco, a social media environment that promotes water pipe smoking, and misperceptions about the addictive potential and potential adverse health effects of this form of tobacco use. There is growing evidence that water pipe tobacco smoking affects heart rate, blood pressure regulation, baroreflex sensitivity, tissue oxygenation, and vascular function over the short term. Long-term water pipe use is associated with increased risk of coronary artery disease. Several harmful or potentially harmful substances present in cigarette smoke are also present in water pipe smoke, often at levels exceeding those found in cigarette smoke. Water pipe tobacco smokers have a higher risk of initiation of cigarette smoking than never smokers. Future studies that focus on the long-term adverse health effects of intermittent water pipe tobacco use are critical to strengthen the evidence base and to inform the regulation of water pipe products and use. The objectives of this statement are to describe the design and operation of water pipes and their use patterns, to identify harmful and potentially harmful constituents in water pipe smoke, to document the cardiovascular risks of water pipe use, to review current approaches to water pipe smoking cessation, and to offer guidance to healthcare providers for the identification and treatment of individuals who smoke tobacco using water pipes.

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Algorithms and the Org Chart

Host(s): Assistant Professor Maritza Salazar Campo
Speaker(s): Melissa Valentine, Assistant Professor of Management Science and Engineering
University: Stanford University
Time: Friday, May 24, 2019, 10:30 AM – 12:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

Prior research explains how algorithms reshape different jobs, but limited research has explored how increasing use of algorithms changes organizational structures. To examine this question, I conducted a 9-month field study in the algorithms and merchandising departments of a high-tech retail company, as they developed algorithms that profoundly reconfigured their organizational structure. I found that their organizational structure symbolically communicated and defined specific categories for understanding and making decisions about customers, products, or services -- it was these categorical structures that were called into question and seen as irrelevant and constraining as new and more algorithms were developed. This automation process was not simple work displacement, however. Instead, the merchandising department developed the new work of curating algorithmically-identified categories and recommendations and explored new organizational structures for this emerging work. My findings contrast with prior studies that theorize and focus on the division of labor encoded and communicated in organizational structure. In this paper, I integrate categorization and organizational design theories to explain this process and its implications for organizations.

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Does Ownership Conversion from Nonprofit to For-Profit Benefit the Public? Evidence from U.S. Nursing Homes

Host(s): Assistant Professor Luyi Gui
Speaker(s): Lauren Lu, Associate Professor of Operations
University: University of North Carolina Kenan-Flagler Business School
Time: Friday, May 24, 2019, 9:30 AM – 11:00 AM
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

In the last few decades, many healthcare institutions converted their ownership type from nonprofit to for-profit, contributing to an increased presence of for-profit ownership in the U.S. healthcare sector. There have been opposing views on whether such ownership conversions benefit the public. Employing a large panel dataset of U.S. nursing homes from 2006 to 2015, we conduct a difference-in-differences analysis on converted facilities’ financial performance, operating policies, and quality of care. We observe that converted facilities significantly increased their post-conversion profit margins, compared to propensity-score-matched controls. To explain the financial improvement, we hypothesize two operational mechanisms: revenue seeking and cost reduction. We find that converted facilities raised revenues by increasing the enrollment of Medicaid-covered residents, who have lower daily reimbursement rate but longer length of stay (LOS), and by keeping unchanged the enrollment of Medicare-covered residents, who have higher daily reimbursement rate but shorter LOS. These changes in resident enrollment were more pronounced in facilities with lower occupancy rate. As a result, unlike critics’ concerns, these ownership conversions from nonprofit to for-profit increased nursing home access by economically disadvantaged populations. Converted facilities also reduced costs by cutting the wage cost of non-nursing staff while keeping that of nursing staff unchanged. In addition, converted facilities kept their total nurse staffing unchanged, but changed the staffing mix. These operational changes led to lower quality of care in converted facilities only immediately after conversion but not in the long term. Interestingly, the post-conversion quality was kept unchanged when a facility was converted by a for-profit nursing home chain or when the pre-conversion occupancy rate was low. Taken together, these results suggest that ownership conversion from nonprofit to for-profit benefits the public in many instances. Two conditions are conducive to such positive outcomes: (1) low pre-conversion occupancy rate, and (2) conversion by a for-profit chain. To perform counterfactual analysis, we employ various machine learning methods to predict post-conversion financial and quality performance. Applying these prediction models to closed nursing homes during 2006-2015, we find that about 22% of the facilities could have achieved increased and positive profit margins if they were converted to for-profit, and roughly 38% of the facilities could have maintained or improved their quality performance.

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Disclosure, Competition, and Learning From Asset Prices

Host(s): Assistant Professor David Yang
Speaker(s): Liyan Yang, Professor of Finance
University: University of Toronto, Rotman School of Management
Time: Friday, May 10, 2019, 2:00 PM – 3:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

I study voluntary disclosure of duopoly firms when they learn information from asset prices. By disclosing information, a firm incurs a cost of losing competitive advantage to its rival firm but benefits from learning from a more informative asset market. Three types of equilibrium arise: nondisclosure, partial disclosure, and full disclosure. In a partial disclosure equilibrium, price informativeness and firm profits increase with the size of noise trading in the financial market. Firms' disclosure decisions can exhibit strategic complementarity, which leads to both a disclosure equilibrium and a nondisclosure equilibrium.

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Network Hubs Cease to be Influential in the Presence of Low Levels of Advertising

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Gabriel Rossman, Associate Professor and Vice Chair
University: University of California, Los Angeles, Department of Sociology
Time: Friday, May 10, 2019, 10:30 a.m. – 12:00 p.m.
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

The “influentials” or “opinion leadership” hypothesis argues that social network hubs have disproportionate importance to how new ideas and behaviors spread. Previous research affirming this hypothesis has assumed that all learning occurs through the network, but we conduct a computational experiment in which we allow learning both through the network and from external sources of information (e.g., advertising). We replicate opinion leadership, but only in the region of parameter space where external influence is absent. When the model allows even trivial levels of external influence, hubs are no more important to diffusion than nodes chosen at random.

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Immigration Fear and Investor Behavior

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Luo Zuo, Associate Professor of Accounting
University: Cornell University, Samuel Curtis Johnson Graduate School of Management
Time: Friday, May 3, 2019, 3:00 PM – 4:30 PM
Location: SB2 Room 117

We examine the effects of public attitudes toward immigration on investor behavior in the financial advisory industry. We find that minority advisors are more likely to receive complaints in periods of high immigration fear than in other periods when compared with their white peers who work in the same firm and at the same location. The tone of complaints against minority advisors is also more negative in periods of high immigration fear, but there is no evidence that the increased level of allegations is driven by a concurrent increase in misconduct committed by minority advisors. We interpret these results as evidence suggesting that immigration fear leads investors to seek more information about their minority advisors, but they process this information in a biased manner that results in an increased number of unfounded allegations.

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Complementary Assets Theory in Times of Knightian Uncertainty

Host(s): Assistant Professor Luke Rhee
Speaker(s): Curba Lampert, Assistant Professor
University: Florida International University, College of Business
Time: Friday, May 3, 2019, 2:30 PM – 4:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

How do complementary assets across the different stages of a firm’s value chain facilitate value creation and value appropriation from technological innovation? The answer remains a key area of interest. However, much of the current thinking about value creation and value appropriation in the complementary assets theory operates with some unstated boundary conditions. The theory is applicable under conditions of risk—where decision makers can know the outcomes or probabilities—but it is less clear how the theory applies under conditions of Knightian uncertainty—where neither outcomes nor probabilities can be known. Knightian uncertainty can have significant implications for choices and outcomes. It questions the decisions made about the value chain and if they will remain relevant. We posit that traditional thinking on the complementary assets theory may not hold under uncertainty. We show that existing theory may lead firms to take a suboptimal approach, unknowingly directing complementary assets in ways for value appropriation, thereby substituting efforts for value creation. We highlight how the consideration of uncertainty reveals an intrinsic trade-off between flexibility and commitment in the complementary assets theory. Furthermore, we posit that how firms manage this tradeoff contributes to the microfoundations of the dynamic capabilities theory.

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Complementary Assets Theory in Times of Knightian Uncertainty

Host(s): Assistant Professor Luke Rhee
Speaker(s): Curba Lampert, Assistant Professor
University: Florida International University, College of Business
Time: Friday, May 3, 2019, 1:00 PM – 2:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

How do complementary assets across the different stages of a firm’s value chain facilitate value creation and value appropriation from technological innovation? The answer remains a key area of interest. However, much of the current thinking about value creation and value appropriation in the complementary assets theory operates with some unstated boundary conditions. The theory is applicable under conditions of risk—where decision makers can know the outcomes or probabilities—but it is less clear how the theory applies under conditions of Knightian uncertainty—where neither outcomes nor probabilities can be known. Knightian uncertainty can have significant implications for choices and outcomes. It questions the decisions made about the value chain and if they will remain relevant. We posit that traditional thinking on the complementary assets theory may not hold under uncertainty. We show that existing theory may lead firms to take a suboptimal approach, unknowingly directing complementary assets in ways for value appropriation, thereby substituting efforts for value creation. We highlight how the consideration of uncertainty reveals an intrinsic trade-off between flexibility and commitment in the complementary assets theory. Furthermore, we posit that how firms manage this tradeoff contributes to the microfoundations of the dynamic capabilities theory.

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Physical Collocation, Formal Work Relationships, and Work-Related Interactions in Organizations

Host(s): 
Speaker(s): Jonathon Cummings, Professor of Management and Organizations
University: Duke University, The Fuqua School of Business
Time: Friday, May 3, 2019, 10:00 AM – 11:30 AM
Location: SB1 5100 Corporate Partners Executive Boardroom

This presentation focuses on how work-related interactions (‘who interacts with whom about work') are shaped by two key elements of organizations: physical collocation and formal work relationships. Whereas physical collocation captures the extent to which employees are proximate to one another in physical space (e.g., sit next to each other), formal work relationships capture the extent to which employees depend on one another within the organizational structure (e.g., boss-subordinate or members of the same functional unit). Prior research has shown how physical collocation and formal work relationships each positively impact work-related interactions, but less is known about their joint impact. For example, compared to collocated employees who have a formal work relationship, non-collocated employees may experience a relative boost in work-related interactions because of increased awareness, socialization, and opportunity. In addition, prior research has focused on collocation within a dyad, but less is known about the role of third-parties who are also collocated with employees. For example, compared to an employee who is not collocated with her boss, an employee who is collocated with her boss may experience a relative decline in work-related interactions because of concerns about monitoring by her boss. Given that physical collocation is often confounded with formal work relationships in organizations, the research design took advantage of quasi-random variation in the office seating of employees after the relocation of a corporate headquarters to a new building. Survey data on work-related interactions were collected from 143 employees three months prior to the move (when members of the same functional unit sat next to each other) and three months after the move (when employees were randomly assigned to seats within zones of the office, thus members of different functional units sat next to each other). The findings suggest that collocation among employees was generally good for work-related interactions, especially for those employees who did not have formal work relationships. However, the collocation of a boss with an employee was generally bad for work-related interactions with other employees, especially when they did not have a formal work relationship. Implications for the intersection of organization design, social networks, and collaborative technology are discussed.

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Survival or Aspiration Reference Point? The Effect of CEO Power on Focus of Attention and Risk Taking

Host(s): Assistant Professor Luke Rhee
Speaker(s): Songcui Hu, Assistant Professor of Management and Organizations
University: University of Arizona, Eller College of Management
Time: Friday, April 12, 2019, 2:30 PM – 4:00 PM
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

In this study, we extend March and Shapira’s (1992) organizational variable risk preferences model which states that a firm’s risk taking is a resultant outcome of attending to multiple reference points including survival point and aspiration point. We do so by incorporating the role of managerial agency and developing a power perspective on how CEOs affect both focus of attention and risk taking of firms in the face of underperformance. We argue that, compared to less-powerful CEOs, more-powerful CEOs tend to be less sensitive to the survival point but more responsive to the aspiration point, because more-powerful CEOs tend to embrace higher employment security, more managerial discretion, and greater hubris in decision making. We also argue that organizational negative momentum, i.e., consecutive loss strikes, strengthens the effect of CEO power. Our empirical analysis using data from S&P 1500 firms from 2001 to 2017 provides support to our theoretical predictions. By linking theories on variable risk preferences, performance feedback, and strategic leadership, this study contributes to conversations about CEO power and performance feedback and its implications for risk-taking behavior in organizations.

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Incentive for Information Sharing in Supply Chain Management (ISOM)

Host(s): Assistant Professor Luyi Gui
Speaker(s): Albert Y. Ha, Chair Professor of Operations Management
University: The Hong Kong University of Science and Technology, Department of Information Systems, Business Statistics, and Operations Management (ISOM)
Time: Friday, April 12, 2019, 10:00 AM – 11:30 AM
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

In the first part of this talk, we present some mathematical models that have been developed to investigate the incentive for a retailer to share private demand information with a manufacturer.  We consider several drivers such as production cost function, production cost reduction effort, information accuracy, competition intensity and type of competition that influence the incentive for information sharing. In the second part of this talk, we present recent research on the incentive for a manufacturer to share private demand information with a retailer under retail price and service effort competition. We explore how this incentive depends on cost of service effort, intensity of effort competition and the number of uninformed retailers.

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Measuring Accruals Quality: A Theoretical and Empirical Evaluation

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Richard Sloan, Professor of Accounting
University: University of Southern California, Marshall School of Business
Time: Friday, April 5, 2019, 3:00 PM – 4:30 PM
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

A large body of empirical research in accounting investigates the causes and consequences of accruals quality, reaching numerous influential conclusions. Yet little work has been done to systematically validate the underlying measures of accruals quality. We provide the first comprehensive evaluation of popular measures of accruals quality. We find that most of these measures often lack power and suffer serious problems with correlated omitted economic characteristics. Certain measures also appear to have the opposite relation to accruals quality as assumed in existing research. Collectively, our evidence casts doubt on the conclusions of previous research. We close by providing guidelines for conducting improved tests of accruals quality.

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Relative Pay for Non-Relative Performance: Keeping up with the Joneses with Optimal Contracts

Host(s): Assistant Professor David Yang
Speaker(s): Ron Kaniel, Jay S. and Jeanne P. Benet Professor of Finance
University: University of Rochester, Simon Business School
Time: Friday, April 5, 2019, 2:00 PM – 3:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

We consider multi-agent contracting when agents have “keeping up with the Joneses” (KUJ) preferences. Although contracts appear inefficient, as performance seems inadequately benchmarked, when a single principal can commit to a public contract, the optimal contract hedges agents’ relative wage risk without sacrificing efficiency. With multiple principals, or a principal that is unable to commit, a “rat race” emerges in which agents are more productive, but wages increase even more, reducing profits and undermining efficiency. Renegotiation reduces or enhances efficiency depending on whether KUJ effects are weak or strong. Public disclosure of contracts across firms can cause output to collapse.

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Pricing Schemes in Cloud Computing: Utilization-Based versus Reservation-Based

Host(s): Assistant Professor Luyi Gui
Speaker(s): Shi Chen, Assistant Professor of Operations Management
University: University of Washington, Foster School of Business
Time: Friday, April 5, 2019, 10:00 AM – 11:30 AM
Location: SB1 Corporate Partners Executive Boardroom

Cloud computing has been a rising trend in the business world. In this paper, we consider two most important pricing schemes offered to sustained customers by major service providers in the cloud industry: the reservation-based scheme (the R-scheme) by Amazon or Microsoft, and the utilization-based scheme (the U-scheme) by Google. We consider a duopoly model with heterogeneous customers characterized by the mean and the coefficient of variation of their usage. We show that under either pricing scheme, the effective price is essentially an increasing function of the coefficient of variation of usage, and thus both schemes aim for rewarding stability in usage. However, when the providers adopt different schemes, we show that customers with lower demand volatility would prefer the R-scheme, while those with higher demand volatility would prefer the U-scheme. Furthermore, we study the impact of evolving market characteristics, including the distributions of market preference, demand size, and demand volatility, as well as the impact of the providers’ service levels on their choices of schemes and decisions on the pricing parameters. We find that if the market has a stronger preference for a particular provider or that provider has a higher service level than its competitor, the provider is more likely to adopt the R-scheme, while its competitor’s adoption of a scheme depends on the extent of the price competition. Specifically, when the diversity of customer preference becomes higher (lower), the price competition becomes softened (intensified), and the competitor is more likely to adopt the R-scheme (U-scheme, respectively).

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Predictive Analytics and Organizational Architecture: Plant Level Evidence From the Census Data

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Eva Labro, Professor of Accounting
University: University of North Carolina, Kenan-Flagler Business School
Time: Friday, March 15, 2019, 3:00 PM – 4:30 PM
Location: SB1 5200 Lyman Porter Colloquia & Executive Terrace

We examine trends in the use of predictive analytics for a sample of more than 25,000 manufacturing plants using proprietary data from the US Census. Comparing 2010 and 2015, we find that use of predictive analytics has increased markedly, with the greatest use in younger plants, professionally-managed firms, more educated workforces, and stable industries. Decisions on data to be gathered originate from headquarters and are associated with less delegation of decision-making and more widespread awareness of quantitative targets among plant employees. Performance targets become more accurate, long-term oriented, and linked to company-wide performance, and management incentives strengthen, both in terms of monetary bonuses and career outcomes. Plants increasing predictive analytics become more efficient, with lower inventory, increased volume of shipments, narrower product mix, reduced management payroll and increased use of flexible and temporary employees. Results are robust to a specification based on increased government demand for data.

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False (and Missed) Discoveries in Financial Economics

Host(s): Assistant Professor David Yang
Speaker(s): Harvey Campbell, Professor of International Business
University: Duke University, the Fuqua School of Business
Time: Friday, March 15, 2019 , 1:30 pm – 3:00 pm
Location: SB1 5100 Corporate Partners Executive Boardroom

Investors make two types of mistakes. First, they erroneously allocate to an asset manager (or a “smart” beta) that underperforms because the asset manager lacks skill. Second, investors might miss out allocating to a good manager. The first mistake is difficult to deal with given there are thousands of managers and many look good purely by luck. We introduce a new technique that optimizes the threshold for a prespecified false discovery rate (i.e., chance of the first mistake), at say 5%. Our method also allows for heterogeneous false discoveries – we should not treat all bad managers the same because some are really, really bad. Next, we focus on the second type of error where investors miss out on good managers. It is routine to ignore this type of mistake. Our results show that current research methods have little or no power to detect good managers. Finally, our method allows for the asymmetric treatment of false discoveries and misses – generally, investing in a bad manager is more costly than missing a good manager. We also offer a way to select managers whereby the investor can prespecify the ratio of false discoveries to misses to accommodate these differential costs. For instance, we can accommodate a decision rule whereby the investor is willing to miss ten good managers to avoid the mistake of selecting one bad manager.

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FLOW (W/ Caitlin Dannhauser)

Host(s): Assistant Professor David Yang
Speaker(s): Jeffrey Pontiff, Professor & James F. Cleary Chair in Finance
University: Boston College, Carroll School of Management
Time: Wednesday, March 6, 2019, 2:00 PM – 3:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

We estimate an apples-to-apples comparison of flows to active mutual funds, index mutual funds, and exchange traded funds. Positive, contemporaneous correlations between aggregate market returns and aggregate flows that were commonplace for active funds are recently only prominent for ETFs. At the individual fund level, the flow-performance relation is more dramatic for passive vehicles, and in particular, for ETFs. Theories of mutual fund flow are hapless in explaining this result. Regardless of vehicle type, flow-induced fire sales and flow-induced trading are similar and the explanations utilized by the literature are congruous with our findings.

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Information Sharing Between Mutual Funds and Auditors

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Ole-Kristian Hope, Professor of Accounting
University: University of Toronto, Rotman School of Management
Time: Friday, March 1, 2019, 3:00 PM – 4:30 PM
Location: SB2 Classroom 122

This paper examines whether there is information sharing between mutual funds and their auditors about the auditors’ other listed firm clients. Using detailed hand-collected data from the Chinese market and employing levels, changes, and PSM analyses, we find that mutual funds invest more in firms with shared auditors. They also earn higher profits from trading in those firms. These effects are more pronounced for firms with a more opaque information environment. The evidence is consistent with information flowing from auditors to mutual funds, providing mutual funds with an information advantage in firms that share the same auditors. We further find that auditors benefit by charging higher audit fees and by improving their audit quality. Our study provides evidence of bi-directional information sharing between two important market intermediaries.

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When Ignorance is Not Bliss: An Empirical Analysis of Sub-tier Supply Network Structure on Firm Risk

Host(s): Assistant Professor Luyi Gui
Speaker(s): Ravi Anupindi, Professor of Technology and Operations
University: University of Michigan, Ross School of Business
Time: Friday, March 1, 2019, 10:00 AM - 11:30 AM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

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Market Competition and Effectiveness of Performance Pay: Evidence from the Field

Host(s): Assistant Professor Luyi Gui
Speaker(s): Tobias Kretschmer, Professor of Management
University: Ludwig Maximilians University of Münich, School of Management, Institute for Strategy, Technology and Organization
Time: Wednesday, February 20, 2019, 2:30 PM – 4:00 PM

Location: SB1 5100 Corporate Partners Executive Boardroom

It is well-established that the effectiveness of pay-for-performance (PfP) schemes depends on employee- and organization-specific factors. However, less is known about the role of external forces. Investigating the role of market competition on the effectiveness of PfP, we theorize that there are two counteracting effects – business stealing and competitor response – that jointly generate an inverted U-shape relationship between PfP effectiveness and competition. Weak competition discourages effort response to PfP because there is little extra market to gain, while strong competition creates low incentives because competitors are more likely to respond. PfP hence has the strongest effect under moderate competition. Field data from a bakery chain and its competitive environment confirm our theory, allow us to empirically separate the business stealing and competitor response effects, and refute alternative explanations.

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The Maintenance and Reconstruction of Shared Management Control Practices Through Heedful Interrelating

Host(s): Professor and Taco Bell Chair Vijay Gurbaxani
Speaker(s): Kursad Asdemir, Assistant Professor of Business Administration
University: The United Arab Emirates University, College of Business and Economics
Time: Tuesday, February 19, 2019, 2:00 PM – 3:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

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Star-Cursed Lovers: Strategic Shading in Online Dating

Host(s): Professor Sanjeev Dewan
Speaker(s): Behnaz Ghahestani Bojd, Doctoral Candidate of Information Systems & Operations Management
University: University of Washington, Foster School of Business
Time: Friday, February 15, 2019, 2:30 PM – 4:00 PM
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

We examine how users respond to the popularity information of potential partners in a gamified mobile dating app. On the one hand, knowing that a potential match is popular can increase her/his appeal. On the other hand, popular people are less likely to reciprocate, and hence users may strategically shade down their revealed preference for popular users to avoid the psychological costs of rejection. In our setting, users interact with each other by playing a rating game, where they rank-order members of the opposite sex and are then get matched based on a Stable Matching Algorithm. A key piece of information shown to users during this process is a “star-rating” for each member of the opposite-sex, which is a function of their prior received ratings. We quantify the causal impact of a user’s star-rating on the preference-ratings that s/he receives during a game and her likelihood of receiving messages after a game. To overcome the endogeneity between a user’s star-rating and her unobserved attractiveness, we employ non-linear fixed-effects models. We find strong support for the presence of strategic shading in our data: (1) three-star users receive lower preference-ratings during the game compared to two-star users, and (2) two-star users receive fewer first messages after the game compared to one-star users. We also show that the effect of star-ratings is heterogeneous across both outcomes and user-specific observables, and that this heterogeneity (or extent of shading) can be directly linked to the severity of rejection concerns. Our findings have implications for the design of dating platforms and measurement of mate preferences in matching markets.

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Investor Demand for Contextual Information: Evidence from Wikipedia

Host(s): Assistant Professor Ben Lourie
Speaker(s): Chenqi Zhu, PhD Candidate in Accounting
University: New York University, Leonard N. Stern School of Business
Time: Thursday, February 14, 2019, 3:00 PM – 4:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

I use the web traffic (wiki-visits) to the Wikipedia pages of S&P 500 companies to study the determinants and consequences of investors’ contextual information acquisition. Employing the launch of Google Knowledge Graph as a natural experiment, I first establish that wiki-visits reflect information acquisition by investors, especially retail investors. I then document that wiki-visits spike at key informational events such as earnings announcements. To better understand investors’ demand for contextual information, I focus on earnings announcements and find that the abnormal wiki-visits at these announcements increase with the announcing firms’ abnormal tone in earnings press releases, textual complexity of previous financial reports, and off-balance sheet intangible intensity. Consistent with contextual information improving investors’ interpretation of financial information, I find that the abnormal wiki-visits at earnings announcements are positively associated with the earnings response coefficient and the speed of price discovery measured by intra-period timeliness. Collectively, these results suggest that investors supplement financial information with highly readable contextual information, thereby improving their understanding of the financial information.

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The Choice Mindset: Implications for Individual, Dyadic, and Group Decision Making

Host(s): Associate Dean and Professor Maia Young
Speaker(s): Krishna Savani, Associate Professor of Strategy, Management and Organization
University: Nanyang Technological University, Nanyang Business School
Time: Monday, February 11, 2019, 10:30 am – 12:00 pm
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

Researchers typically assume whenever people can pick one of multiple options, they have a choice. I propose that even when faced with multiple options, people sometimes perceive that they have a choice, but other times, fail to realize that they have a choice. Nudging people to construe the act of selecting one of many options as a choice can have a broad range of influences on their individual, dyadic, and group decision making. At the individual level, employees who have a greater sense of choice are more likely to exercise their voice in the workplace. They are less also susceptible to decision making errors, such as inflexible perseverance. A choice mindset intervention in a field setting helps people keep distractions at bay, leading them to manage their time in accordance with their goals. At the dyadic level, negotiators in a choice mindset are less anchored to the first offer. They are also less likely to find ultimatums credible, and thereby continue negotiating despite receiving ultimatums, and therefore earn better outcomes. At the group level, when the idea of choice is salient, members contribute less to public goods and are less likely to punish free riders. In experimental markets, when the idea of choice is salient, buyers and sellers are less concerned about the welfare of third parties who are affected by their choices (e.g., people who bear the brunt of environmental pollution caused by a dirty manufacturing process). Overall, the findings indicate that the salience of choice has both positive and negative consequences for people’s decision making.

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Do targeted business tax subsidies achieve expected benefits? Co-authored with Lisa De Simone (Stanford) and Aneesh Raghunandan (London School of Economics)

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Rebecca Lester, Assistant Professor of Accounting
University: Stanford University, Graduate School of Business
Time: Friday, February 8, 2019, 3:00 PM – 4:30 PM
Location: SB1 5200 Lyman Porter Colloquium Room

We examine the association between state and local firm-specific tax subsidies and business activity in the surrounding county, measured as the number of business establishments, number of employees, aggregate wages, per capita employment, and per capita wages. Using a propensity score matched sample and a difference-in-differences design, we find that tax subsidies are positively and significantly associated with local employment and wages, but that these effects are concentrated in the largest tax subsidies. For over 2,000 of the smaller tax subsidies in our sample, we observe no statistically significant relation. Furthermore, we only find evidence of an increase in establishments for the 49 large "megadeal" subsidy packages that include a variety of state and local benefits, but that population growth following such megadeals negates per capita employment and income effects. We provide a large-scale empirical analysis of the relation between firm-specific tax subsidies and aggregate economic activity at the county level, thus extending a literature that generally focuses on the real effects of statutory tax policies that impact all firms within a jurisdiction.

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External Representations In Strategic Decision Making: Understanding Strategy’s Reliance on Visuals

Host(s): Professor Luke Rhee
Speaker(s): Felipe Csaszar, Associate Professor of Strategy
University: University of Michigan, Ross School of Business
Time: Friday, February 8, 2019, 2:30 PM – 4:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

Visual representations pervade strategic decision making. However, the strategy literature has been mostly silent about why visual representations are so pervasive and about how they affect strategic decision making. We address the “why” question by building on ideas from cognitive science to identify four cognitive functions on which strategic decision making relies and that are improved by the use of visuals. We address the “how” question by developing a conceptual model and propositions describing how decision quality is contingent on characteristics of the task environment, the visuals, and the managers. Our work extends the understanding of bounded rational search by explaining how visual representations affect the search process.  Among other theoretical implications, we show that a problem space’s size and “satisfiability” depend on: (i) the ability of managers to select an appropriate visual representation and (ii) the extent to which that visual representation is both usable and malleable. We close by detailing some implications for users, designers, and teachers of visuals in the field of strategy and by suggesting directions for future research.

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The Disciplining Effect of Peers: Evidence From the Timing of Earnings Announcements

Host(s): Assistant Professor Ben Lourie
Speaker(s): Phong Truong, Ph.D. Candidate
University: Carnegie Mellon University, Tepper School of Business
Time: Monday, February 4, 2019, 10:00 am – 11:30 am
Location: SB1 5100 Corporate Partners Executive Boardroom

I present evidence that peers have a disciplining effect on disclosure timing decisions. To do so, I exploit quasi-exogenous variation in the timing of peers' earnings announcements based on the SEC's threshold-based reporting deadline rules. I find that firms respond to early peer announcements by announcing their own earnings early. Furthermore, I show evidence suggesting that peer effects operate under two mechanisms: disciplining and information transfer. Discipline occurs because investors may infer bad news from delay relative to reporting peers. Information transfer occurs because peer reports contain information that is directly value relevant for the focal firm. Importantly, peer effects impose a significant spillover cost in the form of increased audit fees on firms facing peer pressure to report early. My findings highlight a novel externality of financial reporting regulation with benefits and costs that should be considered by policymakers concerned with the timing of earnings information releases.

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Reconsidering Returns

Host(s): Assistant Professor David Yang
Speaker(s): Samuel Hartzmark, Associate Professor of Finance
University: University of Chicago, Booth School of Business
Time: Friday, February 1, 2019, 1:30 PM – 3:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

Investors' perception of performance is biased because the relevant measure, returns, is rarely displayed. Major indices ignore dividends, inducing mechanical underperformance on ex-dividend days. Newspapers are more pessimistic on these days, consistent with mistaking the index for a return. Market betas should track returns, but track prices more than dividends, creating predictable market returns. Mutual funds receive inflows for “beating the S&P 500,” comparing the price-only index with the fund's net asset value change (also not a return). Displaying returns by default would ameliorate these issues, which arise despite high attention and little ambiguity regarding the appropriate measure.

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Learning Optimal Instruments From Data

Host(s): Assistant Professor Mingdi Xi
Speaker(s): Kartik Hosanagar, Professor of Operations, Information and Decision
University: University of Pennsylvania, Wharton School of Business
Time: Friday, February 1, 2019, 10:30 AM – 12:00 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

In this paper we approach the problem of constructing instrumental variable from exogenous information in linear causal models as a (supervised) learning problem. In learning problems the decision-maker must learn an optimal decision rule from a training sample which is to be applied on a test sample. We formulate the choice of construction of instruments in a linear causal model as a decision problem that is amenable the learning approach. We develop an algorithm that we term “cross-learning", which allows training of instruments and causal inference to be simultaneously performed from sample data. Simulations and application on real-world datasets demonstrates that the algorithm is highly effective.

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Peer Information and Managerial Myopia

Host(s): Assistant Professor Ben Lourie
Speaker(s): Badryah Alhusaini, PhD Candidate in Accounting
University: Pennsylvania State University, Smeal College of Business
Time: Monday, January 28, 2019, 3:00 pm – 4:30 pm
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

This paper examines the effect of peer information on managerial myopia. If greater peer information is beneficial, investors will face less uncertainty about the firm’s own prospects and thus fixate less on current earnings. As a result, managers can face less pressure to focus on boosting short-term performance to signal high firm type. Using the percentage of public firms in the industry (i.e. “public firm presence”) as a measure of peer information, I find that managers in industries with greater public firm presence are less myopic. This effect of peer information reducing myopia is less pronounced in instances in which the manager is more pressured to meet short-term benchmarks, as measured by analyst coverage and transient ownership. Finally, I find that, for firms with greater public firm presence, investors face less information asymmetry and react less negatively when those firms miss an earnings benchmark, consistent with greater levels of peer information reducing myopia by facilitating investors to assess the firm more effectively.

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Sample Boxes for Retail Products: Bundling Experience Goods to Leverage Consumer Uncertainty and Teaching in Operations

Host(s): Professor Robin Keller
Speaker(s): Alireza Yazdani, Ph.D. Candidate in Operations and Business Analytics
University: University of Oregon, Lundquist College of Business
Time: Friday, January 25, 2019, 10:00 am – 11:30 am
Location: SB1 5200, Porter Colloquia Room & Executive Terrace

This talk will cover both teaching and research in operations. Consumers often try a few varieties of an experience product before establishing a shopping routine. Sample boxes potentially create value by helping consumers resolve their uncertainties regarding these varieties earlier and at a lower cost. In this paper, we study how firms and consumers share this added value under different market scenarios. We show that when a firm offers a sample box, consumers obtain equal or higher net expected surplus while the firm's expected profit may decrease. We also show that a firm can reverse the potential adverse profit impact of selling sample boxes by introducing an optimally specified future credit.

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Early Patent Disclosures Enhance Price Discovery and Reduce R&D Uncertainty

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Baruch I. Lev, Phillip Bardes Professor of Accounting and Finance
University: New York University, Leonard N. Stern School of Business
Time: Friday, January 18, 2019, 3:00 PM – 4:30 PM
Location: SB1 5200 Lyman Porter Colloquium Room

We focus in this study on the exogenous event of the enactment of the American Inventor’s Protection Act of 1999 (AIPA), which disseminates timely, detailed, and credible information on firms’ R&D activities through early patent disclosures. Exploiting the staggered timing of these patent disclosures, we identify a significant improvement in the speed of stock price discovery. This improvement is stronger when patent disclosures reveal firms’ successful, new, or technologically valuable inventions. This improvement is more pronounced for firms in high-tech or fast-moving industries, and those with large institutional ownership or analyst coverage. We also find that stock liquidity rises and investors’ risk perception of R&D drops after the enactment of AIPA. Our results highlight the importance of timely, detailed, and credible disclosures of technological innovations in alleviating the information frictions faced by investors in R&D-intensive firms.

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Between-Prospects Comparisons: Regret Theory and Probability Dominance

Host(s): Associate Professor Luyi Gui
Speaker(s): Enrico Diecidue, Professor of Decision Sciences at INSEAD
University: INSEAD (France) and Visiting Professor at University of San Diego, Rady School of Business
Time: Friday, January 11, 2019, 2:00 PM – 3:30 PM
Location: SB1 5100 Corporate Partners Executive Boardroom

The most popular models of decision under uncertainty such as expected utility (EU, von Neumann and Morgenstern 1947), and cumulative prospect theory (CPT; Tversky and Kahneman 1992) – assume that the decision maker evaluates each prospect separately and then chooses the prospect with the highest EU (or the highest CPT value). Regret theory (Bell 1982; Fishburn 1982; Loomes and Sugden 1982) is a bold exception in that the forgone alternative does influence the decision maker; hence this theory allows also for between-prospects interactions.

In this talk: I summarize some of the recent advancements in regret theory (behavioral foundation, quantitative measurement, and empirical performance); I then introduce Probability Dominance. This is an heuristic (choosing the alternative that maximizes the probability of being ahead) that also captures the effects of the forgone alternative, yet considers between-prospects interactions in a way that differs from regret theory. The final part of the talk focuses on evaluating the empirical performance of probability dominance relative to EU, CPT, and regret theory.

How Taking and Revisiting Photos Affects Enjoyment of and Memory for Experiences

Host(s): Teaching Professor Kevin Bradford
Speaker(s): Kristin Diehl, Associate Professor of Marketing
University: The University of Southern California, Marshal School of Business
Time: Friday, December 7, 2018, 3:30 PM – 5:00 PM
Location: MSCT 122

Experiences are vital to the lives and well-being of people. Over the course of their lives, people build up a portfolio of experiences that come to make up who they are. People derive enjoyment and value both from the initial experience as well as from the memories of the experience. Taking photos during these experiences has become a central and critical aspect of experiences and photo-taking can affect both enjoyment from the experience itself as well as the memories people have of the experience. Our research finds that, in general, taking photos during the experience increases engagement with and enjoyment of positive experiences. Further, we find that taking photos heightens peoples’ memories for visual aspects of the experience, but can decrease memory for non-visual aspects (e.g., auditory).

Apart from these immediate effects of photo taking on enjoyment and memory, photos also serve as tangible reminders of experiences. In fact people take photos mainly to have access to such tangible reminders in the future, which they hope allow them to relive the experience at a later point. Our research explores whether people correctly anticipate which photos will help them relive the experience better and whether they actually take photos that serve as good reminders in the future. We also examine how actually revisiting photos after the experience affects people’s memories for the experience.

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The Existence and Effect of Competition in the Audit Market: Evidence from the Bidding Process

Host(s): Associate Professor Chuchu Liang
Speaker(s): Jaime Schmidt, Associate Professor of Accounting from The University of Texas at Austin, McCombs School of Business
University: The University of Texas at Austin, McCombs School of Business
Time: Friday, November 30, 2018, 3:00 PM – 4:30 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Prior research provides mixed evidence on whether sufficient audit market competition exists and whether competition impairs or improves audit quality. A major impediment of the prior literature has been the inability of researchers to observe the competitive bidding process. In this study, we use non-incumbent (i.e., competitor) auditor views of public company SEC filings to measure the competitive bidding process. We first validate that our measure of bidding captures competition by documenting that competitor auditors’ views of companies’ SEC filings significantly increase during the three months prior to an auditor change announcement. We then investigate the determinants of competitive bidding and the effect of competitive bidding on audit quality and fees. Consistent with concerns that market concentration impedes competition, we document that less bidding occurs in industry-concentrated markets and when incumbent auditors are either industry market share leaders or have a longer tenure with the client. However, contrary to conclusions in the prior literature, we find no evidence that local market concentration is associated with competitive bidding. We also find that, inconsistent with concerns that competitive pressure causes auditors to placate managers, competitive bidding is associated with an improvement in audit quality by incumbent auditors, as measured by the likelihood to subsequently restate the financial statements. Finally, as expected, we find that competitive bidding is associated with a subsequent reduction in audit fees.

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Butchers, Bakers, and Barcharts: How Digitized Information Affects Gender Differences in Performance

Host(s): Associate Professor Sharon Koppman
Speaker(s): Alexandra Feldberg, Doctoral Candidate in Organizational Behavior from The Harvard Business School
University: The Harvard Business School
Time: Friday, November 30, 2018, 10:30 AM – 12:00 PM
Location: SB1 5100 Corporate partners

This study asks: does increased access to digitized information affect the performance of men and women workers differently? I find that the availability of information in digital platforms disproportionately improves women’s performance in a male-dominated organization. I theorize that digitized information helps women by serving as a relationship substitute, an alternative channel to traditional relationship networks through which peripheral group members can gain access to performance-enhancing information. Using interviews, observations, and archival data, I take advantage of an intervention occurring within a 100-store grocery chain—when it introduced a weekly online report providing managers with a high-level summary of their departments’ performance along key metrics. Comparing sales across 152 departments twelve weeks prior to and following the report’s implementation shows that women managers benefit disproportionately from the report’s introduction but having longer duration of contact with peers and supervisors attenuates its benefits. Findings offer new directions for research on gender inequality and knowledge transfer by suggesting that digital channels of knowledge distribution can offset disparities arising from relationship networks in organizations.

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Feeling Like I Should: Emotions in Social Identity

Host(s): Teaching Professor Kevin Bradford
Speaker(s): Patti Williams, Associate Professor of Marketing
University: The University of Pennsylvania, Wharton School of Business
Time: Friday, November 30, 2018, 12:00 pm – 2:00 pm
Location: SB1 5200 Lyman Porter Colloquium Room

Individuals possess social identities that contain unique, relevant attitudes, behaviors, and beliefs providing “what-to-do” information when enacting that identity. I will present a stream of research demonstrating that identities are also associated with specific discrete emotion profiles providing “what-to-feel” information during identity enactment. Consumers prefer emotional stimuli consistent with their salient social identity, make product choices and emotion regulating consumption decisions to enhance (reduce) their experience of identity-consistent (inconsistent) emotions, including strategically allocating their attention to enhance emotion identity-fit. This research also demonstrates that experiencing an identity-inconsistent emotion can serve as an identity threat, prompting compensatory consumption, and will also demonstrate novel effects that such identity threats reduce working memory capacity. Finally, I will examine the downstream consequences of such compensation, finding that while compensatory consumption after an emotion-based identity threat can restore explicit self-esteem, no such improvements occur for implicit self-esteem, leaving consumers vulnerable and in need of further selfverification. While previous identity research has mostly focused on emotions as a consequence of identity enactment, this stream of research demonstrates that emotions are critical components of the standard for many social identities, and that successful enactment often hinges on feeling the right, and not the wrong, emotion.

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Cooperative Frames and the Formation of Business Relationships: A Field Experiment with Entrepreneurs in Togo

Host(s): Associate Professor of Organization and Management Chris Bauman
Speaker(s): Stefan Dimitriadis, Doctoral Student of Organizational Behavior
University: Harvard University, Harvard Business School
Time: Wednesday, November 28, 2018, 9:00 AM – 10:30 AM
Location: SB1 5200 Lyman Porter Colloquium Room

How can entrepreneurs form more business relationships? In developing markets, this can be challenging because there are no formal institutions to secure interactions. In this study, I explore an overlooked factor that plays a pivotal role in the formation of business relationships in developing markets: the perception of prospective interactions. I argue that in contexts where first interactions among entrepreneurs are high risk, framing them cooperatively leads to the formation of more relationships and to relationships that exhibit more skill complementarity. To test this theory, I conducted a randomized field experiment in Togo with 301 entrepreneurs who participated in a business training program. A random subset were exposed to cooperative frames, which are scripts that draw attention to and motivate interactions guided by the mutual exchange of help. I found that exposure to cooperative frames led to a 50 percent increase in the number of relationships formed among entrepreneurs, and that these relationships were characterized by more complementarity of entrepreneurs’ skills. Furthermore, I found that the businesses of entrepreneurs who were exposed to cooperative frames were significantly more profitable six months after the training program, holding everything else constant. This study shows that the formation of new business relationships in developing markets also depends on the initial framing of interactions, a factor that has so far not been taken into account.

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The Innovation Consequences of Financial Regulation for Young Life-Cycle Firms

Host(s): Assistant Professor Chuchu Liang
Speaker(s): Abigail Allen, Assistant Professor of Accountancy
University: Brigham Young University, Marriot School of Business
Time: Friday, November 16, 2018, 3:00PM – 4:30PM
Location: SB1 5200 Lyman Porter Colloquium Room

The last several decades have witnessed a striking uptick in reactionary financial regulation intended to curb financial misreporting by requiring increased external monitoring and centralized decision-making. We provide evidence that young life-cycle stage firms, characterized by low levels of financial slack and heavy investment in explorative innovation, are particularly vulnerable to negative innovation consequences from such regulation. Using SOX as a backdrop to test our predictions, we document a significant reduction in both R&D spending and innovation outputs for young life-cycle stage firms after regulation, relative both to their more mature counterparts and to young life-cycle stage firms exempt from full regulatory compliance. Additional tests indicate that the decline in innovation manifests both from a diversion of scarce resources and from the imposition of an organizational structure mismatched to the pursuit of explorative innovation. Importantly, we find no evidence that innovation declines are offset by other ensuing benefits to young life-cycle stage firms; across several measures, we fail to detect evidence of improved financial reporting quality. Moreover, an event study analysis suggests that market participants expected financial regulation to be incrementally value decreasing for young life-cycle stage firms, and post-regulation returns analysis corroborates this expectation. Supplemental tests of other regulatory settings yield consistent inferences. Collectively, our results support the notion that financial regulation places a heavy burden on innovative, young life-cycle stage firms.

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Diffusion of off-grid energy products with Rent-to-Own business models: An empirical analysis of usage and payment behavior in developing economies

Host(s): Assistant Professor Luyi Gui
Speaker(s): Jose Guajardo, Assistant Professor
University: Haas School of Business, University of California Berkley
Time: Friday, November 16, 2018, 2:00 pm – 3:30 pm
Location: SB1 5100 Corporate Partners Executive Boardroom

The diffusion of technological innovations in developing economies represents an opportunity for firms to address important societal problems, with the potential to have an impact on a large number of people. The off-grid energy sector is a good example. Worldwide, more than 1 billion people do not have access to electricity. In countries such as Kenya, Tanzania, and Uganda, the electrification rates in rural areas can often be below 10%. Rent-to-own business models—in which customers make incremental payments over time to eventually become owners of goods—are being increasingly used in the diffusion of off-grid energy products in developing economies, as they reduce adoption barriers by allowing flexible payment schemes. How customers actually behave in these flexible environments is, of course, an empirical question, but one that has very important consequences for the viability of an increasing number of firms operating in these markets. In this paper, I empirically analyze how customers’ usage and payment behavior interact in an application of rent-to-own to the distribution of solar lamps in developing countries. By exploiting the longitudinal variation in the data—and hence accounting for intrinsic differences between customers—the analysis documented an engagement effect, which indicates that higher usage rates led to lower probability of late payments. In addition, customers often “bundled” payments, making advance payments for future product access. The analysis showed that bundling payments upfront led to lower usage rates. Hence—and perhaps counterintuitively—although bundled payments may generally seem appealing, firms may not want to encourage this behavior. Building on the insights derived from econometric models, I develop predictive models of default. They revealed that first-period usage information can improve predictive accuracy and that observing usage rates in subsequent periods does not lead to further improvements. Thus, firms can benefit by using first-period information to promptly identify riskier customers as well as potential upselling opportunities. Overall, the analysis highlights the importance for firms of jointly tracking and analyzing payment and usage behavior by customers, particularly in initial stages of the adoption process.

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The Class ceiling: Why it Pays to be Privileged

Host(s): Associate Professor Sharon Koppman
Speaker(s): Sam Friedman, Associate Professor of Sociology
University: The London School of Economics and Political Science, Department of Sociology
Time: Friday, November 16, 2018, 10:30 am – 12:00 pm
Location: SB1 5200 Lyman Porter Colloquium Room

The hidden barriers, or ‘glass ceilings’, preventing women and minority ethnic groups from getting to the top are well documented. Yet questions of social class - and specifically class origin – have been curiously absent from these debates. In this talk I begin by drawing on new data from Britain’s largest employment survey, The Labour Force Survey, to demonstrate that a powerful and previously unrecognised “class pay gap” exists in Britain’s higher professional and managerial occupations. I then switch focus to ask why this pay gap exists. This analysis demonstrates that the class ceiling can only be very partially attributed to conventional measures of ‘merit’. Instead, drawing on 175 interviews across four occupational case studies – television, accountancy, architecture, and acting - I show that more powerful drivers are rooted in the misrecognition of classed self-presentation as ‘talent’, work cultures historically shaped by the privileged, the affordances of the ‘Bank of Mum and Dad’, and sponsored mobility premised on class-cultural homophyly.

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Market Actions and Non-Market Consequences: How Transportation Network Companies Influenced Regulation in New York, Chicago, and San Francisco

Host(s): Distinguished Professor Jone Pearce
Speaker(s): Nicholas Occhiuto, Doctoral Candidate in Sociology
University: Yale University
Time: Tuesday, November 13, 2018, 1:00 PM - 2:30 PM
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

A long line of research has examined how firms attempt to shape regulation and government policy in ways favorable to the firm. Existing research on non-market strategy has largely focused on how firm actions in the non-market environment influence both economic regulation and public policy. Recent research suggests, however, that firms actions in the market environment may also gain regulatory and policy influence. Nevertheless, because most of this work has largely focused on the market actions of existing firms, it remains unclear whether and how the market actions of startups may also help them gain regulatory and policy influence. This paper adds to our understanding of non-market strategy by showing that startups may use market actions to build constituencies, which can function as important assets in influencing their non-market environments. Drawing on 128 interviews, ethnographic observations, and content analysis of primary source documents collected across New York City, Chicago, and San Francisco, this paper will show how Transportation Network Companies used market actions (i.e., contracting with drivers, registering passengers, and securing venture capital investment) to make displays of worthiness, unity, numbers, and commitment of their emerging market to both regulators and policy makers. As a result, these market actions influenced regulators and policy makers to produce regulations that were favorable to the firms. This article also highlights city-level variation of regulation in the context of global market emergence. It will show how this same market actions initiated two different types of non-market outcomes: formal and interpretive change.

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Competitive and Descriptive Market Definitions: Effects on Firm Value

Host(s): Assistant Professor and Dean Maia Young
Speaker(s): Elizabeth G. Pontikes, Associate Professor of Organizations and Strategy from The University of Chicago, Booth School of Business
University: The University of Chicago, Booth School of Business
Time: Thursday, November 15, 2018, 10:30a.m.-12:00p.m.
Location: SB1 5100 Corporate Partners Executive Boardroom

A central question across literatures is how the scope of an organization’s activities affects its value. Most research on this question studies organizational characteristics, such as how firms can leverage their specific resources to effectively diversify. We propose that how the competitive space is defined is critical to understanding effects of firm scope, and largely overlooked. We suggest taking the categorical structure of markets into account can inform these questions. Specifically, we highlight that market categories are defined both by competitive rivals or use-based descriptions. Bringing together the literatures on competitive differentiation and the social and cognitive view of markets, we propose that it is beneficial when firms are in markets that are descriptively similar, but when they occupy a unique competitive position and face different rivals. We also suggest that the level of categorization is important, in that unique positions with respect to industry sub-markets reap benefits of differentiation. Hypotheses are supported in an empirical test of effects on Tobin’s q, using data from high-technology analyst Gartner’s “magic quadrant” reports, that define technology sub-markets through text description and identifying key players in each market.

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Citizen – Consumers Wanted: Revitalizing the American Dream in the Face of Economic Recessions, 1981 - 2012

Host(s): Teaching Professor Kevin Bradford
Speaker(s): Gokcen Coskuner – Balli, Assistant Professor of Marketing
University: Chapman University, The George L. Argyros School of Business and Economics
Time: Friday, November 9, 2018, 12:30 PM – 2:00 PM
Location: SB1 5200 Lyman Porter Colloquium Room

This article examines the ways in which three American presidents attempted to revitalize the American dream during economic recessions over the past four decades. Through analysis of archival text, I theorize the reformulation of the American dream as a governmentality process, one that focuses on continuous reworking of the national myth and the political ideology of neoliberalism and citizen-consumer subjectivities. The analysis indicates as economic recessions threatened the American dream, presidents Reagan, Clinton, and Obama employed disciplinary, legal, and security dispositives (a term developed by Foucault) to create consumer subjectivities as a means of reviving the economy and renewing confidence in the American dream, as well as in neoliberal ideology. The resulting framework extends Foucault’s theorization of governmentality and prior consumer research on consumer subjectivity and consumer moralism in two ways—first, by illustrating how ideology and national mythology are intertwined, and second, by linking consumers’ morality to state and market goals.

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Design of Lotteries and Waitlists for Affordable Housing Allocation

Host(s): Assistant Professor Luyi Gui
Speaker(s): Peng Shi, Assistant Professor of Data Sciences and Operations
University: The University of Southern California
Time: Friday, November 9, 2018, 10:00 AM – 11:30 AM
Location: SB1 5200 Lyman Porter Colloquium Room

We study a setting in which dynamically arriving items are assigned to waiting agents, who have heterogeneous values for distinct items and heterogeneous outside options. An ideal match would both target items to agents with the worst outside options, and match them to items for which they have high value.

Our first finding is that two common approaches -- using independent lotteries for each item, and using a waitlist in which agents lose priority when they reject an offer -- lead to identical outcomes in equilibrium. Both approaches encourage agents to accept items that are marginal fits. We show that the quality of the match can be improved by using a common lottery for all items. If participation costs are negligible, a common lottery is equivalent to several other mechanisms, such as limiting participants to a single lottery, using a waitlist in which offers can be rejected without punishment, or using artificial currency.

However, when there are many agents with low need, there is an unavoidable tradeoff between matching and targeting. In this case, utilitarian welfare may be maximized by focusing on good matching (if the outside option distribution is light-tailed) or good targeting (if it is heavy-tailed). Using a common lottery achieves near-optimal matching, while introducing participation costs achieves near-optimal targeting.

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Are Flatter Organizations More Innovative? Hierarchical Depth and the Importance of Ideas

Host(s): Assistant Professor Luke Rhee
Speaker(s): Zur B. Shapira, Professor of Management
University: New York University, Stern School of Business
Time: Friday, November 2, 2018, 2:30 pm – 4:00 pm
Location: SB1 5200 Lyman Porter Colloquium Room

In analyzing the flow of ideas and timing of evaluation in organizations, Seshadri & Shapira (ICC, 2003) proposed that hierarchical organizations can be conducive to knowledge creation. We discuss a formal model of idea flows and project / idea combination to examine how hierarchies might influence those combinations. First, in hierarchical structures a supervisor can see potential commonalities and complementarities among different projects pursued by her subordinates without those being noticed by them. Second, projects in such organizations get evaluated at each level as they go up the hierarchy. We use the results of the model to generate hypotheses about the importance and variance of importance of ideas. Then we test the hypotheses based on an analysis of patents for 544 firms surveyed by a compensation firm, in which the hierarchical depth of the firm was also requested. We find that even after controlling for size, span of control, and other important variables, firms with deeper hierarchies tended to have a more “important” patent. We conclude the paper with a discussion of the implications of these results for organization theory and innovation.

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See and Be Seen: Communication Visibility in the Era of Digital Work

Host(s): Assistant Professor Luke Rhee
Speaker(s): Paul Leonardi, Professor of Technology Management Program
University: University of California, Santa Barbara, Department of Communication
Time: Friday, October 19, 2018, 2:30 pm – 4:00 pm
Location: SB1 5200 Lyman Porter Colloquium Room

In this talk, I offer building blocks for a theory of communication visibility based on a series of field studies of the implementation of new enterprise social networking sites in large companies. The emerging theory suggests that as work digitalization makes once invisible communication occurring between others in the organization visible for third parties to see, those third parties may be able to improve their metaknowledge (knowledge of "who knows what" and "who knows whom"). Seeing the contents of other people¹s messages helps third-party observers to make inferences about the knowledge other people have and seeing the structure of other people¹s communication networks helps third-party observers to make inferences about who those people talk with on a somewhat regular basis. The emerging theory further suggests that enhanced metaknowledge can lead to more innovative products and services and less knowledge duplication if individuals learn to work in new ways. I discuss the important implications – both positive and negative – that this emerging theory of communication visibility has for work and the design of new technologies and organizations.

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Diversity’s Dark Side: Dominant Group Blowback to Organizational Diversity Policies

Host(s): Assistant Professor Chris Bauman
Speaker(s): John Morton, Doctoral Student in Organization & Management from the University of California, Irvine, the Paul Merage School of Business
University: University of California, Irvine, The Paul Merage School of Business
Time: Friday, October 19, 2018, 10:00 am – 12:00 pm
Location: SB1 5100 Corporate Partners Executive Boardroom

As the workforce has become increasingly diverse, many organizations have responded by implementing various approaches to managing workforce diversity, including formal diversity policies. Organizational diversity policies are widespread in organizations; however, scholars are only beginning to examine the impact of diversity policies on the attitudes and behaviors of dominant group employees (i.e., usually White employees). Using experimental methodology, I find support for the dominant group blowback to organizational diversity policies. Study 1, an online experiment conducted on Amazon’s Mechanical Turk, and Study 2, a field experiment in an organizational setting, found support for such blowback in the form of increased turnover intentions and decreased organizational citizenship behavior for dominant group members. However, Study 3, an online experiment conducted on Amazon’s Mechanical Turk, did not find any differences in unethical behavior for dominant group members exposed to a diversity policy or a neutral mission statement. This suggests that the dominant group blowback does not take the form of active harm against the organization. Taken together, these research findings suggest that diversity policies can have unintended, adverse consequences for organizations.

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Optimal Signaling of Content Accuracy: Engagement vs. Misinformation

Host(s): Assistant Professor Luyi Gui
Speaker(s): Ozan Candogan, Associate Professor of Operations Management
University: University of Chicago, Booth School of Business
Time: Friday, October 12, 2018, 10:00 am – 11:30 am
Location: SB1 5100 Corporate Partners Executive Boardroom

This paper studies information design in social networks. We consider a setting, where agents’ actions exhibit positive local network externalities. There is uncertainty about the underlying state of the world, which impacts agents’ payoffs. The platform can choose a signaling mechanism that sends informative signals to agents upon realization of this uncertainty, thereby influencing their actions. We investigate how the platform should design its signaling mechanism to achieve a desired outcome. Although this abstract setting has many applications, we discuss our results in the context of a specific one: misinformation in social networks. Agents in a social network engage with content that is possibly erroneous. Their payoff is based on the direct satisfaction from engaging, the disutility from engaging with erroneous content, and the positive externality that they derive from engaging with the same content as their peers in the underlying social network. The platform can commit to a signaling mechanism that sends agents informative signals based on the realization of the error of the content, and influence agents’ engagement decisions.

We show that the optimal (in terms of engagement/misinformation) signaling mechanisms have a simple threshold structure: the platform recommends that agents “Engage” with the content if its error is below a threshold and recommends “Do not engage” otherwise. For the mechanism that maximizes engagement, these thresholds depend on agents’ network positions, which we capture through a novel centrality measure that we introduce. Surprisingly, in the case where the platform seeks only to minimize misinformation (regardless of the induced engagement), public signal mechanisms with identical thresholds across agents are optimal. This is in contrast to the engagement maximization setting, where when agents are heterogeneous in terms of their network positions, public signal mechanisms induce substantially lower engagement than the optimal mechanisms. We also study the frontier of the engagement/misinformation levels that can be achieved via different mechanisms and characterize when public signal mechanisms can achieve optimal tradeoffs. Finally, we supplement our theoretical findings with numerical simulations on a Facebook subgraph.

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Pro – Environmental Waste Receptacle Labeling Can Increase Recycling Contamination (Joint work with Jesse Catlin)

Host(s): Professor Robin Keller and Co-Hos
Speaker(s): Yitong Wang, Senior Lecturer (Associate Professor Equivalent) of Marketing
University: University of Technology Sydney, Business School
Time: Friday, October 5, 2018, 10:00 am – 11:30 am
Location: SB1 5200 Lymann Porter Colloquia Room

While aggregate recycling rates in developed countries have plateaued in recent years, the contamination rate of recycling streams due to consumers incorrectly recycling items that cannot be recycled has grown rapidly. We propose that this problem may be partially due to persuasive messages, such as labelling on bins, that encourage recycling, but often lack guidance for how to do so accurately. For example, a number of public garbage receptacles across the U.S. feature the term “landfill” instead of “trash”, encouraging recycling by making the negative impact of garbage more salient. However, this labelling may also lead consumers to incorrectly recycle materials that cannot be recycled. In two field studies, we found that some variations of pro-environmental receptacle labelling led to overly inclusive recycling and an online study provided preliminary evidence that this effect is driven by the negative emotions the labels evoke. A field study using pictorial guides illustrating accurate item disposal showed potential to counteract the previously observed effects.

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A Computational Social Science Framework For Representing Emergent Consumer Experience

Host(s): Professor Alladi Venkatesh
Speaker(s): Donna Hoffman, Professor of Marketing Denit Trust Distinguished Scholar and Co-Director of The Center for the Connected Consumer;Thomas Novak, Professor of Marketing; Louis Rosenfeld Distinguished Scholar and Co-Director of The Center for the Connected Consumer
University: George Washington University School of Business
Time: Friday, June 8, 2018, 2:00 pm – 3:30 pm
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

IoT interactions are generating extremely large amounts of data in a variety of forms. These include IFTTT (online service for creating “if this then that” rules), Amazon Alexa skills, chatbots and other discourse data, intelligent assistants, sensors, smart home, social robots, and autonomous cars. With more than 20 billion devices connected to the Internet (many more than the 7.35 billion people in the world), managers have a need to understand what new kinds of consumer experiences are likely to emerge from these interactions. Interaction data are very high dimensionality and consist of often millions of ongoing interactions among complex component devices (and consumers). This makes IoT data big in two ways: 1) their size, in terms of the number of objects that are interacting with each other, and 2) their complexity, in terms of the number of attributes or features describing each object. This complexity presents significant challenges for…(View Complete Abstract on Catalyst)

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One-To-Many Matching Auctions in Platforms

Host(s): Assistant Professor Mingdi Xin
Speaker(s): Hemant Bhargava; Professor, MSBA Program Chair, Jerome and Elsie Suran Chair in Technology Management
University: University of California, Davis; Graduate School of Management
Time: Tuesday, May 29, 2018, 1:30 pm – 3:00 pm
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Platforms create value by matching participants on alternate sides of the marketplace. While many platforms practice one-to-one matching (e.g., Uber), others can conduct and monetize one-to-many simultaneous matches (e.g., lead marketing platforms). Ideally, the choice between the two modes should be determined by the relative premium that participants perceive for exclusive matches and the nature of heterogeneity in these two sets of valuations. This paper studies the problem of designing an auction format for such platforms, i.e., a set of rules for allocation and pricing of matches. The solutions we devise maintain incentive-compatibility (i.e., truthful bidding is optimal), making them easy to participate in and implement. We formulate the problem optimal incentive-compatible auction as a mixed integer mathematical program. Although the mathematical program is notoriously hard to solve, its value is that it leads to heuristic auction designs that are simple to implement, provide good revenue, and have speedy performance, all critical in practice. Specially, we develop multiple relaxations of the mathematical program to obtain upper bounds on the (unknown) optimal auction revenue and, conversely, renements that produce heuristic auction designs whose optimal revenue is a lower bound. By demonstrating a tight gap between the two bounds for one such design, RM (a reserve-price based mechanism), we prove that it has excellent revenue performance and places low information and computational burden on the platform and participants.

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One-To-Many Matching Auctions in Platforms

Host(s): Assistant Professor Mingdi Xin
Speaker(s): Hemant Bhargava; Professor, MSBA Program Chair, Jerome and Elsie Suran Chair in Technology Management
University: University of California, Davis; Graduate School of Management
Time: Tuesday, May 29, 2018, 12:00 pm – 1:30 pm
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Platforms create value by matching participants on alternate sides of the marketplace. While many platforms practice one-to-one matching (e.g., Uber), others can conduct and monetize one-to-many simultaneous matches (e.g., lead marketing platforms). Ideally, the choice between the two modes should be determined by the relative premium that participants perceive for exclusive matches and the nature of heterogeneity in these two sets of valuations. This paper studies the problem of designing an auction format for such platforms, i.e., a set of rules for allocation and pricing of matches. The solutions we devise maintain incentive-compatibility (i.e., truthful bidding is optimal), making them easy to participate in and implement. We formulate the problem optimal incentive-compatible auction as a mixed integer mathematical program. Although the mathematical program is notoriously hard to solve, its value is that it leads to heuristic auction designs that are simple to implement, provide good revenue, and have speedy performance, all critical in practice. Specially, we develop multiple relaxations of the mathematical program to obtain upper bounds on the (unknown) optimal auction revenue and, conversely, renements that produce heuristic auction designs whose optimal revenue is a lower bound. By demonstrating a tight gap between the two bounds for one such design, RM (a reserve-price based mechanism), we prove that it has excellent revenue performance and places low information and computational burden on the platform and participants.

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Can Multiple On-Demand Service Platforms Coexist?

Host(s): Professor Robin Keller
Speaker(s): Jiaru Bai, Assistant Professor
University: Binghamton University, School of Management
Time: Friday, May 25, 2018, 1:00 pm – 2:30 pm
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

Firms are financing many startups that are essentially on-demand service platforms, we wonder how many startups of this kind can survive in a competitive market. To examine this question, we present a model in which two on-demand service platforms compete in both the provider and customer markets with earning-sensitive service providers and price- and delay-sensitive customers. We first analyze a base model that relies on five market characteristic assumptions: 1) Homogeneous platform valuations; 2) Homogeneous reservation wages; 3) Homogeneous customers; 4) Pure pricing strategies; 5) Nonexclusive providers. We show that both platforms cannot co-exist in equilibrium when the system delay satisfies a "pooling effect" condition that holds in an M/M/k queuing system. Then we find that this result continued to hold even when we relax those characteristic assumptions separately by allowing for non-identical platform valuations, heterogeneous reservation wages, and promotional pricing strategies. However, both platforms may co-exist when customers are heterogeneous or when service providers are exclusive to their respective platforms.

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Comovement: Evidence from Network – Connected Firms in China

Host(s): Assistant Professor Elizabeth Chuk
Speaker(s): T.J. Wong, Professor of Business Administration and Accounting
University: Marshall School of Business, University of Southern California
Time: Friday, May 18, 2018, 3:00 pm – 4:30 pm
Location: SB1 2321, Judy B. Rosener Classroom

In this paper, we examine whether comovement in the stock returns of pairs of Chinese firms connected to the same political network are systematically shaped by the prevailing coordination vs. competition incentives of the network’s politicians. We find strong evidence that stock price comovement is affected by the embeddedness of the firm-politician tie within the network. Among pairs of firms connected to a network through a common politician, we document an increase in stock return comovement. For those pairs of firms connected to a common network via separate politicians (rather than a common politician), we document a relative decrease in stock return comovement. This negative effect suggests that the politicians’ relationships within these political

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Informal Certification: resolving the tension between lowering barriers to entry and new firm legitimacy

Host(s): Dean’s Professor Margarethe Wiersema
Speaker(s): Robert Eberhart. Assistant Professor, Department of Management
University: Leavey School of Business, Santa Clara University
Time: Friday, May 18, 2018, 2:30 pm – 4:00 pm
Location: SB2 Classroom 117

This paper examines the effects on new firms when certifications intended to assist their entry are eliminated. Common efforts to invigorate entrepreneurship often lead to policies that lower the difficulty of the steps that are required to start a firm. The policies often lead to the loss of certifications that audiences use to evaluate a new firm’s propriety and capability. Using insights from recent research on audience diversity as a new firm seeks legitimacy, and quantitative data from new firm credit records, this study offers evidence that after a dramatic reduction of required capital to gain a certificate of incorporation, new firms in emerging industries continue to opt for high capital levels that were previously certified. This happens because as new firms lose the formal certification of satisfying the regulatory requirements of incorporating, they still seek legitimacy by showing their organizational achievement of raising initial capital at or above the previously certified level – what this study calls an “informal certification.” This study also demonstrates that firms with alternate legitimating attributes - an elite founder or local social ties – need not pursue an informal certification. This study contributes to the recent growing literature on audience diversity and organizational responses as a process of legitimization. Overall, this study shed’s light on the dynamics of how new firms acquire legitimacy in a complex, multi-audience environment by examining their responses to policies that deprive them of legitimizing certifications.

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Determining Credit Risk Using Qualitative Disclosure

Host(s): Associate Professor Elizabeth Chuk
Speaker(s): Jared Jennings, Assistant Professor of Accounting
University: Olin Business School, Washington University in St. Louis
Time: Friday, May 11, 2018, 1:00 pm – 2:30 pm
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

We examine whether supervised machine-learning methods extract credit risk relevant qualitative information from conference calls. Using a subsample of observations between 2003 and 2015, we create a summary text-based measure for borrower credit risk by combining the estimates generated by support vector regression, supervised LDA, and random forest trees using factor analysis. We find that our measure explains a substantial portion of borrower creditworthiness as indicated by credit default swap (CDS) spreads. In addition, for firms without actively traded CDS, we find that our measure also captures credit risk as measured by initial interest rate spreads in private debt contracts, future covenant violations, future credit rating downgrades, future bankruptcy filings, and future negative stock price shocks, and is incremental to other common market-based credit risk measures. Our study is the first to convert qualitative disclosure into a quantitative measure of credit risk. This is significant, as the majority of borrowers do not have actively-traded CDS.

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Recent Research and Teaching In Smart City Operations Management

Host: Associate Professor Shuya Yin
Speaker: Ho-Yin Mak, Associate Professor in Management Science
University: Saïd Business School, University of Oxford
Time: Wednesday, May 2, 2018, 10:00 am – 11:30 am
Location: SB1 5100 Corporate Partners Executive Boardroom

Over 50% of the world’s population lives in cities. The ever-growing urban population entails economic opportunities as well as major sustainability challenges. Enabled by latest technological advances, the Smart City approach has emerged as a potential strategy to overcome these grand challenges and unlock new business opportunities. In this talk, I shall first discuss my ongoing research in Smart City Operations Management, focusing on a working paper on peer-to-peer (P2P) crowdshipping in urban omnichannel retail. Toward the end of the talk, I also plan to share about the development of an MBA course on Smart City Analytics at Oxford. Crowdshipping, a novel practice built upon the sharing economy, has been adopted by a number of retailers to tackle the notorious last-mile delivery problem in urban omnichannel retail. In this work, we study the potential of P2P crowdshipping, i.e., enlisting in-store shoppers to deliver online orders in their vicinity, and its impact on the marketing-operations interface for an omnichannel retailer. Specifically, P2P crowdshipping could potentially help the retailer improve delivery efficiency, and gain an additional lever for price discrimination. When these two effects interact, we find that the favorability of crowdshipping heavily depends on product characteristics, and how shopper-deliverers are reimbursed. For necessity goods, a cost-based reimbursement scheme could lead to a win-win outcome in both the retailer’s profit and consumer surplus; for higher-end products, reimbursing deliverers a premium on top of their delivery costs would be favorable.

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The Effect of Health Insurance on Home Payment Delinquency: Evidence From ACA Marketplace Subsidies

Host(s): Associate Professor Mireille Jacobson
Speaker(s): Emily Gallagher, Postdoctoral Research Associate in Household Finance
University: Olin Business School, Washington University in St. Louis
Time: Tuesday, May 1, 2018, 3:30 pm – 5:00 pm
Location: Social Sciences Plaza A, Room 3132

We use administrative tax data and survey responses to quantify the effect of health insurance on rent and mortgage delinquency. We employ a regression discontinuity (RD) design, exploiting the income threshold for receiving Marketplace subsidies in states that did not expand Medicaid under the Affordable Care Act. Eligibility for subsidies is associated with a roughly 26 percent decline in the delinquency rate and reduced exposure to out-of-pocket medical expenditure risk. IV results indicate that this relationship is likely causal. We show that, under plausible assumptions, the social benefits implied by our RD estimates, in terms of fewer evictions and foreclosures, are substantial relative to the transfer value of the subsidies.

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How do IPOs affect Employee Behavior?

Evidence from Brokerage IPOs and Analysts’ Forecasts

Host(s): Associate Professor Elizabeth Chuk
Speaker(s): Mark Bradshaw, Chairperson and Professor of Accounting
University: Carroll School of Management, Boston College
Time: Friday, April 27, 2018, 3:00 pm – 4:30 pm
Location: SB1 5100, Corporate Partners Executive Boardroom

This study examines the effects of initial public offerings (IPOs) by brokerages (henceforth, broker IPOs) on the objectivity of sell-side equity analysts employed by those brokerages. Using a matched sample difference-in-differences research design, we provide evidence that analysts produce more optimistically biased earnings forecasts relative to their peers following their employer’s IPO. We further find that the effect of broker IPOs on analysts’ forecast bias is more pronounced when economic incentives for optimistic bias are stronger (i.e., brokers with higher market-to-book ratios and for covered firms with higher future external financing needs). Our results provide important evidence on how IPOs can impact the behavior of individual, non-executive, employees by increasing their focus on short term results.

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Healthcare Markets: For-Profit vs. Non-Profit Hospital Competition

Host(s): Walter B. Gerken Chair in Enterprise and Society and Professor of Marketing Rajeev Tyagi
Speaker(s): Steven Mark Shugan, McKethan-Matherly Eminent Scholar Chair & Professor of Marketing
University: Warrington College of Business, University of Florida
Time: Friday, April 27, 2018, 2:00 pm – 3:30 pm
Location: SB1 5100, Corporate Partners Executive Boardroom

We find the unusual competitive interactions between for-profit and nonprofit hospitals contribute to the higher profits and prices of nonprofit over for-profit hospitals. The nonprofits’ legal inability to distribute profits to stakeholders allows nonprofits to sacrifice profits for market share and thus have a formidable competitive advantage. Specifically, given nonprofits’ willingness to forego profits for output, nonprofits deter for-profit entry into premium specialty medical services (PSMS) markets, or for-profits cede market share to nonprofits foreseeing low post-entry competitive prices in costly PSMS markets. Consequently, nonprofits dominate PSMS (e.g., oncology, hospice services) markets, commanding both greater output and higher prices. Those gaps increase as competition intensifies because nonprofits seeking output invest more aggressively. As expected, the most profitable U.S. hospitals are nonprofit. Last, focusing on PSMS, nonprofits use national advertising while for-profits use local advertising for basic services. Our analysis involves both game-theoretic models and empirical tests with several healthcare databases.

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Regulation of Charlatans in High – Skill Professions

Host(s): Assistant Professor David Yang
Speaker(s): Jules Van Binsbergen, The Nippon Life Associate Professor of Finance
University: The Wharton School, University of Pennsylvania
Time: Friday, April 27, 2018, 2:00 pm – 3:30 pm
Location: SB1 2321, Judy B. Rosener Classroom

We model a market for a skill that is in short supply and high demand, where the presence of charlatans (professionals who sell a service that they do not deliver on) is an equilibrium outcome. We use this model to evaluate the standards and disclosure requirements that exist in these markets. We show that reducing the number of charlatans through regulation decreases consumer surplus. Although both standards and disclosure drive charlatans out of the market, consumers are worse off because of the resulting reduction in competition amongst producers. Producers, on the other hand, strictly benefit from the regulation, implying that the regulation we observe in these markets likely derives from producer interests. Using these insights, we study the factors that drive the cross-sectional variation in charlatans across professions. Professions with weak trade groups, skills in larger supply, shorter training periods and less informative signals regarding the professional’s skill, are more likely to feature charlatans.

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Fear and the Safety Net: Evidence From Secure Communities

Host(s): Associate Professor Mireille Jacobson
Speaker(s): Marcella Alsan, Assistant Professor of Medicine and Investigator at the VA Palo Alto Health Care System
University: Stanford University
Time: Wednesday, April 25, 2018, 3:30 pm – 5:00 pm
Location: Social Science Plaza A, Room 3132

We study the impact of deportation fear on the incomplete take-up of federal safety net programs in the United States. We exploit changes in deportation fear due to the roll-out and intensity of Secure Communities (SC), an immigration enforcement program administered by the Immigration and Customs Enforcement Agency (ICE) from 2008 to 2014. The SC program empowers the federal government to check the immigration status of anyone arrested by local law enforcement agencies and has led to the issuance of over two million detainers and the forcible removal of approximately 380,000 immigrants. We estimate the spillover effects of SC on Hispanic citizens, finding significant declines in ACA sign-ups and food stamp take-up, particularly among mixed-status households and areas where deportation fear is highest. Our results are most consistent with network effects that perpetuate fear rather than lack of benefit information or stigma.

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Shareholder Litigation and Corporate Innovation

Host: Assistant Professor David Yang
Speaker: Gustavo Manso, Associate Professor of Finance, William A. and Betty H. Hasler Chair in New Enterprise Development
University: Haas School of Business, University of California at Berkeley
Time: Friday, April 13, 2018, 2:00 pm – 2:30 pm
Location: SB1 5200, Porter Colloquia Room & Executive Terrace

We examine whether and to what extent shareholder litigation shapes corporate innovation. We use the staggered adoption of the universal demand (UD) laws in 23 states from 1989 to 2005. These laws impose obstacles against shareholders filing derivative lawsuits thereby significantly reducing a firm’s litigation risk. Following the passage of the UD laws, firms have invested more in R&D, produced more patents based on new knowledge and more patents in new technological classes, generated more patents that have a large number of citations, and achieved higher patent value. Our findings suggest that the external pressure imposed by shareholder litigation discourages managers from engaging in explorative innovative activities.

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Political Connections and Government Subsidies: State-level Evidence

Host: Assistant Professor Elizabeth Chuk
Speaker: Reining Petacchi, Assistant Professor
University: McDonough School of Business, Georgetown University
Time: Friday, March 16, 2018, 3:00pm – 4:30pm
Location: SB1 5100 Corporate Partners Executive Boardroom

Coauthored with Daniel Aobida (Northwestern University) and Allison Koester (Georgetown University) This paper examines whether corporate political connections are associated with government awarded subsidies, and how this relation impacts subsidy effectiveness in spurring state future economic growth. Subsidies relate to foregone government revenues through income, sales, property, and payroll tax credits/abatements, and to government resource transfers through grants and cost reimbursement programs. Using novel datasets to identify state-awarded corporate subsidies and corporate contributions to state political candidates, we find that political contributions increase both the likelihood a company is awarded a state subsidy and the dollar value of subsidy awarded. Companies contributing to a greater number of candidates, to both Republican and Democratic Party candidates, and to both gubernatorial and legislative candidates reap the greatest subsidy benefits. Importantly, we find that subsidies are positively associated with a state’s future intra-industry jobs growth, but only for subsidies awarded to politically unconnected companies. This finding suggests quid pro quo behavior in the state subsidy award process results in a less effective allocation of government resources.

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The Downside of Productive Leisure

Host: Professor Connie Pechmann
Speaker: Jordan Etkin, Associate Professor of Marketing
University: The Fuqua School of Business, Duke University
Time: Friday, March 16, 2018, 12:30pm – 2:00pm
Location: SB1 2321, Judy B. Rosener Classroom

Recent marketing trends encourage consumers to consider whether they are getting the most out of their leisure time. Guidebooks like Lonely Planet publish top-sites lists to help tourists plan the best vacation. Media outlets like The New York Times post-read lists to steer readers towards the best articles. But while this notion of “productive leisure” may appeal to consumers’ desire to be productive and accomplish, could it also undermine some of leisure’s benefits? Five experiments demonstrate that making leisure productive hurts subsequent performance. This occurs because considering what one is doing during leisure imposes cognitive demands, hampering resource replenishment. As a result, when downstream activities require cognitive resources, productive leisure hurts performance. Thus, while taking a break can replenish diminished resources and improve subsequent performance, we demonstrate that making leisure productive can undermine leisure’s restorative benefits and cause consumers to do worse (sometimes even worse than not taking a break at all). The findings further understanding of how productivity and time use shape consumer wellbeing, and have implications for how consumers spend their leisure time.

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Default and Endogenous Leverage in the Laboratory

Host: Assistant Professor David C. Yang
Speaker: Marco Cipriani, Sam P. Woodson, Research Officer of Money & Payments Studies Function
Organization: Federal Reserve Bank of New York
Time: Monday, March 12, 2018, 2:00pm – 3:30pm
Location: SB1 5200 Porter Colloquia Room & Executive Terrace

We study default and endogenous leverage in the laboratory. To this purpose, we develop a general equilibrium model of collateralized borrowing amenable to laboratory implementation and gather experimental data. In the model, we do not rely on ad-hoc leverage constraints, instead, leverage endogenously arises in equilibrium. When financial assets serve as collateral, namely, assets with payoffs that do not depend on ownership (such as bonds), leverage is low and there is no default. In contrast, when non-financial assets serve as collateral, namely, assets with payoffs that depend on ownership (such as firms), leverage is higher and default occurs. In line with these theoretical predictions, leverage and default rates are higher in the treatment with non-financial assets; in contrast to the theory, however, default rates are greater than zero even when assets are financial.

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Does Litigation Encourage or Deter Real Earnings Management?

Host: Assistant Professor Elizabeth Chuck
Speaker: Sugata Roychowdhury, Professor of Accounting
University: Carroll School of Management, Boston College
Time: Friday, March 9, 2018, 3:00 pm – 4:30 pm
Location: SB1 5100 Corporate Partners Executive Boardroom

We examine whether litigation risk encourages or deters real earnings management (REM). The literature documents that litigation risk restricts earnings management via accruals. Reduced ability to manipulate accruals in the presence of high litigation risk can encourage managers to engage in REM instead. However, an alternative scenario is also possible. Specifically, since the intention of REM is to mislead shareholders, managers’ efforts to conceal REM can induce them to make misleading disclosures that become the subject of future lawsuits. This ex post settling-up by shareholders can ex ante deter managers from engaging in REM. We conduct differences-in-differences tests centered on an unanticipated court ruling that reduced shareholders’ ability to initiate class action lawsuits against firms headquartered in the Ninth Circuit. We observe significant increases in REM following the ruling for Ninth-Circuit firms relative to other firms, consistent with litigation deterring REM. Additional analyses reveal that REM rises more for firms that issue optimistic forecasts and exhibit more positive tone and higher obfuscation in the MD&A sections of their 10-K reports. These findings provide evidence on the channel through which litigation constrains REM: the as-yet unexplored link between misleading disclosures and opportunistic real activities. Further results confirm that the deterrence role of litigation is more salient when managers have incentives to manipulate earnings and when governance mechanisms are weaker.

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Externalities As Arbitrage

Host(s): Assistant Professor David Yang
Speaker: Benjamin Hebert, Assistant Professor of Finance
University: Stanford University, Stanford School of Business
Location: SB1 5200 Porter Colloquia Room & Executive Terrace
Time: Friday, March 9, 2018, 2:00 pm – 3:30 pm

Regulations on financial intermediaries can create apparent arbitrage opportunities. Intermediaries are unable to fully exploit these opportunities due to regulation, and other agents are unable to exploit them at all due to limited participation. Does the existence of arbitrage opportunities imply that regulations are sub-optimal? No. I develop of general equilibrium model, with financial intermediaries and limited participation by other agents, in which a constrained-efficient allocation can be implemented with asset prices featuring arbitrage opportunities. Absent regulation, there would be no arbitrage; however, allocations would be constrained-inefficient, due to pecuniary externalities and limited market participation. Optimal policy creates arbitrage opportunities whose pattern across states of the world reflects these externalities. From financial data alone, we can construct perceived externalities that would rationalize the pattern of arbitrage observed in the data. By examining these perceived externalities, and comparing them to the stated goals of regulators, as embodied in the scenarios of the stress tests, we can ask whether regulations are having their intended effect. The answer, in recent data, is no.

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Reflections on Teaching

Host: Taco Bell Endowed Professor Vijay Gurbaxani
Speaker: Roy Jones
University: Simon Business School, University Of Rochester
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Friday, March 9, 2018, 11:30 am – 12:30 pm

Background: Little is known about the impact of non-cardiovascular disease burden on 30-day readmission in heart failure (HF) patients.
Objectives: We aimed to assess the role of non-cardiovascular disease burden on 30-day readmission in HF patients.
Methods: We analyzed the effect of non-cardiovascular disease burden by frequency of ICD-9 code categories on readmissions of patients discharged with a primary diagnosis of HF. We first modeled the probability of readmission within 30 days as a function of demographic and clinical covariates in a randomly selected training dataset of the total cohort. Variable selection was carried out using a bootstrap LASSO procedure with 1000 bootstrap samples, the final model was tested on a validation dataset. Adjusted odds ratios and confidence intervals were reported in the validation dataset.
Results: There were a total of 6228 HF hospitalizations, 1523 (24%) with readmission within 30 days of discharge. The strongest predictor for 30-day readmissions was any hospital admission in the prior year (p<0.001). Cardiovascular risk factors did not enter the final model. However, digestive system diseases increased the risk for readmission by 17% for each diagnosis (p=0.046), while respiratory diseases and genitourinary diseases showed a trend toward a higher risk of readmission (p=0.07 and 0.09, respectively). Non-cardiovascular diseases out-competed cardiovascular covariates previously reported to predict readmission.
Conclusions: In patients with HF hospitalization, prior admissions predicted 30-day readmission. Diseases of the digestive system also increase 30-day readmission rates.
Assessment of non-cardiovascular disease burden in HF patients could serve as an important risk marker for 30-day readmissions.

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Do Unto Others: Development and Validation of a Measure of Managerial Interpersonal Skills (MIPS)

Host: Associate Dean and Professor Gerardo A. Okhuysen
Speaker: Shaun Pichler, Associate Professor of Management
University: Mihaylo College of Business and Economics, California State University, Fullerton
Time: Friday, March 9, 2018, 10:30 am – 12:00 pm
Location: SB1 5100, Corporate Partners Executive Boardroom

It is no secret that employees leave their organizations because of bad managers- but what about the good ones? How can researchers and organizations differentiate managers in terms of their interpersonal skills? And how are these skills related to outcomes for employees—and for managers themselves? These are fundamentally important questions for management scholars and for organizations. With that said, there exists no widely accepted conceptual model, definition or measure of managerial interpersonal skills (MIPS). We sought out to address these questions by developing and validating a measure of MIPS through a multiphasic research program that included four studies: First, through structured interviews with practicing managers and executives; next, through two pilot studies; and finally, in a validation study with matched supervisor-employee data from a large healthcare organization. Results of our research program suggest that, at least among employee reports, MIPS is three-dimensional construct comprised of supporting, motivating and managing conflict, each indicating a higher-order latent MIPS factor. Results also indicate that MIPS predict job attitudes and performance among both employees and managers.

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Toward a neo-Darwinian Synthesis of Neoclassical and Behavioral Economics

Host: Professor Lu Zheng
Speaker: Terence Burnham, Associate Professor
University: George. L. Argyros School of Business and Economics, Chapman University
Time: Tuesday, March 6, 2018, 12:00 pm – 1:00 pm
Location: SB1 5200 Porter Colloquia room & Executive Terrace

There is a schism within economics between the neoclassical and behavioral schools. A primary cause of the behavioral ascent is the experimental evidence of deviations between actual behavior and the neoclassical prediction of behavior. While behavioral scholars have documented these “anomalies,” they have made little progress explaining the origin of such behavior. This paper proposes a biological and evolutionary foundation for the anomalies of behavioral economics by separating proximate and ultimate causation. Such a foundation may allow for a re-uniting of economics; a neo-Darwinian synthesis of neoclassical and behavioral economics.

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Mutual and Hedge Fund Portfolios: The Case of The Missing Value Funds

Host: Assistant Professor David C. Yang
Speaker: Martin Lettau, Kruttschnitt Chair in Financial Institutions 
University: Haas School of Business, University of California, Berkeley 
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Friday, March 2, 2018, 2:00pm – 3:15pm 

We study the portfolio composition of active mutual funds and hedge funds. For each mutual fund we construct the time series of portfolio-weighted characteristics (e.g. size, book-to-market and momentum). We find that a majority of mutual funds are low book-to-market while there are virtually no high book-to-market funds. Even most mutual funds described as value funds'' have book-to-market ratios that not higher than that of the overall market. The portfolios of growth funds'' is strongly tilted towards low book to-market growth stocks. In contrast, "value funds'' actually hold a larger portion of their portfolio in low book-to-market growth stocks than high book-to-market value stocks. We find similar results for alternative value/growth measures. Mutual funds hold mostly very large stocks and do not tilt towards high momentum stocks.

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The Rise of Ant Financial Services

Host: Professor Lu Zheng
Speaker: Lingwen Huang
University: The Paul Merage School Of Business, University Of California, Irvine
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Tuesday, February 27, 2018, 12:00 pm – 1:00 pm

The teaching demo is going to present the phenomenal rise of Ant Financial Services, which started as Alipay, and has since grown to become the world's largest Fintech company. Ant Financial leverages cutting edge technology to provide accessible finance to the underserved SMEs and individuals. This case highlights the dynamic evolution of its business model and its ecosystem. The case also brings up the key challenges that Ant Financial has to deal with, i.e., the intensely competitive Fintech landscape, the viability of its ambitious strategy for inclusive finance, and the transferability of its success beyond China.

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Research and Development Tax Incentives in the Mining Industry

Host: Professor Elizabeth Chuk
Speaker: Sam Sherry, Visiting Scholar at UCI, PhD Candidate in Accounting
University: Paul Merage School of Business, University of California, Irvine
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time:  Friday, February 23, 2018, 3:00 pm – 4:30 pm

This paper examines the impact of the introduction of the R&D tax incentive in 2011 on R&D expenditure by Australian mining firms. The R&D tax incentive was introduced to address limitations of the existing R&D tax concession which prevented small, innovative companies in a tax loss position from benefiting from the concession, and to remedy the very tight targeting of the existing refundable R&D tax offset by removing restrictions on eligibility to make cash refunds accessible to more small to medium sized companies. We examine the effect of the new R&D tax incentive in a setting where small to medium sized companies with accumulated losses are prevalent, namely the Australian mining sector. Using a sample of 907 unique companies in the mining and energy sectors that were listed on the ASX during the period 2008 to 2015, we find that the number of companies receiving R&D tax refunds after 1 July 2011 increased significantly, and the average refund received increased from $220,067 in 2008 to $986,074 in 2015. We find that firms with accumulated losses are more likely to access the R&D tax incentive and that qualifying R&D expenditure by firms eligible for the incentive has increased since 2011, providing prima facie evidence that the R&D tax incentive has been effective.

Retention and its Discontents: How Ideal Workers with Family Aspirations Navigate Career Decision-Making

Host(s): Assistant Professor Maia Young
Speaker: Carrie Oelberger
University: University of Minnesota, Humphrey School of Public Affairs
Location: SB1 5200 Porter Colloquia Room & Executive Terrace
Time: Friday, February 23, 2018, 10:30 am – 12:00 pm

Every career decision forces the worker to grapple with the possibility of realizing – or repressing – deeply held desires.  As such, career decisions are the fruit of protracted deliberation with high emotional stakes, not simply rational calculations of advancement. Moreover, modern careers provide nearly constant opportunities to engage in these reflections. Using interview and detailed career history data from 70 international aid workers, I examine the career decision-making process for people who are extremely devoted to work, enacting ideal worker norms, but who also desire a family. While resolving any work-family conflict is difficult, I find that people with family aspirations experience greater stress in decision-making than their family-rooted counterparts due to the uncertainty of their situation. I show how people navigate these crises by reflecting upon the possibility of transitioning their desires into realities, detailing how they consider the uncertainty of their situation, the breadth of options they perceive, and the temporal durability of those options. Even after a process of deep reflection, many people nonetheless choose to double down and prioritize work, suggesting that people who are devoted to work tend to fear the loss of meaning that it provides. As such, organizations may paradoxically retain employees who are devoted to work, but are personally discontented. These findings hold implications for research on work-family, labor market inequalities, and careers.

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The Implications of Invisibility on the Use of Strategic Inventory in a Supply Chain

Host(s): Assistant Professor Shuya Yin
Speakers: Stephen M. Gilbert, Sam P. Woodson, Jr. Centennial Memorial Professor in Business, Chair of the Department of Information, Risk & Operations Management
University: The University of Texas at Austin, McCombs School of Business
Location: SB1 2321 Judy B. Rosener Classroom
Time: Friday, March 9, 2018, 10:00am – 11:30am

It is now widely accepted that a retailer’s use of strategic inventory can mitigate double marginalization and improve the coordination of a supply chain, potentially benefiting both the downstream retailer and an upstream manufacturer. However, this conclusion has typically been based on the assumption that the manufacturer can observe the retailer’s level of inventory before making wholesale pricing decisions. In reality, there are many situations in which neither the retailer’s sales nor inventory are observable to the manufacturer, effectively concealing the action taken by the retailer. We investigate the implications of such a lack of observability upon the use of strategic inventory in a supply chain consisting of a single retailer and a single manufacturer. We find that the manufacturer’s inability to observe inventory has significant implications for the amount of inventory and the range of holding cost for which it is held in equilibrium. In addition, we find that, in the absence of any form of uncertainty to which the manufacturer could benefit from responding to, he may prefer not to observe the retailer’s inventory. On the other hand, the retailer’s willingness to make her inventory visible depends upon the holding cost.

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Broker Rebates and Investor Sophistication

Host(s): Professor Lu Zheng
Speaker(s): Mor Haziza, Visiting Lecturer in Finance
University: University of California, Irvine. Paul Merage School of Business
Location: SB1 5200 Porter Colloquia Room & Executive Terrace
Time: Tuesday, February 20, 2018, 12:00 pm – 1:00 pm

Following a notice of the Israeli Securities Authority, portfolio managers had to obtain their clients’ proper and legal approval, in writing, so that they can receive a fraction of the transaction costs, their clients pay the broker executing the trades. One would expect an overwhelming opposition to the kickback as consenting investors are exposed to avoidable losses due to (moral hazard) excessive trading. Yet about 89% of the investors in our sample allowed their manager to receive a kickback. This is quite remarkable considering that not responding implies a prohibition. Indeed, the more sophisticated investors tend to disagree. We find that portfolios of consenting investors underperform in the year following their decision. In addition, the empirical evidence indicates that consenting is not a reward on past success.

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When Prospect Theory Meets Consumer Choice Models: Assortment and Pricing Management with Reference Prices

Host(s): Associate Professor Shuya Yin
Speaker(s): Ruxian Wang, Assistant Professor of Operations Management and Business Analytics
University: Carey Business School, Johns Hopkins University
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Thursday, February 15, 2018, 11:00am – 12:30pm

Reference prices arise as price expectations against which consumers evaluate products in their purchase scenarios. We investigate what will happen when prospect theory (e.g., reference prices) meets consumer choice models from the perspectives of both the consumers and the firm. Consumers see multiple relevant products on a particular purchase occasion, and often compare their prices to form the willingness to pay when considering whether to purchase a particular product. Reference prices, which are not included in many choice models, may impact consumer choice behavior, so we incorporate reference prices into consumer choice models and investigate the operations management problems. We take the widely used multinomial logit model as a showcase to examine the effects of reference prices through analytical and empirical study. We consider the optimization problems on assortment planning and pricing under consumer choice models with a variety of reference prices, including the lowest price and the assortment variety. Our empirical study on a real data set demonstrates that incorporating reference prices into choice models can significantly improve goodness-of-fit and prediction accuracy of consumer choice behavior. Moreover, we characterize the optimal policies for the assortment planning and pricing problems under the consumer choice models with various reference prices. In particular for the pricing problems under the reference prices defined by either the lowest price or assortment variety, we show that the optimal pricing policy has the following structure: products can be divided into several groups based on their costs; the products in the same group charge either the same markup or the same price. In practice, reference prices should be taken into account in model estimation and operations management. Ignoring reference prices may lead to substantial losses.

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How do Reductions In Foreign Country Corporate Tax Rates Affect U.S. Domestic Manufacturing Firms?

Host(s): Assistant Professor Elizabeth Chuk
Speaker(s): Ryan Wilson, Richard W. Lindholm Professor of Accounting in Taxation
University: Charles H. Lundquist College of Business, University of Oregon
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Friday, February 9, 2018, 3:00 pm – 4:30 pm

We examine whether reductions in foreign country statutory corporate tax rates affect U.S. domestic manufacturing firms’ profitability and how U.S. firms respond. We develop a measure of U.S. domestic firms’ exposure to changes in foreign country corporate tax rates and find U.S. domestic firms’ profitability is adversely affected by decreases in foreign country corporate tax rates. In cross-sectional analyses, we find the impact of these foreign tax shocks on the profitability of U.S. domestic firms is more pronounced among firms with low product differentiation. We also provide evidence that following foreign tax shocks U.S. firms with low product differentiation increase R&D and experience an increase in total factor productivity. Taken together, these findings suggest that reductions in foreign country statutory corporate tax rates adversely affect U.S. domestic firms’ profitability, and in response U.S. domestic firms become more innovative and productive.

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Repairing Disrupted Practices: Material Singularity and the Servicing of a Consumer Practice

Host(s): Assistant Professor Tonya Bradford
Speaker(s): Linda Price, Professor of Marketing
University: Lundquist College of Business, University of Oregon
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Friday, February 2, 2018, 3:00pm – 4:30pm

Consumer practices constantly face the threat of disruption, as the objects central to their performance gradually and continually disintegrate through natural material forces. We examine how consumers respond to material objects that become misaligned from their practices. Through an in-depth, multi-method study of consumers, objects, and their practices, we utilize a new materialist perspective on practice theory to illuminate often-overlooked processes of object alignment, disintegration, and repair that are integral to nearly every consumer practice. We introduce the concept of material singularity and develop a general model of object-practice calibration, which explains why and how consumers protect, maintain, and repair their continually disintegrating practices. Building on these material practice insights, we also describe the processes by which service providers aid in object-practice calibration by integrating their practices with consumers’ materially singular objects and the practices to which these objects are central.

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Former Insiders' Trading

Host(s): Assistant Professor Elizabeth Chuk
Speaker(s): Erik Johannesson, Ph.D. Candidate
University: Columbia University
Location: SB1 4410 Center for Global Leadership Room
Time: Wednesday, January 31, 2018, 3:00pm – 4:30pm

Using detailed and unique data from Sweden, I show that former insiders trade profitably in the shares of companies with which they used to be affiliated. A trading strategy mimicking former insiders’ trading behavior yields abnormal returns of 7.6% per year. These returns are primarily driven by post-separation purchases rather than by sales. They do not reflect general stock-picking skills: former insiders earn significantly lower abnormal returns when trading in companies with which they have no affiliation. Their informational advantage diminishes over time, but less so if they have ties to current insiders. The importance of such ties increases in the presence of value-relevant information. My results are consistent with former insiders benefiting from both a retained informational advantage and from inside information obtained post-separation when trading in inside stock.

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Media Exposure Through the Funnel: A Model of Multi-stage Attribution

Host(s): Vijay Gurbaxani
Speaker(s): Vibhanshu Abhishek, Assistant Professor of Information Systems
University: Carnegie Mellon University
Location: SB1 4410, Center for Global Leadership (CGL) Suite
Time: Thursday, January 25, 2018, 1:00pm – 2:30pm

In this paper, we address the problem of advertising attribution by developing a Hidden Markov Model (HMM) of an individual consumer's behavior based on the concept of a conversion funnel. We apply the model to a unique dataset from the online campaign for the launch of a car. We observe that different ad formats, e.g. display and search ads, affect consumers differently based on their states in the decision process. Display ads usually have an early impact on the consumer, moving her from a disengaged state to a state in which she interacts with the campaign. On the other hand, search ads have a pronounced effect across all stages. Further, when the consumer interacts with these ads (e.g. by clicking on them), the likelihood of a conversion increases considerably. Finally, we show that attributing conversions based on the HMM provides fundamentally different insights into ad effectiveness relative to the commonly used approaches for attribution. Contrary to the common belief that display ads are not useful, our results show that display ads have a significant effect on the early stages of the conversion process. Furthermore, we show that only a fraction of online conversions are driven by online ads.

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Do Firms Manage Pay Inequality?

Host(s): Dean’s Professor Jone Pearce
Speaker(s): Paul Willman, Emeritus Professor of Management
University: London School of Economics and Political Science
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time: Friday, January 26, 2018, 10:30 am – 12:00 pm

The paper examines the role of the modern firm in the creation of inequality of income. Specifically, it examines the growth in the use of asset based rewards for senior executives, combined with continued use of salaried rewards for other employees, and the impact this has on measures of inequality within the firm. The paper presents data on intra firm inequality from the UK FTSE 100 for the period 2000-2015. It looks at ratios of CEO to average earnings and attempts to explain both the growth in inequality on this measure and the extent of variance between firms. It concludes first, that executive compensation option structures constitute a ‘one way bet’ on pay increases and, second, that differences in outsourcing as well as levels of CEO pay are important influences on ratios. Policy implications are discussed.

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Is there a home field advantage in global markets?

Host(s): N/A
Speaker(s): Andrew Karolyi, Harold Bierman, Jr. Distinguished Professor of Management
University: SC Johnson College of Business, Cornell University
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Friday, January 19, 2018, 2:00 pm - 3:15 pm

International equity mutual funds that hire managers from a country linked to the fund`s geographic mandate exhibit a strong bias to invest in stocks of that country. These funds with “home-biased managers” attract disproportionally more flows, on average, that intensify during periods of higher economic uncertainty in that country. Stocks domiciled in countries in which the fund has a homefield advantage outperform those held by other funds without home-biased managers, but with investments in the same countries. We interpret this new finding as evidence of an informationbased channel through which the home-bias phenomenon may be revealed and link it to theories that emphasize the role of an informational endowment advantage.

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An Analysis of Time-Based Pricing in Electricity Supply Chains (Joint with Baris Ata and Serasu Duran)

Host(s): Assistant Professor Luyi Gui
Speaker(s): Ozge Islegen, Assistant Professor of Operations
University: Kellogg School of Management, Northwestern University
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Friday, January 19, 2018, 10:00 am - 11:30 am

Our paper empirically evaluates the impact of time-based tariffs on the electricity supply chain. We investigate the residential electricity demand and supply equilibrium, using data from a field experiment conducted by the Ireland Commission for Energy Regulation: We first estimate individual households’ demand as a function of retail electricity prices. Then, we characterize the optimal retail prices under the flat rate, time-of-use (TOU) and real-time pricing (RTP) schemes for the social planner, the monopolist retailer and in a perfectly competitive retail electricity market. We find that time-based pricing schemes can be effective in reducing the peak load. Specifically, a simple TOU tariff with predetermined rates for different hours of the day can reduce the peak load as much as RTP. However, an RTP scheme can prevent demand spikes by significantly increasing the price of electricity in a given hour. We also find that time-based tariffs do not change consumers’ electricity bills significantly. Finally, time-based prices only slightly increase the carbon dioxide emissions in Ireland. By a numerical study in the U.S. electricity markets, we show that the environmental impact of time-based tariffs can be significant in other electricity markets with different generation mix and dispatch decisions.

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Collective Intelligence and Learning in Teams

Host(s): Assistant Professor Maritza Salazar
Speaker(s): Anita Williams Woolley, Associate Professor of Organizational Behavior and Theory
University: Carnegie Mellon University, Tepper School of Business
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time: Friday, January 12, 2018, 10:30 am – 12:00 pm

Recent research suggests that groups can be characterized by a collective intelligence factor, which represents their ability to work together as observed in their performance across a range of different tasks. In this research, we investigate whether collective intelligence also can predict the rate of group learning. In a longitudinal study of 59 teams who worked together in an MBA course, we find that collective intelligence predicts two different forms of group learning: task mastery and performance improvement. We find that group task mastery, as measured by cognitive synergistic gains, mediates the relationship between collective intelligence and performance improvement. We also explore the degree to which collective intelligence and team performance improvement are related to team member ratings of the quality of team interaction, which has been conceptualized as another dimension of learning. As expected, we find no relationship between collective intelligence and member-rated quality of team interaction but do find that both rated interaction quality and collective intelligence explain unique variance in performance improvement over time across groups. Based on the consistency in patterns across this and other studies, we conclude that collective intelligence impacts performance improvement via a cognitive rather than a socioemotional path. We discuss both the theoretical and practical implications of these findings.

Signals or Shackles? The Effect of Patents on Inventor Mobility and Entrepreneurship

Host(s): Professor John Joseph
Speaker(s): Justin Frake, Ph.D. Candidate
University: Robert H. Smith School of Business, University of Maryland
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Monday, December 11, 2017, 10:30 am – 12:00 pm

How do patents affect the probability that an inventor will leave their employer to join or start another firm? Building on theories of appropriability and firm-specificity, prior studies support the notion that patents constrain inventors. I argue, using signaling theory, that patents will increase inventor mobility and entrepreneurship by acting as signals of inventor quality. I further argue that the positive effects of patenting are exacerbated for university inventors and inventors working on discrete technologies. Instead of relying on patent records to measure mobility, which leads to sampling and misclassification bias, I match US patent data with linked employee-employer Census microdata. This novel dataset allows me to observe the near-complete patent, wage, and employer history of most US inventors between 1995 and 2008. To causally identify the effect of patenting, I use the historical leniency of quasi-randomly assigned patent examiners to instrument for whether a patent is granted. I challenge prior work by finding support for the signaling, rather than constraining, effects of patents. To test whether signaling is the operant mechanism, I show that patenting also increases the inventor’s wages and future productivity. My findings reveal an interesting paradox for innovative firms: by patenting an inventor’s idea, firms dramatically increase the probability that the inventor will leave to join or start another firm.

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Peer Firm Disclosure Response to Takeover Threat

Host(s): Assistant Professor Elizabeth Chuk
Speaker(s): Shuping Chen, Professor of Accounting
University: McCombs School of Business, University of Texas at Austin
Location: SB1 2321 Judy B. Rosener Classroom
Time: Friday, December 8, 2017, 3:00 pm – 4:00 pm

We examine how firms subject to a takeover threat change their voluntary disclosure behavior. We exploit the exogenous control shock experienced by firms upon the hostile takeover announcements of rival firms in the same industry, and perform difference-in- difference analyses to test shocked firms’ disclosure reaction relative to control firms. We find that, after the control shock, treatment firm managers provide more forecasts and issue more 8-Ks and the expanded disclosure contains more bad news. In addition, the expanded disclosure is of a higher precision as evidenced by managers’ conference call language that is easier to understand and that contains less obfuscation component. Treatment firms also provide more quantitative but not qualitative earnings forecasts, and their 10-Ks contain fewer uncertainty words. Taken together, our combined results are consistent with treatment firms expanding voluntary disclosure and increasing the transparency of the associated disclosure in response to the control shock. Our study contributes to the voluntary disclosure literature by providing much needed causal evidence on voluntary disclosure changes.

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The Social Foundations of Creativity: Evidence From Popular Music, 1955-2000

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Noah Askin, Assistant Professor of Organizational Behavior
University: INSEAD Business School Fontainebleau Campus
Location: SB1 5200 Porter Colloquia Room & Executive Terrace
Time: Friday, December 8, 2017, 10:30 am – 12:00 pm

Creativity is central to cultural production, but what makes certain producers more likely to innovate than others? More specifically, what are the different sources of social influence that drive variation in creative output, and through what mechanisms do these sources operate? To answer these questions, we leverage original data on over 25,000 musical artists and 600,000 songs recorded and released between 1955 and 2000, using fine-grained musical features to construct a continuous measure of creative output (i.e., song novelty). We then test whether artists draw creative inspiration through the recombination of diverse ideas, or are instead stimulated by the creativity of their musical neighbors. We find that both of these mechanisms explain an artist’s propensity to write and release novel songs, but in systematically different ways: creative artists tend to recombine material from diverse genres that they encounter through their collaboration networks, while they draw inspiration from—and are granted legitimacy by—other creative artists with shared genre, record label, and/or geographic affiliations. This pattern holds even after controlling for an individual or group’s historical propensity to produce novel songs. These findings suggest that the likelihood of generating new ideas is influenced not only by direct interaction and collaboration with others, but also through indirect exposure via shared cultural, organizational, and geographic contexts. Understanding when and how creative potential travels across these “spheres of influence” sheds new light on the production of novelty in music and the social foundations of creativity more generally.

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Sourcing and procurement cost allocation in multi-division firms

Host(s): Associate Professor John Turner
Speaker(s): Assistant Professor of Management, Fang Fang
University: College of Business and Economics, California State University at Los Angeles
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Friday, December 8, 2017, 10:30 am – 12:00 pm

Problem definition. Through Central Procurement Organizations (CPOs), large firms with multiple divisions have begun adopting a center-led sourcing approach that allows firms to centralize strategic sourcing activities, while permitting decentralized execution by divisions, allowing the firm to leverage large purchase volumes with vendors. This new center-led procurement environment has brought a new decision requirement: How can a CPO select vendors for each division’s requirements to minimize the firm’s total procurement cost and simultaneously develop a fair and alignment-inducing mechanism to allocate the costs (and savings) of company-wide procurement to the divisions? Academic/Practical relevance. Past research and current practice have not addressed this linkage between vendor selection and cost allocation in multi-division firms. Methodology. We model this sourcing and procurement cost allocation (SPC) decision problem facing CPOs of large firms as a mixed-integer optimization problem. This model is flexible and permits us to incorporate and examine alternative divisional participation schemes and commonly used fair cost allocation rules. Results. Although the SPC problem is NP-hard, our analysis characterizes important aspects of the optimal solution to reveal that (a) the CPO could incur a significant additional cost in ensuring fair cost allocation, (b) selecting vendors first and then setting appropriate transfer prices (in a sequential, rather than simultaneous manner) could cause large deficits for the CPO, and (c) of two common fairness rules (uniform pricing and proportional savings allocation), one does not uniformly dominate another, and similarly neither of two participation schemes (flexible and all-or-nothing) dominates the other in all cases. Managerial implications. This work shows that sourcing and procurement cost allocation are interlinked, highlighting the need for managers to make these decisions jointly. CPOs have several choices (participation schemes and fairness rules) in organizing multi-division procurement; this research helps construct a framework for managers to understand the relative impact of their choices. Keywords: Procurement, Cost allocation, Applied optimization

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Platform Competition under Network Effects: Piggybacking and Optimal Subsidizing

Host(s): Assistant Professor Tingting Nian
Speaker(s): Professor of Information Technology Management, Dongjun Wu
University: Scheller College of Business, Georgia Institute of Technology
Location: SB1 5200 Lyman Porter Colloquia Room
Time: Thursday, December 7, 2017, 2:30 pm – 4:00 pm

A repeated challenge in launching the two-sided market platform is how to solve the “chicken-and-egg” problem. Subsidizing one side of the market to jumpstart the platform adoption process has often been suggested in the literature as the solution. In this paper, using a game-theoretic framework, we study piggybacking -- importing users from external networks as a new approach to launch platforms. First, we solve for the platforms' optimal pricing strategies and identify conditions under which each competing platform should subsidize users in the presence of piggybacking. Benchmarked with the case of no-piggybacking, we find that piggybacking does not change the condition of but only the degree of platform subsidizing. Second, we discover when subsidizing is complementary to piggybacking. Third, we show that the platform with stronger piggybacking capabilities tends to monetize more aggressively the side with stronger network effects, while the opponent platform has to monetize the other side. These findings are robust to an extension when piggybacking is endogenized. Finally, we extend our model to examine fabricated piggybacking such as zombie users and fake profiles in platform competition. We show that fabricated piggybacking may affect the platforms' subsidizing conditions, and it always undermines the opponent platform’s profit. These results contrast sharply to findings under authentic piggybacking. Managerial implications for platform practitioners are also discussed. (This is joint work with Yifan Dou.)

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Wealth Management and Financial Advisory Services in the Asia-Pacific Region

Host(s): Associate Professor Christopher Schwarz
Speaker(s): Professor of Finance, Lujer Santacruz
University: School of Commerce, University of Southern Queensland
Location: SB1 5200 Lyman Porter Colloquia Room
Time: Friday, December 1, 2017, 12:00 pm – 1:30 pm

The present paper is an industry study of wealth management and financial advisory services in the Asia-Pacific region, recognising the strong growth in personal wealth in this region. It aims to gain an understanding of the structure of the industry, current directions and opportunities thereof. The paper starts with a look at the wealth management and financial advisory services industry in the US, on which the practices in other countries are patterned and given that US financial entities are major players in the Asia-Pacific region. Examining the US industry is also a good way of introducing the terminologies used in the industry worldwide. The paper then examines the industry in Australia, which has a relatively well developed financial advisory environment before examining the industry in other major Asia-Pacific countries. For each country, the paper looks at the industry participants and the regulatory environment. Finally, the paper examines the general trends and directions that impact the industry and identifies potential opportunities.

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Adaptive Thinking: Why some Directors exert an Outsized Influence on Strategic Change in New Ventures at IPO

Host(s): Dean’s Professor Margarethe Wiersema
Speaker(s): Razvan Lungeanu, Assistant Professor of Management and Organization
University: Smeal College of Business, Penn State
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Thursday, November 30, 2017, 10:30 pm – 12:00 pm

This study addresses the oft-debated questions of whether, when, and how corporate board members help shape firm strategy by advancing a new perspective on heterogeneous director influence that introduces the notion of the deep/broad director. Specifically, we build upon research in strategy/organization theory and human cognition to suggest that deep/broad new outside directors, whose expertise results from a blend of depth and breadth of experience, will have an outsized influence in shaping firm strategy. We test our theory using an extensive multi-year dataset that tracks all firms that went through an IPO in the U.S. across multiple business cycles (1997, 2001, and 2004) until 2011. Focusing on new outside directors in their first year of service (and controlling for selection issues), our results support our main prediction that those directors whose prior experiences are both deep and broad are the most influential directors for strategic change. We find this result to be robust for multiple indicators of strategic change. We also explore whether the outsized influence of the deep/broad director on strategic change may vary by differences in a board’s openness to strategic change. We conclude by highlighting the relevance of our approach and findings for future research and debates on director selection and director expertise.

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Attention Biases in Social Networks

Host(s): Dean’s Professor Margarethe Wiersema
Speaker(s): Luke Rhee, Assistant Professor of Technology Management and Innovation
University: Tandon School of Engineering, New York University
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Monday, November 27, 2017, 10:30 am – 12:00 pm

This study introduces the notion of attention allocation in social networks to examine how people receive high performance evaluations in innovation projects. Using survey data on communication networks among software engineers at a mobile service company, we find that independent of their network structure, engineers who allocate their attention to information coming from brokers receive higher performance evaluations in innovation projects than those who pay no (or little) attention to that information. Although individuals should pay attention to information shared by brokers for better innovation performance, our data reveal that individuals typically pay less attention to information coming from brokers than they do to information shared by other work colleagues. Consequently, there is a mismatch between the communication partners to whose information people normally pay attention and to whose information they should be paying attention for innovation. These findings about attention bias in social networks make a number of contributions to behavioral theories of networks and innovation in an organization.

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The Persistence and Pricing of Merger-Related Transitory Growth and Its Implications for Growth Anomalies and Asset Pricing Models

Host(s): Assistant Professor Liz Chuk
Speaker(s): Daniel Collins, Professor and Department Executive Officer Henry B. Tippie Research Chair in Accounting
University: The University of Iowa, Tippie School of Business
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, November 17, 2017, 3:00 pm – 4:30 pm

Prior literature in financial economics and accounting measures asset growth as year-over-year nominal growth in total assets. Such growth estimates are upward biased when firms engage in mergers and acquisitions. We decompose asset growth into merger-related and organic growth components, and find that merger-related growth is less persistent than organic growth. We find that merger-related growth is a strong predictor for future returns after controlling for other return predictors in cross-sectional tests. Asset pricing tests reveal that priced risk factors do not explain this merger-related growth pricing anomaly. We also documents that merger-related growth is positively associated with analysts’ optimism in earnings forecasts and stock recommendations. Furthermore, such return predictability is exhibited by firms that do not transparently disclose the merger-related and organic growth components, and is more pronounced for stocks with high transaction costs and arbitrage risk. Finally, the return predictability of merger-related growth dissipates within one year. Collectively, these findings are consistent with the performance over-extrapolation hypothesis and investors with limited attention playing a role in mispricing.

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Emphasizing feasibility and near optimality in first-order methods: A level-set method with a feasible solution path

Host(s): Associate Professor John Turner
Speaker(s): Assistant Professor, Negar Soheili Aza
University: University of Illinois at Chicago
Location: SB1 5200 Lyman Porter Colloquium Room
Time: Friday, November 17, 2017, 2:00 pm – 3:30 pm

Large-scale constrained convex optimization problems arise in several application domains, including data mining and machine learning, nonlinear resource allocation problems in operations management, and circuit and layout design. First-order methods are good candidates to tackle such problems due to their low iteration complexity and memory requirement. These features have led to revived interest in first-order methods from academics and commercial software developers (e.g., TensorFlow). However, the success of first-order methods has been greatest for problems with simple feasible sets. Current bundle and level-set approaches attempt to extend the applicability of these methods to more complicated objectives and constraint sets but either rely on the solution of challenging subproblems or do not guarantee a feasible solution, especially if the procedure is terminated before convergence, for example, due to time limits in an online environment. Infeasibility may void the implementation of a solution in real-world situations where constraints capture operating conditions that must be satisfied.

This status-quo motivates our research. We develop a level-set method that finds a feasible and near (relative) optimal solution to a constrained convex optimization problem with a fairly general objective function and set of constraints, maintains a feasible solution at each iteration (i.e., a feasible solution path), and only relies on calls to first-order oracles. We establish the iteration complexity of our approach, also accounting for the smoothness and strong convexity of the objective function and constraints when these properties hold. The dependence of our complexity on the optimality guarantee is similar to the analogous dependence one can obtain in an unconstrained setting, which is not known to be true for other level-set methods in the literature.

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Optimizing Two-Sided Promotion for Transportation Network Companies: A Structural Model with Conditional Bayesian Learning

Host(s): Assistant Professor Mingdi Xin
Speaker(s): Yong Tan, Neal and Jan Dempsey Professor of Information Systems
University: Foster School of Business, University of Washington
Location: SB1 2321 Judy B. Rosener Classroom
Time: Friday, November 17, 2017, 10:30 am – 12:00 pm

The mobile app of a transportation network company (TNC) allows the TNC platform to run aggressive and diverse two-sided sales promotions to help to introduce new products. We examine how two-sided sales promotion affects drivers’ willingness to use the TNC app and how the TNC develops its optimal promotion strategies accordingly. To investigate the effects of sales promotion, we estimate a structural model of drivers’ decisions to accept orders and to cancel generated orders and their perception of passengers’ willingness to utilize a sales promotion. Bayesian learning processes are introduced to account for decisions under uncertainty as the app is introduced. We find measurable evidence of drivers’ learning about the value of the attributes of the transportation network app. The results indicate that the substantial value of early promotion not only encourages current usage but also fosters learning that sustains drivers’ use of the app afterward. Our results also show that revealed tips from passengers signal low quality of service and that platform cashback to passengers has a positive effect on drivers by increasing drivers’ chances of being rewarded. Given the estimated parameters, we run simulations to explicitly measure the indirect effects of the sales promotion, as supported by learning, and show how cashback for passengers affects the decisions of drivers. Finally, our experimental promotion policies show improved performance with regard to drivers’ willingness to use the app as well as its cost effectiveness.

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Social Comparison and Employee Mobility

Host(s): Associate Professor Libby Weber
Speaker(s): Teppo Felin, Professor of Strategy
University: University of Oxford, Saïd Business School
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, November 3, 2017, 2:00 pm – 3:30 pm

In this paper we study the nexus of social comparison, wage inequality, and employee mobility. Extant research has largely focused on how within-firm social comparison of wages—using aggregate measures such as firm-level wage inequality (e.g., Gini coefficient)—impact employee satisfaction, productivity and mobility. We argue that social comparison is “personal” in the sense that it is a function of one’s relative standing within and across firms, rather than a function of more aggregate measures (e.g., overall wage inequality, average wages of the firm, the firm’s ranking in terms of average wage within the industry). We utilize a more fine-grained measure of social comparison, that is, a focal employee’s relative standing or rank both within and across firms. Using a large-scale, multi-year and multi-industry dataset we show that both within and across-firm employee wage rank is negatively correlated with mobility. We also theoretically argue and empirically show that industry-level social comparison matters more than firm-level comparison—suggesting a need to broaden the scope of the social comparison literature to include the set of other firms that an employee might move to. Across-firm social comparisons are salient due to a number of factors, including the professional ties and embeddedness of employees in networks outside the firm. We replicate extant findings of firm-level wage inequalities and mobility, and provide a more nuanced discussion of why and how wage inequality shapes employee mobility. We also highlight and discuss the implications of wage inequality and mobility on firm performance. key words: employee mobility, social comparison, strategy, performance.

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Lenders’ Use of Analyst Earnings Forecasts When Establishing Debt Convenant Thresholds

Host(s): Assistant Professor Elizabeth Chuk
Speaker(s): Andrew Call, Associate Professor
University: Arizona State University, School of Accountancy
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, October 27, 2017, 3:00 pm – 4:30 pm

We examine whether lenders use analyst forecasts of the borrowing firm’s future earnings when establishing covenant thresholds in private debt contracts. We find greater proximity between the analysts’ consensus earnings forecast and the future earnings performance required by the contract among borrowers whose analysts historically issue accurate earnings forecasts, consistent with our hypothesis that lenders use analyst earnings forecasts when establishing debt covenant thresholds. These results are robust to firm and year fixed effects as well as an instrumental variable approach that addresses potential correlated omitted variables. We also find that the likelihood that the borrower violates a debt covenant following a decline in creditworthiness is increasing in the extent to which the debt covenant threshold is set closer to analyst expectations, suggesting that lenders’ use of analyst research increases the effectiveness of debt covenants in transferring contingent control rights. Our results provide new evidence on the role of analyst earnings forecasts in debt contracting and inform the literature on the information used by lenders when establishing debt covenant thresholds.

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Stage-Gate Selection In Innovation

Host(s): Professor John Joseph
Speaker(s): Ronald Klingebiel, Professor of Finance
University: Frankfurt School of Finance and Management
Location: SB1 3410, Center for Investment and Wealth Management
Time: Wednesday, October 25, 2017, 10:30 am – 12:00 pm

We use a hybrid inductive method to examine resource-allocation decision making at stage gates of the innovation process at former handset maker Sony Ericsson. We particularly focus on project discontinuation, a key objective in organizing innovation as selective funnels. We provide three insights with implications for escalation theory. First, initial uncertainty constrains the articulation and tracking of projects’ commercial attractiveness. This means that escalation can be an unknowable process as well as a decision bias, limiting the usefulness of selection gates early in development. Second, we document a reluctance to search and update business cases as projects near completion. This suggests the presence of a new mechanism that might inadvertently have been captured in escalation studies of self-justification and goal-substitution effects. Third, we reveal a strong form of escalation, whereby projects, whose deteriorating commercial prospects are reflected in downward business-case revisions, are more likely to be continued than projects with stable or improving business cases. This suggests a counter-intuitive effect of attention on commitment escalation. Our findings contribute to a better understanding of both the nature of escalation decisions and the stage-gate organization of innovation under uncertainty.

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Relative Valuation and the Production of Information

Host(s): Assistant Professor David Yang
Speaker(s): Alan Moreira, Assistant Professor of Finance
University: Simon Graduate School of Business, University of Rochester
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, October 20, 2017, 2:00 pm – 3:00 pm

We study the problem of an investor that allocates analysts to assets to learn about future asset values. We show that when analysts are better at relative rather than absolute asset valuations the optimal matching of analysts to assets displays a balancedness property in which pairs of distinct assets are covered by a similar number of analysts. A balanced allocation allows the investor to efficiently aggregate information using the relative value between assets, eliminating the effect of the analyst-specific component. We show that the optimal matching of analysts to assets and the optimal portfolio decision depends on the structure of the analyst coverage network - the bipartite graph where the vertices are the firms and the edges are all the pairs of distinct firms that are covered by at least one common analyst. For example, capital is only reallocated between firms that are connected in the network, and the intensity of the reallocations depends on both the value of relative asset recommendations and the strength of the connection between the assets.

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Business Models: Toolkits for Sensemaking in a Post – Chandlerian Economy

Host(s): Professor John Joseph
Speaker(s): William Ocasio
University: Kellogg School of Management, Northwestern University
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time: Friday, October 20, 2017, 10:30 am – 12:00 pm

The business model concept is increasingly used by practitioners, but our understanding of its origins and development is limited. Using a combination of inductive text analysis and historical narrative, we trace the evolution of the concept from 1990 to 2016. Our analysis shows that the concept began in semiconductors, computers, and e-business firms as they transitioned away from vertically integrated organizations towards greater specialization and horizontal collaboration. The concept expanded in usage and became institutionalized but its precise application was quite varied. Paradoxically this ambiguity in meaning facilitated sensemaking and strategizing across a variety of industries responding to changes in to technology, globalization, and customer demands in a post-Chandlerian economy.

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Asset Pricing in the Quest for the New El Dorado

Host(s): Associate Professor David Yang
Speaker(s): Bruce Carlin
University: Anderson Graduate School of Business, University of California, Los Angeles
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time:Friday, October 13, 2017, 10:00 am – 11:30 am

Creative destruction not only involves bringing new technology to market, it imposes higher risk on the future of existing assets. We characterize the asset pricing implications of creative destruction when investors compete for market share. Compared to first best, the quest for oligopoly rents leads to overinvestment in uncertain projects, spikes in asset prices and risk premia, and an aftermath in which prices fall steeply as uncertainty resolves. If competition for rents is sufficiently aggressive, the elevated price-dividend ratio predicts negative future expected returns. This resembles a bubble ex post, but arises solely from competitive behavior and does not require heterogeneous beliefs, behavioral biases, or financial frictions. Our analysis yields novel empirical predictions and we discuss how financial innovation might be used to predict bubbles ex ante.

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Does PCAOB Regulatory Enforcement Deter Non-Sanctioned Auditors?

Host(s): Assistant Professor Elizabeth Chuck
Speaker(s): Phillip Lamoreaux, Assistant Professor of Accounting
University: Arizona State University
Location: SB1 2321 Judy B. Rosener Classroom
Time:Friday, September 29, 2017, 3:00 pm – 4:00 am

We investigate whether public enforcement by the PCAOB against an audit firm influences the audit quality of nonsanctioned audit firms. PCAOB enforcement activities are publicized with the intent to serve a deterrence function for other auditors. However, the effect of public enforcement on non-sanctioned audit firms has not been empirically investigated. Exploiting this exogenous event to non-sanctioned firms, we hypothesize and find that non-sanctioned auditors improve the quality of their audits after a publicized PCAOB enforcement action against a competing auditor. Specifically, clients of these non-sanctioned audit firms have a lower incidence of client misstatement, but a higher incidence of reported internal control deficiencies. We also find that these non-sanctioned auditors charge higher audit fees postenforcement. Taken together, these results are consistent with non-sanctioned auditors making costly efforts to improve the quality of their audits as a result of PCAOB enforcement.

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Out-of-Town Home Buyers and City Welfare

Host(s): Associate Professor David Yang
Speaker(s): Stijn Van Nieuwerburgh, Professor of Finance
University: Leonard N. Stern School of Business, New York University
Location: SB1 2321, Judy B. Rosener Classroom
Time: Wednesday, September 20th, 2017, 2:00 pm – 3:30 pm

The major cities of the world have attracted a flurry of out-of- town (OOT) home buyers. Such capital inflows affect housing affordability, the spatial distribution of residents, construction, labor income, wealth, and ultimately welfare. We develop a spatial equilibrium model of a city with substantial heterogeneity among residents. We calibrate the model to the New York and Vancouver metro areas. The observed increase in OOT purchases is associated with 1.1% (5.0%) higher house prices and a 0.1% (0.34%) welfare loss in New York (Vancouver). Taxing OOT buyers can turn welfare losses into gains when tax revenues finance a local public good.

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Internet Adoption and Knowledge Diffusion

Host(s): Associate Professor MIngdi Xin
Speaker(s): Chris Forman, Peter and Stephanie Nolan Professor of Strategy, Innovation, and Technology
University: Charles H. Dyson School of Applied Economics and Management, Cornell University
Location: SB1 2321, Judy B. Rosener Classroom
Time: Wednesday, September 20th, 2017, 10:30 am – 12:00 pm

What is the capacity of ICT to reduce the (geographical and technological) localization of knowledge? In this paper, we analyze the impact of Internet adoption within US firms on knowledge spillovers. More specifically, we investigate the impact of basic Internet access on the likelihood that patents invented at a given R&D establishment cite patents invented elsewhere within the same firm. Our findings suggest that adoption of Internet significantly fosters cross-location citations in a significant way, and that these effects are proportional to the technologically proximity of the establishments. This positive effect holds even when excluding collaborative patents or controlling for earlier collaborations, and suggests that Internet adoption has helped in reducing the spatial localization of knowledge but not in the ability to draw from new knowledge sources (i.e., across different technological areas).

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Supply Risk Mitigation via Supplier Diversification and Improvement: An Experimental Evaluation

Host(s): Assistant Professor Luyi Gui
Speaker(s): Basak Kalkanci, Professor at Georgia Institute of Technology
University: Georgia Institute of Technology
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Thursday, August 3rd, 2017, 3:00 pm – 4:30 pm

The agriculture industry plays a critical role in the U.S. economy and various industry sectors depend on the output of farms. A salient challenge in farming is uncertainty in the farm yield, which depends on the weather conditions (and other unpredictable factors) during the growing season and   impacts farmers' profit. To protect and raise farmers' income, the U.S. government offers two subsidy programs to farmers: the Price Loss Coverage (PLC) program which pays farmers a subsidy when the market price of a crop falls below a reference price, and the Agriculture Risk Coverage (ARC) program which pays a subsidy when farmers' revenue is below a guaranteed level. Given the unique features of PLC and ARC, in this paper we develop models to analyze the effects of these programs on consumers, farmers, and the government. Our analysis generates several insights. First, while PLC always motivates farmers to plant more acres compared to the no-subsidy case, farmers may plant less acres under ARC, leading to a lower crop supply. Second, despite the prevailing intuition that PLC benefits farmers only if the crop price remains very low for several years, we show that both farmers and consumers can be better off with PLC for a large range of parameter values, even when the reference price represents the historical average market price.  Third, we show that the two-sided structure of the ARC subsidy may induce farmers to utilize the subsidy in two different ways, depending on the crop and market characteristics. This is used to explore the implications of each subsidy regime on different stakeholders. Fourth, our analysis reveals that the government's cost of maximizing social welfare can be lower under PLC. Finally, we calibrate our model with USDA data and provide insights about the effects of crop characteristics and market characteristics on the relative performance of PLC and ARC. Our findings are corroborated by USDA's statistics for farmers' enrollment in the subsidy programs.

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Price vs. Revenue Protection: An Analysis of Government Subsidies in the Agriculture Industry

Host(s): Assistant Professor Luyi Gui
Speaker(s): Foad Iravani, Assistant Professor of Operations Management
University: Foster School of Business, University of Washington  
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Thursday, May 18, 2017, 12:30 pm – 2:00 pm

The agriculture industry plays a critical role in the U.S. economy and various industry sectors depend on the output of farms. A salient challenge in farming is uncertainty in the farm yield, which depends on the weather conditions (and other unpredictable factors) during the growing season and   impacts farmers' profit. To protect and raise farmers' income, the U.S. government offers two subsidy programs to farmers: the Price Loss Coverage (PLC) program which pays farmers a subsidy when the market price of a crop falls below a reference price, and the Agriculture Risk Coverage (ARC) program which pays a subsidy when farmers' revenue is below a guaranteed level. Given the unique features of PLC and ARC, in this paper we develop models to analyze the effects of these programs on consumers, farmers, and the government. Our analysis generates several insights. First, while PLC always motivates farmers to plant more acres compared to the no-subsidy case, farmers may plant less acres under ARC, leading to a lower crop supply. Second, despite the prevailing intuition that PLC benefits farmers only if the crop price remains very low for several years, we show that both farmers and consumers can be better off with PLC for a large range of parameter values, even when the reference price represents the historical average market price.  Third, we show that the two-sided structure of the ARC subsidy may induce farmers to utilize the subsidy in two different ways, depending on the crop and market characteristics. This is used to explore the implications of each subsidy regime on different stakeholders. Fourth, our analysis reveals that the government's cost of maximizing social welfare can be lower under PLC. Finally, we calibrate our model with USDA data and provide insights about the effects of crop characteristics and market characteristics on the relative performance of PLC and ARC. Our findings are corroborated by USDA's statistics for farmers' enrollment in the subsidy programs.

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New Organizational Forms, Intermediaries, And Alternative Work Arrangements That Lie Beyond Employment: Research And Practical Opportunities

Host(s): Assistant Professor Maritza Salazar
Speaker(s): John Boudreau, Professor of Management and Organization
University: Marshall School of Business, University of Southern California
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Friday, April 28, 2017, 10:30 am - 12:00 pm

Organization success, worker behaviors and leadership will increasingly involve optimizing work that includes, but goes well beyond traditional employment.  Cascio and Boudreau (in press) and Boudreau, Jesuthasan and Creelman (2015) note evidence that a larger proportion of work is and will be done by individuals working outside the traditional regular full-time employment relationship, through arrangements such as alliances, talent-trading, tours of duty, freelancers, along with familiar options of outsourcing, temporary employment and contractors.  Yet virtually all present laws, organizational systems and human resource processes and most research focuses on regular full-time employees.  This gap raises important questions about the future of research on work, employment, human resources, strategy and organizational design, such as: What are the fundamental dimensions of this new world, and how can they help leaders make better decisions about work and talent? Will they be as committed as full-timers? Will their rapid turnover require extensive orientation and training of new ones? Will they stick around long enough to develop the kind of depth of understanding of people and operations that will enable them to contribute meaningfully? Can work arrangements appropriately protect workers and balance worker and organizational rights and needs?  This talk will describe examples of emerging non-standard work arrangements, as the context for a review of research on nonstandard work through the lens of the talent-management lifecycle.  We set out to discover where research has been plentiful and sparse, and whether research frameworks applied to nonstandard work are similar to those applied to traditional, regular fulltime employment, and the implications for future research.

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Relative Target Setting and Cooperation

Host(s): Assistant Professor Radhika Lunawat
Speaker(s): Michal Matejka, Associate Professor of Accounting
University: W.P. Carey School of Business, Arizona State University 
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Friday, April 21, 2017, 3:00 pm - 4:30 pm

A large stream of work on relative performance evaluation highlights the benefits of using information about peer performance in contracting. In contrast, the potential costs of discouraging cooperation among peers have received much less attention. The purpose of our study is to examine how the importance of cooperation affects the use of information about peer performance in target setting, also known as relative target setting. Specifically, we use data from 111 business units of an industrial services company where managers need to share specialized equipment and staff with their peers to manage bottlenecks in their capacity. We construct several empirical proxies for the importance of cooperation and examine their effect on target setting. We find robust evidence that the sensitivity of target revisions to past peer (own) performance is lower (higher) when the importance of cooperation is higher, which is consistent with the theory that compensation contracts incorporating information about peer performance discourage cooperation.

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The Group Dynamics of Inter-organizational Relationships: Collaborating with Multiple Partners in Innovation Ecosystems

Host(s): Assistant Professor John Joseph
Speaker(s): Jason Davis, Associate Professor of Entrepreneurship and Family Enterprise
University: INSEAD Asia in Singapore
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, April 21, 2017, 2:00pm - 3:30pm

This paper examines how organizations collaborate with multiple partners, such as when they develop innovative and complex product platforms like smartphones, servers, and MRI machines that rely on technologies developed by organizations in three or more sectors. Research on multipartner alliances often treats them as a collection of independent dyads, neglecting the possibility of third-party influence and interference in dyads that can inhibit innovation. Using a multiple-case, inductive study of six groups, each composed of three organizations engaged in technology and product development in the computer industry, I examine the collaborative forms and processes that organizations use to innovate with multiple partners in groups. Groups that used the collaborative forms of independent parallel dyads or single unified triads generated mistrust and conflict that stemmed from expectations about third-party participation and overlapping roles and thus had low innovation performance and weaker ties. Other groups avoided these problems by using a dynamic collaboration process that I call “group cycling,” in which managers viewed their triad as a small group, decomposed innovative activities into a series of interlinked dyads between different pairs of partners, and managed third-party interests across time. By temporarily restricting participation to pairs, managers chose which ideas, technologies, and resources to incorporate from third parties into single dyads and ensured that the outputs of multiple dyads were combined into a broader innovative whole.

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Inattention and Inertia in Household Finance: Evidence from the Danish Mortgage Market

Host(s): Assistant Professor David Yang
Speaker(s): John Y. Campbell, Morton L. and Carole S. Olshan Professor of Economics
University: Harvard University
Location: SB2 116
Time: Friday, April 21, 2017, 2:00 pm – 3:30 pm

A common problem in household finance is that households are often inactive in response to incentives. Mortgages are generally the largest household liability, and mortgage refinancing is an important channel for monetary policy transmission, so inactivity in this setting can be socially costly. We study how the Danish population responds to mortgage refinancing incentives between 2010 and 2014, building an empirical model that identifies two important sources of inactivity: inattention (a low probability of responding to a refinancing incentive in a given quarter), and inertia (a psychological addition to the financial cost of refinancing). Inertia is hump-shaped in age and generally increasing in socioeconomic status, while inattention is highest for older households and households with low income, education, housing wealth, and financial wealth, making it the key determinant of low refinancing among households with low socioeconomic status. Our model highlights the importance of policies to make such households aware of refinancing opportunities or to refinance mortgages automatically.

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Merchant Energy Trading in a Network

Selvaprabu (Selva) Nadarajah at University of Illinois at Chicago and
Nicola Secomandi at Tepper School of Business, Carnegie Mellon University

Host(s): Assistant Professor John Turner
Speaker(s): Selvaprabu (Selva) Nadarajah, Assistant Professor of Information and Decision Sciences
University: University of Illinois at Chicago
Location: SB1 5200 Porter Colloquia Room and Executive Terrace
Time: Friday, April 7, 2017, 10:30 am – 11:30 am

We formulate the merchant trading of energy in a network of storage and transport assets as a Markov decision process with uncertain energy prices, generalizing known models. Because of the intractability of our model, we develop heuristics and both lower and dual (upper) bounds on the optimal policy value estimated within Monte Carlo simulation. We achieve tractability using linear optimization, extending near optimal approximate dynamic programming techniques for the case of a single storage asset, versions of two of which are commercially available. We propose (i) a generalization of a deterministic re-optimization heuristic, (ii) an iterative version of the least squares Monte Carlo approach, and (iii) a perfect information dual bound. We apply our methods to a set of realistic natural gas instances. The combination of our re-optimization heuristic and dual bound emerges as a practical approach to nearly optimally solve our model. Our iterative least squares Monte Carlo heuristic is also near optimal. Compared to our other heuristic, it exhibits slightly larger optimality gaps and requires some tuning, but is faster to execute in some cases. Our methods could enhance single storage asset software and have potential relevance beyond our specific application.

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Negative Affect Management in Service Interactions

Host(s): Dean’s Professor Jone Pearce
Speaker(s): Xiao-Yu Liu, Professor of Human Resource Management and Organizational Behavior
University: University of International Business and Economics
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, April 7, 2017, 3:00 pm - 4:00 pm

How do service employees deal with customers with negative affect at the start of a service encounter? We attempt to answer this question by drawing on prior research on affect transference and proactive personality. This study firstly examines the reciprocal process by which restaurant customers and servers influence each other’s affect in a daily study of customer service interactions. Data from 180 customer-employee dyads supported the hypotheses proposing that employee proactive personality buffers the relationship between customer negative affect before service and employee negative affect during service, as well as the relationship between employee negative affect during service and subsequent customer ratings of service quality after service. Employee proactive personality also moderated the indirect effect of initial customer negative affect on service quality through employee negative affect during service. In addition, employee proactive personality was associated with employee negative affect during service. These findings highlight the potential for employee proactive personality in limiting negative affective transfer in service encounters. Then, based on interviews with 18 service employees and data from 250 customer-employee dyads in barber shops, this study further examined how proactive employees manage their own affective states in response to negative customer affect before service and how employees manage affective displays in such a way as to influence customer affective experience and service quality.

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Flow and the Quality of Life

Host(s): Associate Professor Loraine Lau-Gesk
Speaker(s): Mihaly Csikszentmihalyi, Distinguished Professor of Psychology and Management
University: School of Social Science, Policy & Evaluation
Time: Friday, March 24, 2017, 3:30 pm – 5:00 pm
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

Professor Csikszentmihalyi will introduce the concept of flow — the optimal experience of full engagement with what one is doing -- and some of its applications to such activities as work, creativity, education and life in general — based on 45 years of research conducted around the world.

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Employee Non-Compete Agreements and External Knowledge Sourcing: The Paradoxical Impact of Potential Employee Mobility

Host(s): Assistant Professors John Joseph and Libby Weber 
Speaker(s): Deepak Somaya, Associate Professor of Business Administration, Stephen V. and Christy C. King Faculty Fellow
University: College of Business at Illinois, University of Illinois at Urbana-Champaign 
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, March 17, 2017, 2:00 pm – 3:30 pm

Prior research assumes that because non-compete agreements impede employee mobility, they negatively impact external knowledge sourcing, defined as the use of external knowledge in firms’ internal innovation. In this paper, we examine the proposition that non-competes may paradoxically have the opposite effect. When firms innovate by building on external knowledge, they may face higher risks of losing valuable R&D talent due to both reduced firm-specificity and diminished labor market frictions. By mitigating such potential talent losses, enforceable non-competes may therefore encourage firms to engage in more (rather than less) external knowledge sourcing. Empirically, we leverage a natural “quasi-experiment” created by a sudden and unexpected change in non-compete law in Michigan 1985, and employ a differences-in-differences empirical methodology to help identify causal effects. We find that stronger non-compete enforceability increased the extent to which firms drew on external knowledge, especially from local (within-state) sources and in industries that otherwise have weaker appropriability.

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Using An Experiment To Learn About Selection, Treatment Effect Heterogeneity, And External Validity

Host(s): Assistant Professor Mireille Jacobson
Speaker(s): Amanda Kowalski, Associate Professor of Economics
University: Yale School of Management, Yale University
Location: Social Sciences Plaza A, Room 3132
Time: Wednesday, March 14, 2017, 3:30 pm - 5:00 pm

I examine treatment effect heterogeneity within an experiment to inform external validity. The local average treatment effect (LATE) gives an average treatment effect for compliers. I bound and estimate average treatment effects for always takers and never takers by extending marginal treatment effect methods. I use these methods to separate selection from treatment effect heterogeneity, generalizing the comparison of OLS to LATE. Applying these methods to the Oregon Health Insurance Experiment, I find that the treatment effect of insurance on emergency room utilization decreases from always takers to compliers to never takers. Previous utilization explains a large share of the treatment effect heterogeneity. Extrapolations show that other expansions could increase or decrease utilization.

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Using Games to Teach Auction Theory to Students

Host(s): Professor Philippe Jorion
Speaker(s): Charles Cuny, Senior Lecturer in Finance
University: Olin Business School, Washington University in St. Louis
Location: SB1 5200 Porter Colloquia Room and Executive Terrace
Time: Monday, March 13, 2017, 3:30 pm – 5:00 pm
 
Abstract is not available.

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Modern Disclosure Theory

Host(s): Assistant Professor Radhika Lunawat
Speaker(s): Ron Dye, Professor of Accounting Information and Management
University: Kellogg School of Management, Northwestern University
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Friday, March 10, 2017, 3:00 pm - 4:30 pm

Abstract available upon request to the speaker. 

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Using An Experiment To Learn About Selection, Treatment Effect Heterogeneity, And External Validity

Host(s): Professor Rick So
Speaker(s): Saif Benjaafar, Distinguished McKnight University Professor; Director, Initiative on the Sharing Economy
University: College of Science and Engineering, University of Minnesota
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, March 10, 2017, 11:00 am - 12:30 pm

We describe an equilibrium model of peer-to-peer product sharing, or collaborative consumption, where individuals with varying usage levels make decisions about whether or not to own. Owners are able to generate income from renting their products to non-owners while non-owners are able to access these products through renting on as needed basis. We characterize equilibrium outcomes, including ownership and usage levels, consumer surplus, and social welfare. We compare each outcome in systems with and without collaborative consumption and examine the impact of various problem parameters including rental price, platform's commission fee, cost of ownership, owner's moral hazard cost, and renter's inconvenience cost. Our findings indicate that, depending on the rental price, collaborative consumption can result in either lower or higher ownership and usage levels, with higher ownership and usage levels more likely when the cost of ownership is high. We show that consumers always benefit from collaborative consumption, with individuals who, in the absence of collaborative consumption, are indifferent between owning and not owning benefiting the most. We also show that the platform's profit is not monotonic in the cost of ownership, implying that a platform is least profitable when the cost of ownership is either very high or very low. (Joint work Xiang Li, Guangwen Kong, and Costas Courcoubetis).

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The Making of Hawks and Doves: Inflation Experiences and Voting on the FOMC

Host(s): Assistant Professor David Yang
Speaker(s): Stefan Nagel, Michael Stark Professor of Finance and Economics
University: Ross School of Business, University of Michigan, Ann Arbor
Location: SB1 2321, Dr. Judy B. Rosener Classroom 
Time: Friday, March 3, 2017, 2:00 pm - 3:15 pm

We show that personal experiences of inflation strongly influence the hawkish or dovish leanings of central bankers. For all members of the Federal Open Market Committee (FOMC) since 1951, we estimate an adaptive learning rule based on their lifetime inflation data. The resulting experience-based forecasts have significant predictive power for members’ FOMC voting decisions, the hawkishness of the tone of their speeches, as well as the heterogeneity in their semi-annual inflation projections. Averaging over all FOMC members present at a meeting, inflation experiences also help to explain the federal funds target rate, over and above conventional Taylor rule components.

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Stuck in the Shell: Middle-Stage Goal Pursuers Avoid (But Need) Social Reference Point

Host(s): Professor Connie Pechmann
Speaker(s): Szu-chi Huang, Assistant Professor of Marketing
University: Stanford Graduate School of Business, Stanford University
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, March 3, 2017, 3:30 pm - 5:00 pm

When people arrive in the middle stage of goal pursuit, they deliberately avoid social reference points that could potentially outperform them—a phenomenon we term “stuck-in-the-shell effect.” We use the frequency of head turns, eye movements, and direct choices to document this U-shaped pattern of avoidance behavior and show that this behavior is indeed driven by a fear of being outperformed: Middle-stage goal pursuers avoid social reference points that are relevant, proximal, and potentially superior. Paradoxically, however, in both individual and collective goal contexts, we found that the very social reference points that middle-stage goal pursuers attempt to avoid could ultimately restore their motivation and pull them out of the slump. Our findings connect the psychophysics of goal pursuit with information avoidance literature and shed light on why middle-stage goal pursuers get stuck in an environment that is rich with social information.

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Asset Pricing With Return Extrapolation

Host(s): Assistant Professor David Yang
Speaker(s): Lawrence Jin, Assistant Professor of Finance
University: California Institute of Technology
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, February 24, 2017, 2:00 pm – 3:15 pm

We develop a representative agent general equilibrium model with return extrapolation and recursive preferences. The model can serve as a quantitative benchmark for the comparison between belief-based behavioral asset pricing models and more traditional models. Our model matches in magnitude investors' extrapolative beliefs and their memory structure derived directly from survey evidence. Also, the model generates a large and countercyclical equity premium, a low and procyclical interest rate, low interest rate volatility, strong excess volatility and predictability for equity returns, persistence of price-dividend ratios, as well as low correlations between consumption growth and stock returns. Extrapolative beliefs generate perceived persistence in dividend and consumption growths that, under recursive preferences, help explain some of our model predictions.

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The Dominant Logic of Matching: Finding Acquisition Targets

Host(s): Professor John Joseph
Speaker(s): Henrich Greve, Professor of Entrepreneurship, The John H. Loudon Chaired Professor of International Management
University: INSEAD, Singapore Campus
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 24, 2017, 2:00 pm - 3:30 pm

Acquisitions are preceded by a search for targets and assessment of whether a potential target is a good fit. While prior research has emphasized resource fit and search costs, we argue that the dominant logic of the acquirer is a source of direction and constraint in the search. Based on this theory, cognitive schema and myopia by the dominant coalition can shape top management strategic analysis and conception of the firm, and are important influences in resource allocations such as acquisitions. They are likely to narrow down their search to targets that resonate with them on the mental construction of the firm environment. As a result, firms match not only on resources, but also on characteristics that are likely to be a source of cognitive schema that are influential in the dominant logic, such as nature of governance, ownership structure, and board composition. We derive new hypotheses on target selection in acquisitions from this theory, and our findings support the hypotheses by showing strong influences from this mechanism on target selection in acquisitions in China.

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When Two Bodies Are (Not) a Problem: Gender and Relationship Status Discrimination in Academic Hiring

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Sharon Koppman, Assistant Professor of Organization & Management
University: Kellogg School of Management, Northwestern University
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 24, 2017, 10:30 am - 12:00 pm

Although junior faculty search committees serve as gatekeepers to the professoriate and play vital roles in shaping the demographic composition of academic departments and disciplines, how committees select new hires has received minimal scholarly attention. In this paper, I highlight one mechanism through which committees evaluate applicants and contribute to gender inequalities in academic careers: relationship status discrimination. Through a comparative, ethnographic case study of junior faculty search committees at a large R1 university, I show that committees actively considered women’s—but not men’s—relationship status when selecting hires. Drawing from gendered scripts of career and family that present men’s careers as taking precedence over women’s, committee members believed that heterosexual women whose partners held academic or high-status jobs were not “moveable” and excluded such women from offers, when there were viable male or single female alternatives. Conversely, male applicants’ relationship status was discussed infrequently, and all female partners were seen as moveable. Consequently, I show that the “two-body problem” is a gendered phenomenon embedded in cultural stereotypes and organizational practices that can disadvantage women in academic hiring. I conclude by discussing the implications of such relationship status discrimination for sociological research on labor market inequalities and faculty diversity.

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Monetary Stimulus and Bank Lending

Host(s): Assistant Professor David Yang
Speaker(s): Itay Goldstein, Professor of Finance and Economics
University: Wharton School, University of Pennsylvania
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, February 17, 2017, 10:30 am - 11:45 am

The U.S. Federal Reserve purchased both agency mortgage-backed securities (MBS) and Treasury securities to conduct Quantitative Easing (QE). Using micro-level data, we find that banks benefiting from MBS purchases increase mortgage origination, compared to other banks. At the same time, these banks reduce commercial lending and firms that borrow from these banks decrease investment. The effect of Treasury purchases is different: either positive or insignificant in most cases. Our results suggest that MBS purchases caused unintended real effects and that Treasury purchases did not cause a large positive stimulus to the economy through the bank lending channel.

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Short-Sales Constraints and Aftermarket IPO Pricing

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Wish Upon a Star? How Network Proximity to Stars Influences the Attainment of Stardom

Host(s): Professor John Joseph
Speaker(s): Joel A.C. Baum, Professor of Strategic Management
University: Rotman School of Management, University of Toronto
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, February 10, 2017, 2:00 pm - 3:30 pm

Third-party awards that identify and rank “star performers” are important for ordering actors in crowded, complex markets. Because such awards are typically bestowed annually, however, stardom is more closely tied to recent performance and less stable than hierarchical orderings based on status. In such conditions, proximity to stars may inform attributions of close rivals’ quality, but the nature of these “spillovers” is debatable. When one actor receives an award, for example, a film actor wins an Oscar or a musician wins a Grammy, how does this stardom affect the fates of the winner’s closest rivals? Are close rivals elevated too, gaining spillovers of attention and recognition from the increased notoriety of the winner? Or conversely, are they lost in the shadow of the winner’s notoriety and forced to compete more intensely for attention and recognition that they would have garnered otherwise? We investigate this question in a study of US equity analysts. Using the stock co- coverage network to gauge analysts’ proximity, we examine the impact of an analyst being named to Institutional Investor’s “All-America Research Team”, the magazine’s annual ranking of sell-side equity analysis, on the subsequent likelihood of analyst’s closest rivals’ being named to a “Team” as well. We also examine the efficacy of rivals’ competitive responses to an alter’s ascension to stardom.

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Do ETFs Increase The Commonality In Liquidity Of Underlying Stocks?

Host(s): Assistant Professor David Yang
Speaker(s): Vikas Agarwal, Professor of Finance
University: J. Mack Robinson College of Business, Georgia State University, GA
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, February 10, 2017, 2:00 pm - 3:15 pm

We examine the impact of ETF ownership on the commonality in liquidity of the stocks held by ETFs, while controlling for the ownership by other institutional investors. Our results indicate that ETF ownership significantly increases the liquidity commonality on account of the arbitrage mechanism inherent in ETFs that ensures that ETF prices are in line with the prices of the underlying stocks. We show that greater arbitrage activities in both the primary and secondary markets of ETFs are associated with an increase in the effect of ETF ownership on commonality in liquidity. We exploit a quasi-natural experiment based on ETF trading halts to establish a causal relation between ETF ownership and liquidity commonality. Taken together, our results show that ETFs reduce the ability of the market participants to diversify liquidity shocks.

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Momentum, Reversals and other Puzzles in Farma-MacBeth Cross-Sectional Regressions

Host(s): Assistant Professor David Yang
Speaker(s): Mark Kamstra, Professor of Finance
University: Schulich School of Business, York University
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Tuesday, February 7, 2017, 12:00 pm - 1:00 pm

The existence of reversals and momentum in equity returns has challenged proponents of efficient markets for over 30 years. Although explanations for momentum profits based on cross-sectional return dispersion have been proposed, evidence of time-series autocorrelation from Fama-MacBeth cross-sectional regressions persists without any good risk/return explanation. In this paper I show that common implementations of the Fama-MacBeth procedure will yield upward biased estimates of time-series autocorrelation coefficients. Even in absence of autocorrelation, the bias is strictly positive, leading to apparent momentum when there is, in fact, none. Perhaps more interestingly, this biased implementation of the Fama-MacBeth procedure has found its way into a great many other studies and may, similarly, lead to apparent effects when there are none. I outline conditions under which this bias occurs and prove the existence of bias under these conditions. I also provide a Monte Carlo simulation demonstrating the magnitude of the bias. Finally, I provide demonstrations of the impact of this bias with reference to published results in the literature, demonstrating how correcting this bias can overturn results.

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What are We Really Good at? Product Strategy with Uncertain Capabilities

Host(s): Professor Sreya Kolay
Speaker(s): Dr. Matthew Selove, Associate Professor
University: The George L. Argyros School of Business & Economics, Chapman University
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, February 3, 2017, 3:00 pm - 4:30 pm

Firms often learn about their own capabilities through their products’ successes and failures. This paper explores the interaction between such learning from experience and product strategy in a formal model. We consider a firm that can launch a sequence of products, where each product’s performance depends on the fit between the firm’s capabilities and the product. A successful new product always causes the firm to become more optimistic about the capability most relevant for that product; however, it can also cause the firm to become less optimistic about some of its other capabilities, including capabilities the new product does not use. A product launch generates useful information for future decisions if it leads to learning about capabilities used by potential future products. We find that a product sharing few or even no capabilities with potential future products may generate more useful information than a product with greater overlap.

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How Emotions Move Us: An Action-Readiness Account of the Effects of Emotions on Decision-Making

Host(s): Professor Gerardo Okhuysen
Speaker(s): Maia Young, Associate Professor of Management and Organizations
University: Anderson School of Management, University of California, Los Angeles
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 3, 2017, 10:30 am - 12:00 pm

In this talk, I’ll present findings on anger and two common decision biases: confirmation bias and anchoring. I find that anger can improve decision making when task success requires the decision maker to be confrontational. In the case of confirmation bias, people often erroneously focus on information that confirms their opinion and ignore information that disconfirms it. However, people who are angry are more prone to seek disconfirming information, attenuating the bias. Paradoxically, people who are angry seek information about opponents’ claims to refute them, but exposure to the information moderates their position. In the case of anchoring bias, people’s numeric estimates of unknown values are overly influenced by salient values that are unlikely to be accurate. However, people who are angry are less prone to anchoring bias. For both confirmation and anchoring biases, anger reduces the bias because it motivates confrontation. Whereas the dominant model of emotions and decision-making asserts that cognitive appraisals that accompany emotions affect decision making, my research suggests that emotions can also affect decision making by changing motives.

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Vote Avoidance and Shareholder Voting in Mergers and Acquisitions

Host(s): Assistant Professor Chong Huang
Speaker(s): Kai Li, Professor of Finance
University: University of British Columbia, Sauder School of Business, Vancouver, BC, Canada
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, December 2, 2016, 2:00 pm - 3:30 pm

Using a hand-collected sample of U.S. stock deals over the period 1995-2015, we examine whether and how the requirement of acquirer shareholder voting affects deal quality. We find that acquirer management substitutes stock with cash to bypass shareholder voting, and that deals bypassing shareholder voting have lower announcement returns than those requiring shareholder voting. Employing a regression discontinuity design in a setting without managerial discretion, we show a positive causal effect of shareholder voting on deal quality. Moreover, this positive value effect is concentrated among acquirers with higher institutional ownership and among acquirers buying targets with more severe information problems. We conclude that shareholder voting mitigates the agency problems in mergers and acquisitions.

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Cost-Benefit Analysis of Resource Allocation in The United States: Models and a 1980-2011 Case Study

Host(s): Assistant Professor Luyi Gui
Speaker(s): Dr. Jun Zhuang, Associate Professor and Director of Undergraduate Studies, Department of Industrial and Systems
University: University at Buffalo, The State University of New York
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, December 9, 2016, 2:00 pm - 3:30 pm

Fire-related hazards and incidents are an everyday phenomenon, and firefighting in the United States owe to more than one million firefighters in about 30,000 fire departments across the country. The estimated total cost of fire was $329 billion in 2011. Leveraging the National Fire Incident Response System (NFIRS) data set, we conduct a data-driven study to propose empirical and theoretical models to assess risk levels and quantitatively measure effectiveness of investments. We then study the optimal risk-reduction strategies, and optimal resource allocation strategies given a total budget constraint. We will also discuss public-private partnership, equity, and optimal routing in fire protection. This study would benefit policymakers and analysts in fire protection and safety, to save lives and other losses.

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Casting A Wider Net: How Increasing the Proportion of Women Applicants Affects the Hiring of Female Freelancers in an Online Labor Market

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Ming Leung, Assistant Professor of Management of Organization
University: Haas School of Business, University of California, Berkeley
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Friday, December 2, 2016, 10:30 am - 12:00 pm

It is well-understood that women and men work in distinctly different jobs, contributing to substantial disparity in earnings. Less well-understood are the mechanisms generating these uneven outcomes – hampering remediation efforts. Explanations oscillate between whether employers are biased against certain applicants and whether women and men vary in their likelihood of applying to certain jobs. Conclusions are difficult to draw because researchers rarely account for how many women and men apply. This is critical because employment outcomes result from a two-sided process: applicants first decide to apply then employers decide to hire. I argue that accounting for the proportion of women applying to jobs significantly alters the conclusions we can draw. Analyses of 792,650 job postings, by 249,506 employees who received 7,699,370 job applications from 292,518 freelancers on an online market for contract labor demonstrate my contention. Regression analyses first reveal that equally qualified women are more likely to be hired for female-type jobs and less likely to be hired for male-type jobs of IT & Programming, than men. However, this differential hiring is completely mediated once the proportion of women applying to these jobs is accounted for. Most strikingly, for every 1% increase in proportion of women applying to a job, there is a commensurate 1% increase in the proportion of female freelancers hired – for all job-types. These findings advocate for a focus on the challenges women face in applying to traditionally male-type jobs. I also provide insight into the burgeoning phenomenon of online hiring and the gig-economy.

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Bank Capital & Monitoring: Evidence from Loan Quality

Host(s): Assistant Professor Radhika Lunawat
Speaker(s): Hemang Desai, Robert B. Cullum Professor of Accounting
University: Edwin L. Cox School of Business, Southern Methodist University
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Friday, November 4, 2016, 3:00 pm - 4:30 pm

There are two competing theoretical perspectives on whether bank capital improves or adversely affects banks’ monitoring incentives. We show that bank capital is positively associated with loan quality, an outcome of bank’s monitoring effort, after controlling for other determinants of loan quality. Importantly, using two ex-ante measures of bank’s monitoring effort that capture quality and quantity of labor input into monitoring, we show that bank capital is positively related to monitoring efforts. Our evidence is consistent with the prediction in Mehran and Thakor (2011) that bank capital strengthens monitoring incentives which in turn increases the value of its loan portfolio.

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When Transparency Improves, Must Prices Reflect Fundamentals Better?

Host(s): Assistant Professor Radhika Lunawat
Speaker(s): Assistant Professor Snehal Banerjee
University: Rady School of Management, University of California, San Diego
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, October 28, 2016, 3:00 pm - 4:30 pm

No. A common regulatory response to high market uncertainty is to increase transparency by making access to fundamental, payoff-relevant information cheaper. We study the impact of such policies on how informative prices are about fundamentals in a setting where investors can endogenously choose to learn about asset fundamentals and liquidity trading by others. When liquidity demand is price-dependent (e.g., due to forced deleveraging), we show that higher transparency, even if exclusively targeting fundamentals, can make prices less informative. As such, regulatory changes which make learning easier may exacerbate the very problems they are intended to address.

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How Do Complementers Respond to the Threat of Platform Owner Entry? Evidence from the Mobile App Market

Host(s): Professor Tingting Nian
Speaker(s): Assistant Professor Feng Zhu
University: Harvard Business School, Harvard University
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Thursday, October 27, 2016, 2:30 pm - 4:00 pm

How do complementers respond to the threat of platform owner entry, and how do such responses differ from the responses to actual entry? Using the mobile platform Android as our research setting, we examine how app developers on Android adjust their rate and direction of innovation efforts and prices in response to Google’s entry threat and actual entry into to the app markets. Based on a difference-indifferences empirical framework, we find that app developers that are affected by Google’s entry reduce their innovation efforts on affected apps after entry threats increase; after Google’s actual entry, they reduce innovation efforts on affected apps further and also increase these apps’ prices. However, we find that affected app developers do not withdraw from the platform completely—once the threat occurs, they shift innovation efforts from affected apps to other unaffected apps, as indicated by an increase in updates on unaffected apps during both the entry-threat and actual-entry period.

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RFQ, Sequencing, and the Most Favorable Bargaining Outcome

Host(s): Assistant Professor Luyi Gui
Speaker(s): Leon Y. Zhu, Associate Professor
University: University of Southern California, Marshall School of Business
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time: Friday, October 21, 2016, 12:30 pm - 2:00 pm

When suppliers are imperfect substitutes, it is usually the best interest of a buyer to procure from various suppliers to match the needs of different customers. Motivated by prescription drug affordability practices, we study quantity-dependent pricing contracts with exclusion clauses in a dual-sourcing setting. We show that the quantity-dependent pricing contracts coordinate the supply chain, but introducing exclusion clauses may lead to various equilibriums in profit allocation. As a result, we analyze the negotiations between a buyer and two suppliers both with and without a request for quotation (RFQ) stage that precedes the negotiation. We show that the buyer can leverage the RFQ stage even under a full information setting when the negotiation sequence is endogenously determined by the final quotations of the RFQ process. Specifically, the buyer's equilibrium payoff with RFQ dominates the most favorable equilibrium under bargaining without RFQ.

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The Impact of Affordable Care Act Medicaid Expansion on Medicaid Revenue, Uncompensated Care, and Hospital Financial Position

Host(s): Associate Professor Mireille Jacobson
Speaker(s): Tom Buchmueller, Professor of Business Economics and Public Policy
University: Ross School of Business, University of Michigan
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time: Monday, October 17, 2016, 11:00 am - 12:30 pm

In debates over the Affordable Care Act, hospitals argued forcefully for Medicaid expansions with the hope that favorable changes in payer mix would reduce uncompensated care and consequently improve financial performance. Although uninsured discharges fell in Medicaid expansion states relative to non-expansion states, little is known about how expansions affected hospital financial performance. We estimate the impact of expansion on Medicaid payments, uncompensated care costs, net income, and operating margins using the 2011-2015 Medicare cost reports. Relative to hospitals in non-expansion states, Medicaid revenues increased and uncompensated care fell for hospitals in expansion states. Comparing all expansion states to non-expansion states suggests that net operating income and operating margins increased slightly. However, this result masks heterogeneity among expansion states. The improved financial performance was limited to states where the ACA expansion represented a major change in eligibility standards and a large increase in insurance coverage. Among hospitals in states in which childless adults above the Federal Poverty Line (FPL) were already eligible for Medicaid, changes in Medicaid revenues and uncompensated care were smaller and net income and operating margins did not improve relative to the trend in non-expansion states. We provide theoretical and empirical evidence that worsened financial position in these states could be explained by high levels of crowd-out of private hospital discharges.

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Prompting the Benefit of the Doubt: The Joint Effect of Auditor-Client Social Bonds and Measurement Uncertainty in Audit Adjustments

Host(s): Professor Radhika Lunawat
Speaker(s): Professor Steven Kachelmeier
University: University of Texas, Austin
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, September 30, 2016, 3:00 pm - 4:30 pm

We design an incentivized experiment to test the extent to which measurement uncertainty elevates the risk that social bonds between auditors and reporters compromise audit adjustments. Results indicate that, when audit evidence is characterized by some residual uncertainty, the adjustments our auditor-participants require is sensitive to whether they have an opportunity to form a modest but friendly social bond with reporters. In contrast, although auditors do not adjust fully even when misstatements are known with certainty, social bonding has no effect in this scenario. Accordingly, our experiment contributes beyond the main effects of social bonding and measurement uncertainty demonstrated in prior research by showing that these forces are interdependent. A practical implication is that audit firms’ expanded use of in firm specialists and concurring partners when determining audit adjustments to complex accounts can confer both technical benefits from expertise and social benefits from a more distanced assessment that is less influenced by day-to-day interactions with client personnel.

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The Self-Fulfilling Cycle of Coercive Surveillance

Host(s): Professor Sharon Koppman
Speaker(s): Professor Michel Anteby
University: Boston University
Location: SB1 5200, Lyman Porter Colloquia Room and Terrace
Time: Friday, September 30, 2016, 10:30 am - 12:00 pm

In the past few decades, the growth of surveillance has become a fixture of organizational life. Past scholarship has largely explained this growth as the result of managerial demands for added control over workers, coupled with newly available cheap technology (such as cameras). We draw on identity work literature to complement this view, suggesting that workers can also drive the growth in surveillance. We show that workers under surveillance can feel constantly observed and seen, but they also feel largely unnoticed and uncared for as individuals by management. This paradoxical experience leads them to interpret the surveillance as coercive and to engage in invisibility practices to attempt to go unseen and remain unnoticed. Management, in turn, views these attempts as justification for even more surveillance, thus creating a self-fulfilling cycle of coercive surveillance. Our analysis therefore links in part the growth of surveillance to workers’ own identity work, while also identifying a unique form of identity work attached to such surveillance. Overall, our study offers one of the first endogenous explanations for the growth of surveillance and carries important implications for the literature on surveillance and identity work.

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A Dynamic Model of Two-Sided Markets (with Anna Ingster Adachi)

Host(s): Professor Tingting Nian
Speaker(s): Professor Luis Cabral
University: New York University
Location: SB1 5200, Lyman Porter Colloquia Room and Terrace
Time: Wednesday, September 21, 2016 10:30 am - 12:00 pm

We introduce a dynamic framework to analyze two-sided markets. The (single) platform owner sets prices at the beginning of each period. Agents (buyers, sellers, readers, consumers, merchants, etc.) make usage decisions every period and platform membership decisions occasionally. We show that optimal platform prices result from an extension of the canonical elasticity rule that also accounts for (a) the externality of two-sided markets and (b) the dynamic value of attracting new platform members. We provide analytical results relating prices to the size of each platform side. We also examine the determinants of equilibrium platform size, showing that the stationary distribution may be bi-modal, that is, with some probability the platform remains very low or takes very long to increase in size.

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Emotions are Contagious: Social Network and Mood-Induced Stock Returns

Host(s): Professor David Hirshleifer
Speaker(s): Qiguang Wang
University: University of California, Irvine
Location: SB2 Conference Room 306
Time: Friday, August 19, 2016, 1:00 pm - 2:30 pm

Aggregate stock market experiences mood-induced return movements. Moreover, there are also substantial cross-sectional variations in individual stocks’ reaction to these mood events. This paper tests the hypothesis that social interactions amplify the mood effects. I estimate social interactions for the local population of firms’ headquarters using Spatial Model and the U.S. census data. I show that cross-sectionally, stocks with higher local social interactions exhibit higher Friday returns and pre-holiday returns. This effect cannot be explained by stock and firm characteristics or existing return seasonalities, and is stronger for small, retail, and volatile stocks. The evidence strongly supports the notion that emotion contagion is a key determinant for mood-induced stock returns.

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CEO Power and Nonconforming Reference Group Selection

Host(s): Assistant Professor John Joseph
Speaker(s): Professor Pino Audia
University: Dartmouth College
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, June 3, 2016, 2:00 pm - 3:30 pm

By integrating insights from social psychological research on power and organizational research on legitimacy, we examine the influence of CEO power on organizations’ selections of nonconforming reference groups and the impact of these selections on analysts’ stock recommendations and coverage. Our empirical analyses rely on reference group selections manually coded from stock performance graphs of 10-K filings within the U.S. chemical industry. Consistent with previous studies, our data reveal that the majority of reference groups selected are well-known indexes favored by the SEC, analysts, and investors. At the same time, fourteen percent of the reference groups used by organizations in our sample are nonconforming custom peer groups generally regarded with suspicion by outsiders. Consistent with our predictions, we find that organizations with powerful CEOs are more likely to use custom peer groups and that the use of custom peer groups has a negative influence on analysts’ stock recommendations and coverage. We contribute to research on the choice of reference groups by calling attention to CEO power as a driver of the choices of nonconforming reference groups and by highlighting the negative effects of such choices.

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What Is a Digital Cookie Worth?

Host(s): Professor VC Choudhary
Speaker(s): Professor Rahul Telang
University: Carnegie Mellon University
Location: SB1 5200, Lyman Porter Colloquia Room and Terrance
Time: Monday, May 23, 2016, 10:30 am - 12:00 pm

Tracking a user’s online browsing behavior to target them with relevant ads has become pervasive. There is an ongoing debate about the value of such tracking and the associated loss of privacy experienced by users. We inform this debate by quantifying the value of using different kinds of potentially intrusive information in targeted advertising. We collect a large proprietary dataset with over 1.3 million individual impression-bid-level observations. The data has detailed cookie information, as well as the bids placed by the firm for serving ad impressions. We also know whether a user saw the ad and whether a purchased occurred. First, we find that using more information from cookies increases the accuracy of prediction of purchases, but at a decreasing rate. We also find that firm’s bidding decision (how much to bid for an ad) can be accurately predicted by cookie information. We then estimate the effect of an ad on a user’s purchase probability. In particular, we examine whether users who have a high baseline purchase probability are also more likely to be influenced by ads. We find that on average ads do not have a statistically significant impact on purchase probabilities of consumers. However, individuals who have a high baseline purchase probability, do respond positively to ads and ads can increase their purchase probability by up to 2.7 percentage points. To overcome potential endogeneity in ad placement, we use an instrumental variable and find that these results are robust. Finally, we simulate different policy regimes by restricting different kinds of user information from being used for targeted advertising and quantify the impact such restrictions have on sales. We find that restricting more intrusive variables for targeting lowers ad effectiveness and leads to fewer potential purchases.

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Simple Pricing for Services and Information Goods

Host(s): Mingdi Xin
Speaker(s): Professor Hemant Bhargava
University: University of California, Davis
Location: SB1 3410, Elisabeth and Paul Merage Conference Room
Time: Thursday, May 12, 2016, 11:00 am - 12:30 pm

The first part of my talk will cover results from the attached working paper "Pricing Digital Goods: Valuation vs. Appetite'' which analyzes "simple pricing''---where firms face a large market of heterogeneous consumers, but offer either a single “Pay as you Go” plan (one per-unit price), a single “All you can Eat” plan (one buffet price), or a combination of both (either a two-part tariff, or a choice between per-unit and buffet price). We show that appetite heterogeneity, caused by variation in rate of satiation, is far more consequential in plan design than the more commonly analyzed valuation heterogeneity. The profit advantage of a two-part tariff over per-unit and buffet pricing is significant only under moderate RAH (appetite heterogeneity relative to valuation heterogeneity). The 2PT also has higher profit vs. giving consumers a choice between per-unit and buffet prices, but the combination dominates on market coverage and consumer surplus. Per-unit pricing works quite well when RAH is high, while buffet pricing does well when RAH is low. But when a firm is uncertain about RAH, or has numerous products with different RAH, then the per-unit plan is less risky compared to the buffet plan, sacrificing less profit across the spectrum of scenarios, and producing higher market share. The second part of my talk (based on a paper that is in draft form) extends the analysis to three-part tariffs (F, Q, s) - fixed fee, allowance, per-unit overage fee) which is also very common in practice, and considered the most efficient way to price discriminate when users consume multiple units. Intuitively, this should be more profitable than 2PT. But we show that for all log-concave distribution of valuations (the most common assumption in modeling valuation heterogeneity), the optimal 3PT reduces to a 2PT, and a 3PT is not any more profitable. But a 3PT does produce higher profit under other conditions, e.g., the market has a bimodal distribution, or when consumers have uncertain valuations.

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Resource Interdependence and Appropriability: A Study of Product and Process Inventions

Host(s): Professor John Joseph
Speaker(s): Professor Gautam Ahuja
University: University of Michigan, Stephen M. Ross School of Business
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, May 6, 2016, 2:00 pm - 3:30 pm

We examine how building interdependence between a firm's activities enhances a firm’s appropriation of returns to its inventions. The strategy literature has argued that higher levels of interdependence between a firm's activities can protect a firm from imitation and thereby enhance appropriability. We evaluate this argument recognizing that firms have access to multiple different mechanisms to enhance appropriability and increasing interdependence is just one of them. Specifically we examine three routes to appropriating value from your inventions described in the literature - building enhanced levels of interdependence between your activities, investing in substantial production capacity and building access to multiple markets. Using a new measure of interdependence based on textual coding of patent claims, we demonstrate that building increased interdependence between a firm’s product and process inventions deters imitation and improves firm performance. However, this effect is most significant when the firm has more limited access to alternative scale-based mechanisms (production capacity, market access) for value appropriation. Further, firms systematically differ in their usage of these three different mechanisms in theoretically predictable ways and not all firms choose to use enhanced interdependence as a mechanism for increased appropriability. Thus, we develop a contingent model that identifies the limits to complexity and interdependence as a source of protection from imitation.

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Making Transparency Transparent: Productivity and Behavioral Implications of Observability at Work

Host(s): Professor Luyi Gui
Speaker(s): Assistant Professor Ethan Bernstein
University: Harvard Business School
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Thursday, April 21, 2016, 1:30 pm - 3:00 pm

We are increasingly observed and observing at work. Advances in technology, from increased use of smart cameras to wearable tracking devices, are enabling “Super Vision” (Gilliom & Monahan, 2012) far beyond any level of supervision envisioned when Frederick Taylor (1911) touted the benefits of managerial oversight through scientific management. That has had profound implications for compliance, both within organizations and beyond. In this talk, I explore the conditions which, when present, might make workplaces designed with zones of privacy (rather than full observability) more productive and, ironically, more transparent—a result I term the “transparency paradox.” After reviewing several studies that investigate different aspects of the transparency paradox, I will then relate the results back to my own experiences in the regulation of consumer financial products in the United States.

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Entry, Exit and the Potential for Resource Redeployment

Host(s): Professor Libby Weber & Professor John Joseph
Speaker(s): Professor Marvin Lieberman
University: UCLA Anderson School of Management
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, April 8, 2016, 2:00 pm - 3:30 pm

Combining the concept of resource relatedness with the economic notion of sunk costs, we assess how the potential for resource redeployment affects market entry and exit by multi-business firms. If the performance of a new business falls below expectations, a diversified firm may have more flexibility if it is able to redeploy its resources back into related businesses. In effect, relatedness reduces the sunk costs associated with a new business, which facilitates exit. This, in turn, has implications for entry: by decreasing the cost of failure, the potential for redeployment justifies the undertaking of riskier entries and greater experimentation. These dynamic benefits of relatedness are distinct from standard notions of ‘synergy.’ To show support for this idea, we provide a mathematical model, descriptive data, and company examples.

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The Role of Tacit Knowledge In Auditor Expertise and Human Capital Development

Host(s): Professor Ben Lourie
Speaker(s): Dr. Jasmijn Bol
University: Tulane University, Freeman School of Business
Location: SB1 5200, Lyman Porter Colloquia Room and Terrace
Time: Friday, April 8, 2016, 3:00 pm - 4:30 pm

Prior audit research predicts and finds that tacit managerial knowledge is associated with better annual performance evaluations, but only for relatively experienced auditors (Tan and Libby [1997]). By contrast, and based on the increasing importance of social skills in today’s audit ecology, we predict and find that tacit knowledge is now also valued in relatively inexperienced auditors. In particular, audit firms reward both tacit managerial knowledge and tacit audit quality knowledge in relatively inexperienced auditors via career opportunities, better performance evaluations, and bonus compensation. Shifting to relatively experienced auditors, we predict that better supervision of subordinate auditors is one way in which tacit managerial knowledge enhances relatively experienced auditors’ performance. We find that, consistent with this prediction, supervisors with higher tacit managerial knowledge better develop this knowledge in their subordinates, value tacit knowledge more when evaluating subordinates’ annual performance, and strengthen the firm commitment of higher tacit knowledge subordinates to the firm.

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Power as an Emotional Liability: Implications for Perceived Authenticity and Trust after a Transgression

Host(s): Professor Gerardo Okhuysen
Speaker(s): Professor Peter Kim
University: University of Southern California
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, April 1, 2016, 3:00 pm - 5:00 pm

People may express a variety of emotions after committing a transgression. Through four empirical studies, we investigated how the perceived authenticity of such emotional displays and resulting levels of trust are shaped by the transgressor's power. Past findings suggest that individuals with power tend to be perceived as more authentic. Yet our findings reveal that: a) a transgressor’s display of emotion is perceived to be less authentic when that party’s power is high than low, b) this perception of emotional authenticity, in turn, directly influences (and ultimately mediates) the level of trust in that party, and c) these effects lead perceivers to exert less effort when asked to make a case for leniency toward high than low power transgressors. This tendency to discount the emotional authenticity of the powerful was, furthermore, found to arise from power increasing the transgressor’s perceived level of emotional control and strategic motivation. These results were found across different types of emotions, different expressive modalities, different operationalizations of the transgression, and different types of participants.

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Why Strategic Management Scholars Must Adopt a Stakeholder Perspective

Host(s): Professor Libby Weber & Professor John Joseph
Speaker(s): Professor Jay Barney
University: Eccles School of Business, University of Utah
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Thursday, March 31, 2016, 11:30 am - 1:00 pm

Despite calls for integrating a stakeholder perspective more completely into strategic management research and practice, most strategic management scholars continue to build on the assumption that shareholders are a firm’s only residual claimant. This paper shows that scholarly efforts designed to explain the existence of expected economic profits logically requires that stakeholders, besides a firm’s shareholders, are residual claimants, and thus that strategic management research must incorporate multiple stakeholders in its analysis of expected economic profits. This conclusion has a variety of important implications for several research traditions, including stakeholder theory, strategic management, entrepreneurship, and finance.

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Lessons Learned From Hybrid [In-Person & Online] Teaching

Host(s): Professor Connie Pechmann
Speaker(s): Lecturer Raymond Pirouz
University: University of California, Irvine
Location: SB1 2100, Experian Case Study Classrooms
Time: Monday, March 14, 2016, 12:00 pm - 1:00 pm

Over a six-year period, Raymond Pirouz has taken his “Marketing on the Internet” MBA elective from a standard 10-week in-person course to a hybrid offering wherein the class meets in-person for the first and final session with all other class sessions held completely online. Through trial and error, Raymond has adopted a unique mix of technologies and approaches resulting in key learnings & best practices centered around the pursuit of one central objective: To replicate a “University of” teaching & learning experience in a digital context.

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Supply and Demand Functions in Inventory Models

Host(s): Professor Shuya Yin
Speaker(s): Professor Annabelle Feng
University: Purdue University
Location: SB1 5100
Time: Friday, March 4, 2016, 1:30 pm - 3:00 pm

The heart of an inventory model is the modeling of the supply and demand functions. To allow for analytical tractability, the existing literature focuses on almost surely linear supply and demand functions, which greatly limits the applicability of the models. The goal of this paper is to provide a unified approach to analyze general random supply and demand functions. By transforming the problem into one defined on a higher dimension, we show that many of the seemingly highly nonlinear supply and demand functions (in the almost sure sense) are linear in the stochastic sense. With this new notion of linearity, called the stochastic linearity in mid-point, our ability to analyze inventory and supply chain problems is much enhanced. We are able to prove the concavity of the profit function in the transformed inventory and pricing decisions for a general class of supply and demand functions that cover and go much beyond the ones studied in the existing literature. We further show that when the supply functions are stochastically increasing in the dispersive order, a condition satisfied by almost all the supply functions analyzed in the existing literature, the optimal ordering decision follows an almost threshold policy—When the inventory level is above a threshold, no order is placed to the supplier; otherwise, a positive order is issued to the supplier with exception over a set of inventory levels with zero Lebegue measure. If, in addition, the demand distribution is continuous, this policy reduces to a strict threshold policy and it is optimal to select the suppliers based on per unit cost of delivery. To demonstrate the applicability of these theoretical developments, we analyze several known and new examples of supply and demand functions. We also present a nonparametric approach to show how one can empirically estimate and verify the stochastic properties of the supply and demand functions. This is a joint work with J. George Shanthikumar.

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The Potlatch Revisited: Distinction and Destruction among the New Global Elite

Host(s): Professor Sharon Koppman, Co-Sponsored by: The Department of Sociology
Speaker(s): Associate Professor Ashley Mears
University: Boston University
Location: SB1 5200
Time: Friday, March 4, 2016, 12:00 pm - 1:30 pm

This paper draws its conceptual lens from the sociology of expectations and from market studies to investigate the relationship between hype cycles and how future markets are formed. Through discourse analysis we interrogate a body of 462 publicly accessible texts from the period 2005 to 2015 around digital health technologies and markets across newspapers, internet sources and public policy documents, tracing: the content of the discourse, the promises made and warnings sounded, who contributes to the hype, and its effects on the shaping of the digital healthcare landscape. We find that the digital health technology hype follows an hourglass pattern, where the early market impetus around cost savings in healthcare systems finds itself replaced by a technology development frenzy in a second phase before settling down into a more mature third phase where technologies are integrated into a wider socio-economic discourse again.

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From Electronic Health Records to Mindful Cyborgs: How Expectations Shape Markets

Host(s): Professor Alladi Venkatesh
Speaker(s): Professor Susi Geiger
University: UCD Dublin
Location: SB1 5200
Time: Friday, March 4, 2016, 12:00 pm - 1:30 pm

This paper draws its conceptual lens from the sociology of expectations and from market studies to investigate the relationship between hype cycles and how future markets are formed. Through discourse analysis we interrogate a body of 462 publicly accessible texts from the period 2005 to 2015 around digital health technologies and markets across newspapers, internet sources and public policy documents, tracing: the content of the discourse, the promises made and warnings sounded, who contributes to the hype, and its effects on the shaping of the digital healthcare landscape. We find that the digital health technology hype follows an hourglass pattern, where the early market impetus around cost savings in healthcare systems finds itself replaced by a technology development frenzy in a second phase before settling down into a more mature third phase where technologies are integrated into a wider socio-economic discourse again. The paper contributes to technology marketers' understanding of how technology markets are shaped and how they can position themselves in these markets to best effect, and to marketing researchers' understanding of how complex markets form. We warn against following the 'hype', especially when it encourages companies to engage in technology development that is blinded by the promises of an untapped market and unhinged from broader systems, societal, ethical or economic concerns.

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Spillovers Inside Conglomerates: Incentives and Capital

Host(s): Professor Chong Huang
Speaker(s): Professor Denis Sosyura
University: University of Michigan
Location: SB2 122
Time: Friday, February 26, 2016, 1:30 pm - 2:45 pm

Using hand-collected data on divisional managers at conglomerates, we find that a change in industry pay in one division generates spillovers on managerial pay in other divisions of the same firm. These spillovers arise only within the boundaries of a conglomerate. The intra-firm spillovers increase when conglomerates have excess cash and when managers have more influence over its distribution, but decline in the presence of strong governance. These spillovers are associated with weaker performance and lower firm value. Our evidence is consistent with simultaneous cross-subsidization via managerial payoffs and capital budgets and suggests that these practices arise in similar firms.

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Value of Multi-Dimensional Rating Systems: Evidence from a Natural Experiment

Host(s): Professor Mingdi Xin
Speaker(s): Associate Professor Pei-Yu Chen
University: Arizona State University
Location: SB1 5200 5th Floor, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 19, 2016, 10:30 am - 12:00 pm

Online product ratings offer consumers information about products. However, consensus is lacking on whether or not single-dimensional ratings can efficiently convey product quality information to consumers. Some scholars have discussed the potential of designing multi-dimensional rating systems to transfer quality information because quality is often comprised of multiple dimensions. This study directly investigates whether or not, and to what extent, multi-dimensional rating systems enhance the efficiency of information transfer. Our key identification strategy hinges on a natural experiment on www.tripadvisor.com (TripAdvisor) when the website reengineered and changed its rating system from single-dimensional to multi-dimensional in January 2009. To control the unobserved quality change over time at the restaurant level, we obtain rating data on the same set of restaurants from www.yelp.com (Yelp), which allow us to identify the causal effect using a difference-in-difference approach. Results from a set of econometric analyses show that ratings in a single-dimensional rating system have a high dispersion and downward trend, in contrast to those in a multi-dimensional rating system, which support the conjecture that multi-dimensional rating systems facilitate matching between consumer preferences and product attributes. Consumers form more accurate expectations from multi-dimensional ratings and are therefore less likely to be either “disappointed,” which results in a downward trend in ratings, or “surprised,” which leads to a higher dispersion of ratings. We also conduct two randomized experiments to understand the mechanisms of how multi-dimensional rating systems enhances information transfer. Results suggest that multi-dimensional rating systems not only help consumers find products that better fit their preference, but also increase their confidence of their choice. These results support the view that multi-dimensional rating systems enhance information transfer efficiency. This study provides important implications for a good design of online rating systems that help consumers match their preferences with product attributes.

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The Local Realities of Risk, Responsibility, and Regulatory Empowerment: A Frontline Safety Approach

Host(s): Professor Luyi Gui
Speaker(s): Assistant Professor Garry Gray
University: University of Victoria
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 12, 2016, 10:00 am - 11:30 am

In what ways do social interactions within work settings influence compliance with legal regulations? How do those on the frontline who perform day-to-day work, interpret and respond to regulations designed to specify and bound their work practices? A frontline safety approach takes seriously the relationships between people at the local level, between people and the systems/institutions in which they are embedded, and between people and their wider social and political contexts. It is vital for regulatory scholarship to recognize these issues, in particular, how conceptions of individuals (as rational, responsible, economic actors) are constructed and maintained at these levels. In this presentation, I will illustrate limitations in regulatory empowerment approaches that require citizens to speak up by drawing on field research among blue collar workers in factories and truck driving as well as professionals in white collar settings such as hospitals and universities. Power imbalances play a crucial role in the decision to speak up, however, not only among those doing manual labor, but also among highly trained professionals.

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Do managers tacitly collude to withhold industry-wide bad news?

Host(s): Professor Ben Lourie
Speaker(s): Professor Catherine M. Schrand
University: University of Pennsylvania
Location: SB1 5200 5th Floor, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 12, 2016, 3:00 pm - 4:30 pm

We analyze when firms in an industry could collectively withhold adverse news about industry conditions. Intra-industry correlation in signals should increase capital market pressures to disclose, making it difficult for firms to collectively withhold adverse news. Using a strategic game framework, we predict that a cooperative withholding equilibrium is possible, but whether it is achievable depends on the structure of the industry, the nature of the industry news, and the extent to which these factors are common knowledge. Using opacity in 10-Ks as a proxy for withholding, we document a small number of cases of increased intra-industry withholding of adverse news, controlling for changes in firm fundamentals including complexity. Strategic withholding is more likely in industries with greater negative tailrisk, greater equity incentives, and trade associations that foster interpersonal connections. The analysis has implications for mandated disclosure of industry-wide news by providing an understanding when economic forces are sufficient to generate voluntary disclosure of industry-wide adverse conditions.

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Robust Dynamic Estimation

Host(s): Professor Rajeev Tyagi
Speaker(s): Professor Prasad Naik
University: University of California, Davis
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, February 12, 2016, 3:30 pm - 5:00 pm

Managing marketing resources over time requires dynamic model estimation, which necessitates specifying some parametric or nonparametric probability distribution. When the data generating process differs from the assumed distribution, the resulting model is misspecified. To hedge against such a misspecification risk, the extant theory recommends using White’s (1980) sandwich estimator. This approach, however, only corrects the variance of estimated parameters, but not their values. Consequently, the sandwich estimator does not affect any managerial outcomes such as marketing budgeting and allocation decisions. To overcome this drawback, we present the minimax framework that does not necessitate any distributional assumptions to estimate dynamic models. Applying minimax control theory, we derive an optimal robust filter, illustrate its application to a unique advertising data set from the Canadian Blood Services, and contribute several novel findings. We discover the compensatory effect: advertising effectiveness increases and the carryover effect decreases as robustness increases. We also find that the robust filter uniformly outperforms the Kalman filter on the out-of-sample predictions. Furthermore, we uncover the existence of a profit-volatility tradeoff, similar to the returns-risk tradeoff in finance, whereby the volatility of profit stream decreases at the expense of reduced total profit as robustness increases. Finally we prove that, unlike for-profit companies, managers of non-profit organizations should optimally allocate budgets opposite of the advertising-to-sales ratio heuristic; that is, advertise more (less) when sales are low (high).

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Improving Environmental, Health, and Safety in Supply Chains: Some Preliminary Studies

Host(s): Professor Shuya Yin
Speaker(s): Professor Chris Tang
University: University of California, Los Angeles
Location: SB1 5200, Lyman Porter Colloquium Room and Executive Terrace
Time: Friday February 5, 2016, 9:30 am - 11:00 am

Many factories in developing countries have serious Environmental, Health and Safety (EHS) issues. Due to inconsistent law enforcement, limited progress has been made. What can be done? This is an open research topic that operations management and supply chain researchers should explore. I plan to share some of my preliminary studies in this presentation.

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Using Choice Architecture to Improve Energy Decisions

Host(s): Professor Chris Bauman
Speaker(s): Professor Rick Larrick
University: Duke University
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Monday, February 1, 2016, 3:30 pm - 5:00 pm

This talk will describe a set of cognitive biases that lead people to misunderstand their energy use. The talk will review four principles of “choice architecture” derived from cognitive and social psychology for helping decision makers make better energy decisions. Brief research examples will be given in support of each. The principles will also be illustrated more broadly as tools for helping employees and consumers make better decisions. (1) Do the calculations for decision makers. “Miles per gallon” (MPG) is a familiar efficiency metric used to evaluate automobiles in the United States. However, gas consumption is a highly curvilinear function of MPG. As a result, MPG leads people to severely underestimate the gas savings from small MPG improvements on inefficient cars. Calculating consumption for decision makers by using a measure such as “gallons per 100 miles” corrects this bias. (2) Translate energy use to important objectives such as cost and environmental impact. People often fail to map energy use to other concerns, such as cost and environmental impact, because they lack knowledge or motivation. Translations remind people of goals they care about and guide them to options they prefer. (3) Provide a meaningful relative comparison. Relative comparisons help consumers evaluate whether an ambiguous energy number is good or bad. For instance, OPower has demonstrated that people reduce their energy use when given specific comparisons to average (and best) neighbors. Other comparisons, such as ambitious but realistic goals, also lead to reduced energy use. (4) Use an expanded scale, such as lifetime cost (not daily cost). People tend to ignore small numbers. To address this issue, energy-related numbers can be scaled to large but realistic time periods. Research shows that people are more interested in energy efficient products when given costs on a longer time scale.

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The Bright Side of Managerial Overconfidence

Host(s): Professor Shuya Yin
Speaker(s): Professor Juan Li
University: Nanjing University
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Boardroom
Time: Friday, January 29, 2016, 10:00 pm - 11:30 pm

A well-known behavior phenomenon is managers hold excessive faith that they know the truth. Managers may receive signals about market states, in which the states may be high or low, thus, the posterior probability of market state being high(low) with receiving a hit (bomb) signal is not smaller than the prior probability, managers may exhibit overconfidence on the accuracy of signals. The objective of this paper is to answer under which conditions overconfidence bias may lead to higher profits, the corresponding managerial insights for firms are whether to hire overconfident managers and how to estimate the value of signals in a competitive setting. The paper shows firms’ differentiation strategies critically depend on how costly it enter market. When the fixed cost of entry is not too high, both firms would like to hire rational managers. However, for a larger fixed cost, counterintuitively, one of firms exploits to hire overconfident manager to differentiate their competition if the market states being high is relatively large, the main reason of overconfidence leading to higher profits is benefits from ordering more with receiving the hit signal are sufficiently large compared with loss from ordering less with receiving the bomb signal. The fact that hiring overconfident managers is stable in a wide range of environments may help to explain why overconfident managers remains prevalent, even if it contributes to decision bias. Furthermore, overconfidence bias leading to higher profits are robust even when market states belong to a normal distribution.

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Vicarious Learning In Startups: Evidence From Accelerator Programs

Host(s): Professor John Joseph
Speaker(s): Professor Chris Bingham
University: University of North Carolina
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, January 29, 2016, 2:00 pm - 3:30 pm

A fundamental challenge for new startups is overcoming liabilities of newness - especially lack of experience and business understanding. Accelerators, intense, time-compressed entrepreneurial education programs, attempt to alleviate these critical liabilities by facilitating vicarious learning for participating new ventures. Yet, the organizations literature suggests that since new ventures lack experience and thus adequate levels of absorptive capacity to assimilate and integrate new knowledge, vicarious learning may be less effective. Using a multiple case, inductive study of eight US seed accelerator programs and affiliated startups, we address this tension and explore how accelerators may contribute to (or distract from) vicarious learning in startups. Our data suggest how accelerators do both. Collectively, our findings contribute to strategy by introducing intermediaries that may broker vicarious learning for others, to organization theory by suggesting how startups can build initial absorptive capacity, and to entrepreneurship by demystifying how accelerators can help or harm venture development.

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"Only One Left - I'll Fight you for It!": Scarcity Promotion Advertising and Aggressive Behavior

Host(s): Professor Connie Pechmann
Speaker(s): Dr. Darren Dahl
University: Sauder School of Business
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Monday, January 25, 2016, 1:00 pm - 2:30 pm

Marketers frequently use scarcity promotions, where a product or service is limited in either quantity or is promoted for a limited time. The present research shows that the mere exposure to scarcity promotion advertising can activate actual aggression even outside the consumption domain, when the scarce item is not even attainable. Further, exposure to scarcity promotion advertising prompts consumers to perceive other consumers (even if not physically present) as potential threats to obtaining a desired product. This threat, in turn, is shown to drive aggression towards others. Four studies using violent video game behavior to measure aggression demonstrate that firearm shooting behavior (number of shots fired), punching behavior (punches thrown), and consumer preferences for violent experiences are higher in response to such advertising.

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Attributes of Informative Disclosures

Host(s): Professor Ben Lourie
Speaker(s): Professor Daren Roulstone
University: Ohio State University
Location: SB1 2321, Judy Rosener Flexible Classroom
Time: Thursday, January 21, 2016, 2:00 pm - 3:30 pm

Regulatory actions and academic research suggest a variety of seemingly “good” disclosure attributes: readability, amount of forward-looking information, concreteness (numerical intensity), and more disclosure in general. While all of these attributes seem intuitively desirable, there is little empirical evidence about how these disclosure attributes compare in terms of informing the readers of financial reports. We examine equity market responses to quarterly earnings announcements as a function of these disclosure attributes and find substantial variation in their effects. We find strong evidence that forward-looking disclosures represent informative disclosures, very little evidence that readability is associated with disclosure informativeness, and actually find evidence that both disclosure length and numerical intensity are negatively associated with disclosure informativeness. We provide several reasons why these measured attributes may not capture disclosure quality as expected. Overall, our results should help inform both managers and regulators making decisions about how to craft or encourage informative disclosures. Our results also suggest caution for academics using seemingly intuitive measures of disclosure quality.

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Which Factors Matter to Investors? Evidence from Mutual Fund Flows.

Host(s): Chong Huang
Speaker(s): Professor Brad Barber
University: UC Davis
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, January 15, 2016, 1:30 pm - 2:45 pm

When assessing a fund manager's skill, sophisticated investors will consider all factors (priced and unpriced) that explain cross-sectional variation in fund performance. We investigate which factors investors attend to by analyzing mutual fund flows as a function of recent returns. Investors attend most to market risk (beta), but treat returns attributable to size, value, momentum, and industry factors as alpha. Flows of direct-sold funds- whose investors are likely more sophisticated than those of broker-sold funds-are less responsive to factor-related returns, which suggests sophisticated investors are aware that factor-related returns are not indicative of managerial skill.

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Stringency, Governance, Media Coverage and Diffusion of Environmental and Social Labeling Schemes

Host(s): Professor Luyi Gui
Speaker(s): Professor Charles J. Corbett
University: University of California, Los Angeles
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Friday, January 15, 2016, 10:00 am - 11:30 am

The diffusion of ecolabels has been widespread, through adoption of individual labels by firms and consumers has varied widely. Little is known about why some labeling schemes are more widely adopted than others. One might speculate that firms prefer labels with less stringent requirement, as they are less costly to adopt. Conversely, firls may prefer to associate themselves with a label that is sufficiently well-governed to minimize the risk of negative publicity emerging about other firms carrying that smae label. the notion "well-governed" itself is also not well-defined. Finally, one might speculate that labels which receive favorable coverage in the media are likely to be more widely adopted, and that labels which are more stringent and better-governed are more likely to attract such favorable coverage. We explore these linkages (between stringency, governance, and media coverage and adoption) using three sources of data. We analyze 40 environmental and social labeling schemes, using www.ecolabelindex.org and other sources to code their governance practices. We conducted a survey of 67 experts from governments, major retailers, NGOs, consultancies. and academia, around the world, to determine stringency, quality of governance, and breadth of adoption. Finally, we analyzed 3043 media articles on these 40 schemes, to determine the tenor of media coverage. We find that only accreditation of verifiers is associated with a better overall quality of governance. We also find that labels that are better-governed are also more widely adopted, consistent with the expectation that firms are more wary of joining labels with weal governance. On the other hand, labels that are more stringent are not less widely adopted, suggesting that (within the range of stringency included in our sample) labels do not suffer by imposing stricter requirements. We find that the tenor of the media coverage of a label does not depend on its stringency, on most specific governance practices, or its overall quality of governance. Only an open and consensus-based standard-setting process is associated with more favorable media coverage. More favorable media coverage is not, however, associated with wider adoption. Overall our findings point to "reassurance" as a key part pf governance of ecolabels, whether in the form of accreditation of verifiers, or participation of many stakeholders in the standard-setting process.

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