Information will be updated throughout the summer and fall.

Accounting & Management

Akash Chattopadhyay

Abstract:
Managing Activists: Earnings Management during Activism Campaigns
This paper examines the role of reported performance and earnings management, in the context of shareholder activism. I find that reporting better accounting performance at the onset of an activism campaign is associated with a lower likelihood of proxy fights and board turnover for target firms. Consequently managers, facing a threat to their control and careers, take strategic actions to boost short-term earnings. Proxies for earnings management, including abnormal accruals, are significantly higher for target firms in the quarter following the launch of an activism campaign, concurrent with a short-lived improvement in profitability. Consistent with the economic incentives arising for managers, earnings management is more pronounced when the market signals support for the activist, when the activist has higher ownership, when the target firm's past performance has been poorer, and when private benefits of control for managers are higher. Furthermore, earnings management in the quarter following activism is observed only in firms which are still engaged with the activist. Finally, I find evidence suggesting that this type of earnings management influences the outcome of activism.
Faculty Advisor(s): P. Healy (Chair), I. GowS. Srinivasan, and C. Wang

Carolyn Deller

Abstract:
Beyond Performance: When Potential Matters to Employee Career Outcomes
Using proprietary data from a large, multinational organization, I examine employee-level career outcomes under an evaluation system comprising assessments of both employee performance and future-oriented potential. My data pertains to the 7-year period after the implementation of the performance and potential system, yet natural variation arises in whether the employees in my sample were hired prior to, or after, implementation (“experienced employees” and “new employees”, respectively). I find that while voluntary departures of experienced employees appear to be triggered where an employee experiences a decrease in his or her potential rating from one period to the next, voluntary departures among these employees are otherwise unrelated to absolute potential ratings. Conversely, new employees exhibit a linear relation between potential ratings and voluntary departures, whereby higher potential employees are less likely to leave the organization. In addition, new employees experience a reduced likelihood of voluntary departure in the event of an increase in potential (decreases in potential appear to have no effect). I also find an increase in the proportion of high-potential employees in the period following the implementation of the system, highlighting employee selection as the primary underlying mechanism (rather than sorting out or motivational effects). Overall, my study contributes to our understanding of employee and organizational responses in the context of a performance and potential system.
Faculty Advisor(s): D. Campbell (Co-Chair), T. Sandino (Co-Chair), R. Simons, and E. Soltes

Henry Eyring

Abstract:
What to do with the Data in the Warehouse: Unlocking the Potential of Performance Data Reporting to Drive Performance
With advances in data computation and communication technology, a surfeit of data has built up in “warehouses,” and begs the question of to whom it should be shown and how. Fortunately, behavioral economic research has recently deepened understanding of how individuals respond to information display. I apply behavioral economic theory in assessing how to unlock the potential of performance data reporting to elicit performance improvement. I use proprietary datasets from several leading hospitals that have posted physicians’ patient satisfaction ratings and comments online, and conduct field experiments in online education, to identify dynamics of public and private performance reporting. The public reporting analysis shows that public visibility of physician ratings drives service improvement while impeding the updating of ratings from prior published values. The private reporting analysis identifies how an individual’s initial performance informs the optimal balance of related strengths and weaknesses, as well as the most motivating standard for peer comparison, to report to him or her. The results support effective performance reporting and evaluation, and help organizations awash in data avoid lamenting as might a modern-day ancient mariner, “data, data, everywhere, but not a drop to use”.
Faculty Advisor(s): D. Campbell (Chair), V. NarayananS. Datar, and A. Raman

Rajesh Vijayaraghavan

Abstract:
Recognizing Loan Losses in Banks: An Examination of Alternative Approaches
I investigate the accounting rules for loan loss recognition in banks and how they could be improved. The FASB in June 2016 issued a new rule that replaces current GAAP to a model that allows banks to use broader information in estimating allowances. This new rule will be effective starting December 2019. To empirically evaluate the current GAAP and the new model, I construct two models, exploiting the difference in the information set under the rules, which parallels the change from the current GAAP to the new rule. Using a methodology that combines micro data and machine learning techniques, I provide evidence that it is, in fact, possible to construct an allowance model that outperforms current GAAP, without expanding the information set beyond that permitted under the current rule. I find that expanding information to this model does not significantly improve model performance. I further show that the difference between my model predicted allowance and the actual allowance recognized by banks is economically meaningful. Using my model, banks would have recognized larger losses entering the financial crisis. The results from my paper shed light on the role of information in accounting rules, and provide a unique opportunity to evaluate aspects of the new accounting rule before it comes into effect. The implications from the paper are that broader information alone is not important, but additional guidance may be necessary for bank managers on implementing the new rule.
Faculty Advisor(s): P. Healy (Co-Chair), V. Narayanan (Co-Chair), I. Gow, and D. Scharfstein

Business Economics

William Diamond

Abstract:
Safety Transformation and the Structure of the Financial System
This paper develops a model of how the financial system is organized to most effectively create safe assets and analyzes its implications for asset prices, capital structure, and macroeconomic policy. In the model, financial intermediaries choose to invest in the lowest risk assets available in order to issue safe securities while minimizing their reliance on equity financing. Although households and intermediaries can trade the same assets, in equilibrium all debt securities are owned by intermediaries since they are low risk, while riskier equities are owned by households. The resulting market segmentation explains the low risk anomaly in equity markets and the credit spread puzzle in debt markets and determines the optimal leverage of the non-financial sector. An increase in the demand for safe assets causes an expansion of the financial sector and extension of riskier credit to the non-financial sector-- a subprime boom. Quantitative easing increases the supply of safe assets, leading to a compression of risk premia in debt markets, a deleveraging of the non-financial sector, and an increase in output when monetary policy is constrained. In a quantitative calibration, the segmentation of debt and equity markets is considerably more severe when intermediaries are poorly capitalized.
Faculty Advisor(s): D. Scharfstein (Chair), J.SteinS. Hanson, and A. Sunderam

Xavier Jaravel

Abstract:
The Unequal Gains from Product Innovations: Evidence from the US Retail Sector
Using detailed barcode-level data in the US retail sector, I find that from 2004 to 2013 higher-income households systematically experienced a faster increase in product variety and lower inflation for continuing products. Annual inflation was 0.65 percentage points lower for households earning above $100,000 a year, relative to households making less than $30,000 a year. I explain this finding by the equilibrium response of firms to market size effects: (A) the relative demand for products consumed by high-income households increased because of growth and rising inequality; (B) in response, firms introduced more new products catering to such households; (C) as a result, continuing products in these market segments lowered their price due to increased competitive pressure. I use changes in demand plausibly exogenous to supply factors — from shifts in the national income and age distributions over time — to provide causal evidence that increasing relative demand leads to more new products and lower inflation for continuing products, implying that the long-term supply curve is downward-sloping. Based on this channel, I develop a model featuring a secular trend of faster-increasing product variety and lower inflation for higher-income households, which I test and validate using Consumer Price Index and Consumer Expenditure Survey data on the full consumption basket going back to 1953.
Faculty Advisor(s): R.Chetty, L. KatzP. AghionE. Glaeser, and J. Lerner

Diana Moreira

Abstract:
Recognizing Merit: How Math Awards Affect Student Performance in Brazil
Awards that confer public recognition for outstanding performance can provide ex-ante incentives for effort. But such public recognition also may have ex-post impacts on behavior by changing beliefs, norms or interests. I investigate how the public recognition of a student's accomplishments in Brazil's Math Olympiad, a large national competition for public school students, impacts their own and their peers' subsequent academic performance. The Math Olympiad "Honorable Mention" award recognizes the top 4% of participants. No information is disclosed on the performance of those who do not win an award. I use a regression discontinuity design comparing classrooms with narrow winners and losers of the award. I find that the award improves future educational outcomes of both winner and her classmates. The spillovers on classmates are substantial - a fourth of the magnitude of the effects on the winner themselves, and driven by peers in the top quartile of the test score distribution. The award spillovers have important long-run consequences: the enrollment in selective colleges of classmates of a narrow award winner increases by 10%. The continued presence of the winner in the classroom in future years appears to be a key mediating channel driving behind improved academic performance of winner's classmates at the time of the award. The results show that ex-post motivation and effort can be enhanced by recognizing the success of a high-performing student.
Faculty Advisor(s): L.Katz (Chair), R.FryerE.Glaeser, and G.Rao

Mingzhu Tai

Abstract:
House Prices and the Allocation of Consumer Credit
It is well documented that the housing boom of the early 2000s fueled credit expansion by homeowners. Far less attention has been paid to the effects of the housing boom on non-homeowners, who make up over 30% of the US households. In this paper, I use individual consumer credit data from 493,204 US consumers to show that the last housing boom led to a significant reduction in renter credit access even before the housing market collapsed. In particular, banks reduced non-mortgage credit supply when they expanded mortgage lending to homeowners in response to the strong house price growth during this period. As a consequence, renters living in locations where banks had more geographic exposure to the housing boom ended up borrowing less but defaulting more. The results are especially pronounced in locations with stronger credit market frictions. Such house price effects on the borrowing and default behavior of renters persisted during the subsequent recession. This research suggests that policies affecting house prices and mortgage financing have broader implications for the less well-off households that do not own a home.
Faculty Advisor(s): D. Scharfstein (Chair), J.CampbellD.Laibson, and A. Sunderam

Management

Michele Rigolizzo

Abstract:
Getting Better at Getting Good: A New Conceptual Model and Measure of Expertise Development
In this paper, I introduce a new conceptual model and behavioral measure of expertise development. Integrating research in management, education, cognitive psychology, and neuroscience, I developed the Learning as BehaviorS (LABS) model, which deconstructs expertise development into five measurable learning behaviors: taking on a challenge, acquiring information, exploring the context of that information, continual practice, and reflecting on premises. Using a new behavioral measure, in two separate studies, I find that these learning behaviors are only weakly correlated and that an individual is unlikely to engage in all five. This paper offers a new piece to the puzzle of why expertise development is so hard: it requires one to engage in behaviors that, at times, call for nearly opposite attributes. Indeed, taken together, the learning behaviors require the learner to be highly self-confident while valuing others’ expertise, diligently focused yet openly curious, doggedly persistent yet critically analytic. This suggests that engaging in one learning behavior may actually make it less likely that one will engage in others. More generally, I demonstrate that individual workplace learning, which has thus far been measured as a single construct, is more accurately conceptualized as a series of independent behaviors that serve long-term development.
Faculty Advisor(s): T. Amabile (Chair), A. Edmondson, and E. Bernstein

Marketing

Tami Kim

Abstract:
The Risks and Rewards of Consumer Voting
The number of firms empowering consumers to vote on company decisions is on the rise. Across eight studies—including laboratory and field experiments—we explore each distinct phase of this empowerment strategy (pre-voting, voting, and post-voting). We show that consumer voting can be a double-edged sword. During the pre-voting period, voting can be more effective at encouraging consumer participation than merely soliciting input, but can backfire if consumer votes do not count for a majority of the outcome (studies 1a-1c). While voting can mitigate the negative impact of receiving a less-preferred outcome (the product one did not vote for; studies 2a/b), voting produces unintended negative consequences during the post-voting period: consumers react negatively to losing the ability to vote on subsequent firm decisions (studies 3a/b and 4). These negative consequences are driven by perceived violations of procedural justice (studies 1b and 3b); as a result, firms can mitigate these negative outcomes by managing consumer expectations about future voting (study 4). Our studies offer insight into both the rewards and attendant risks of consumer voting.
Faculty Advisor(s): M. Norton (Chair), L. JohnJ. Gourville, and R. Buell

Organizational Behavior

Rachel Arnett

Abstract:
Making Diversity Win: Cultivating Inclusion through Expressing Cultural Identity Differences at Work
The present research investigates the role of employees’ interpersonal behaviors in determining whether diversity is beneficial or inhibitive in the workplace. More specifically, I examine the relationship between 1) cultural majority-group employees’ (“majorities”) engagement in inclusive behaviors, and 2) cultural minority-group employees’ (“minorities”) engagement in cultural identity expression (i.e., voluntarily bringing attention to one’s cultural background during workplace interactions). Although both majorities and minorities often fear that expressing cultural identity differences will have negative consequences for workplace inclusion, the results of two studies demonstrate that minority cultural identity expression can actually increase three types of majority inclusive behaviors: professionally inclusive behaviors, socially inclusive behaviors, and multicultural appreciation behaviors. The richness of the cultural identity expression (i.e., the extent to which cultural identity expression provides greater insight into minorities’ culturally-based thoughts and feelings) is particularly important: as minority cultural identity expression increases in richness, such expressions are more likely elicit inclusive behaviors from majorities. The current set of studies also tests the mechanisms underlying these effects. Overall, this research sheds light on the ways in which employees’ interpersonal behaviors can make or break the success of diversity in the workplace.
Faculty Advisor(s): R. Ely (Chair), K. McGinnL. RamarajanJ. Sidanius, and F. Gino

Andrew Brodsky

Abstract:
Putting the Work into Work Communication: The Consequences of Strategic Communication Choices in Professional Interactions
Whether the topic is leading, selling, or negotiating, one of the key questions that employees, managers, and scholars have long asked is ““How can I communicate most effectively?” In crafting their messages, employees utilize strategies that vary along dimensions such as emotionality, authenticity, challenge, and—particularly recently—medium richness. To bridge these domains and develop more comprehensive theory of strategic work communication choices, I conducted a number of studies that span the research areas of employee voice, emotional labor, impression management, and virtual communication. In my dissertation, not only do I examine the interpersonal consequences of communication strategies, but I also explore the intrapersonal consequences of the underlying work or effort needed to craft messages to fit these strategies. Across a variety of contexts, I find that employees often make suboptimal communication decisions, and in some cases, may be better off putting in less rather than more effort into their interactions. My dissertation utilizes a multi-method approach—with surveys, field and laboratory experiments, and experience sampling techniques—as well as data collected from multiple organizations around the world, including a Big Four accounting firm in Australia, an international school system in Vietnam, and a technology firm in the United States. By combining the findings from this diverse set of studies, I aim to provide more comprehensive theory and practical recommendations for crafting effective work communication, both for employees themselves and the organizations in which they are situated.
Faculty Advisor(s): T. Amabile (Chair), J. MargolisA. Grant, and F. Gino

Curtis Chan

Abstract:
The Double-Edged Sword of Organizational Culture: The Doing and Undoing of Normative Control with a Legitimized and Ambiguous Frame
Culture is often described by scholars as utilized by actors with strategic intention, and managers have long yearned to “master” culture in order to effectively recruit and manage their workforce. And in particular, culture is seen as a crucial part of the recruiting, management, and retention of talent in organizations—a key means of normative control, binding members’ hearts and minds to the organization’s interest. Yet, organizational culture may be double-edged: an intentional use of culture can have both intended effects as well as countervailing unintended consequences. In this paper, I build theory around how organizational culture can be double-edged, by theorizing the characteristics and the downstream processes that allow a cultural element to have countervailing effects of both producing and undermining normative control. To do this, I draw on a two-year, inductive, ethnographic case study of consultants at a strategy consulting firm, ConsultingCo, wherein the organizational culture revolves around the frame of having “Impact”. Overall, I find that the ambiguity and legitimacy of a cultural element allow it to be double-edged because the cultural element powerfully draws in broad swath of recruits, but it also gives too much interpretive space and too high expectations on the cultural element, such that many members come to divergent interpretations of the cultural element and use the cultural element as a reason to leave the organization. I conclude by suggesting this study’s theoretical implications for scholarship on culture in organizations. This study also shows that practitioners ought to be cautious about the cultural elements used to manage people; it may be possible that the same frame that helps recruiting may hinder retention.

Lisa Kwan

Abstract:
Cross-Group Flouting: Boundary Spanning that Circumvents Formal Processes
Counter to the dominant focus of groups research on the benefits of boundary spanning, this qualitative study shows how informal activity across group interfaces – a kind of boundary spanning – can override formal cross-group processes and lead to negative outcomes. We introduce cross-group flouting behavior to capture informal cross-group activity that circumvents formal cross-group processes, driven by unilateral focus on one’s own group goals. Beyond disruptions to the internal task performance of other groups, results suggest flouting behavior can give rise to a bilateral flouting process that causes long-term relational harm between groups. This paper contributes to boundary spanning and workarounds research, and extends dominant scholarly explanations for integration challenges within organizations.
Faculty Advisor(s): A. Edmondson (Co-Chair), J. Polzer (Co-Chair), F. Gino, and L. Ramarajan

Ryann Manning

Abstract:
All Hands Are Needed: Emotion and Resilient Organizing by West African Diaspora Communities in Response to the 2014-2015 Ebola Outbreak
Disasters are destructive and emotionally fraught events. Existing literature shows that emotions play a critical role in resilience at the individual level, but we know less about how emotion relates to resilience at a collective level. In this paper, I focus on what I call “resilient organizing,” the process by which groups of people work together to activate, combine, and recombine resources in order to respond and adapt successfully to adverse events. I examine the case of the 2014-2015 Ebola outbreak, specifically the response to Ebola by the global diaspora communities of one of the worst affected countries: Sierra Leone. Using abductive analytic techniques, I combine retrospective interviews with real-time data from diaspora organizations, online public conversations, and my own experiences working on the response to Ebola. I find that shared emotional experiences helped connect members of the diaspora to the emerging crisis in Sierra Leone, and generated a sense of urgency and efficacy which convinced many to get involved in the response. I develop the concept of “emotional modulation” and show how activists sought to strategically shape their communities’ collective emotional landscape in order to generate a balance of emotions to facilitate resilient organizing. Based on these findings, I build a theoretical model in which emotional modulation and resilient organizing influence one another in a dynamic, recursive process, with the potential for positive or negative cycles of emotion and (in)action.
Faculty Advisor(s): M.Lamont (Co-chair), K. McGinn (Co-Chair), J. Battilana, and J.Viterna

Ovul Sezer

Abstract:
Humblebragging: A Distinct—and Ineffective—Self-Presentation Strategy
Self-presentation is a fundamental aspect of social life. We identify humblebragging—bragging masked by a complaint—as a distinct and increasingly ubiquitous form of self-promotion. In seven studies, we show that although people often choose to humblebrag when motivated to make a good impression, it is an ineffective self-promotion strategy due to the perceptions of insincerity it induces. Study 1a and Study 1b show that humblebragging is ubiquitous strategy in everyday life, used frequently when people attempt to impress others. Study 2a and Study 2b demonstrate that individuals use humblebragging in a strategic effort to elicit both liking and respect. Study 3 and Study 4 show that humblebragging is less effective than simply bragging or complaining, as it has both global costs—reducing liking and perceived sincerity—and specific costs: it is even ineffective in signaling the specific trait that a person wants to promote. Study 5 provides evidence that these perceptions impact people’s generosity towards humblebraggers. Studies 3, 4, and 5 show that despite people’s belief that combining bragging and complaining confers the benefits of both self-promotion strategies, humblebragging backfires because it is seen as insincere.
Faculty Advisor(s): M. Bazerman (Co-Chair), F. Gino (Co-Chair), M. Norton, and A. Brooks

Elizabeth Baily Wolf

Abstract:
Emotion as Performance Feedback: (Mis)Inferring Work Quality from Evaluators’ Affect
Evaluators often express emotion in evaluative situations (e.g., performance reviews, job interviews) for reasons both related and unrelated to the evaluation itself. This paper explores how evaluators’ emotional expressions shape performers’ metaperceptions, self-assessments, and decision-making. In a survey of 370 matched pairs of evaluators and performers, the more hopeful, happy, and proud, and the less disappointed, performers perceived their evaluators to be, the more positive their metaperceptions. Additionally, there was a low degree of agreement between evaluators and performers about the emotional content of their evaluations. In five experiments, different emotional expressions by an evaluator elicited different perceptions of performance quality by performers. In general, performers perceived their work more positively when their evaluators expressed positive emotions than negative emotions. However, discrete emotional expressions did communicate additional information over and above positive or negative valence. Further, these inferences influenced performers’ decisions about whether to accept a job offer, whether to include a website link in a press release, whether to include a website in a personal portfolio, and whether to ask a client for a referral. Results from the six studies suggest that evaluators’ emotional expressions provide interpersonal performance feedback that shapes performers’ metaperceptions, self-assessments, and decision-making, but that evaluators’ expressions are ambiguous signals that may lead performers to make suboptimal decisions about their work.
Faculty Advisor(s): R. Ely (Co-Chair), A. Cuddy (Co-Chair), A. Brooks, and M. Norton

Strategy

Jin Hyung Kim

Abstract:
U.S. Defense Contracts and the Lobbying Strategies of Foreign MNEs: The Liability of Foreignness and Make-or-Buy Decisions about Political Goods
Prior research shows that political capital is critical in business-government relations to achieve desirable non-market strategy outcomes. Less attention has been paid to the fact that firms vary in their ability to build and acquire political capital. In particular, foreign multinational enterprises (MNEs), which typically suffer from the liability of foreignness, have more difficulty acquiring and strengthening political capital in a host country. We know little about how foreign MNEs acquire and use political capital, or about whether they achieve their non-market strategic goals. Drawing on the literatures on the liability of foreignness and transaction-cost economics (TCE), I argue that foreign MNEs can acquire political capital and achieve better non-market outcomes by hiring outside lobbyists than by using internal lobbyists. Using U.S. government defense prime contract award data, I found that hiring outside lobbyists helps foreign MNEs achieve higher contract amounts; this outcome is driven by hiring more experienced lobbyists and high-status lobbying firms. This study has theoretical and practical implications for studies on political capital, non-market strategies, the liability of foreignness, and transaction-cost economics.
Faculty Advisor(s): J.Siegel (Co-Chair), D. Yao (Co-Chair), and S.Hiatt

Nishani Siriwardane

Abstract:
Benefitting from Less Hierarchical Managerial Practices: The Role of Societal Norms Regarding Social Distinction
Past literature has highlighted that introducing less hierarchical practices, such as increasing employee responsibility and autonomy, has many benefits. However, even when firms try to implement these practices, truly reducing hierarchy has proven to be difficult: hierarchical tendencies tend to re-emerge and persist. Though research has suggested that creating a consistent firm ethos and shifting rooted mindsets may help, very little is known as to what influences a firm’s ability to create such environments. In particular, the role of societal norms and the different degrees to which firms are influenced by these norms has not been a focus in the literature. This study demonstrates that the social structures within firms – which to varying extents reflect broader societal norms - play a key role in whether firms benefit when implementing less hierarchical practices. Specifically, I suggest that when the degree of social distinction within a firm is high, it will not reap productivity and performance benefits even when introducing less hierarchical practices. Social distinction is defined as the differences in status, prestige, and power that distinguish and distance groups of individuals from one and other. Using longitudinal survey data of organizational practices of firms located in France, I find that French and foreign multinationals (MNEs) from high-power-distance countries, where social distinction tends to be high, do not see productivity and performance benefits when implementing less hierarchical practices. However, local French firms, where distinction is less prevalent, and foreign MNEs from countries where social distinction is less accepted tend to benefit significantly. I rule out alternative explanations that differences in size, initial productivity levels, and managerial quality explain why local French firms and not MNEs see benefits. For a deeper contextual understanding, I supplement my quantitative analysis with interviews of employees working in different types of firms in France. The interviews shed light on the challenges that firms face when implementing less hierarchical practices in the French cultural context and on the varying role that social distinction plays.
Faculty Advisor(s): J.Siegel (Chair), M.AntebyJ. Battilana, and E. Bernstein