Gerardo Pérez Cavazos is an Assistant Professor of Business Administration in the Accounting & Management Unit. He teaches the first-year MBA course Financial Reporting and Control.
His research focuses on two overlapping themes. The first theme examines the information asymmetry that exists between a firm and its customers and suppliers by investigating customer communication, payment practices, and supplier reputation. The second theme centers on firm integrity. In particular his work focuses on how managers learn and control corporate misconduct within the organization. His research in this area examines managerial monitoring of facilities, employee whistleblowing, and managerial retaliation against whistleblowers.
Professor Pérez Cavazos received a PhD in accounting and an MBA from The University of Chicago Booth School of Business. Prior to his graduate studies, he earned a bachelor’s degree in economics at the Instituto Tecnológico Autónomo de México (ITAM) and worked in investment banking at Barclays Capital.
Gerardo Pérez Cavazos is an Assistant Professor of Business Administration in the Accounting & Management Unit. He teaches the first-year MBA course Financial Reporting and Control.
His research focuses on two overlapping themes. The first theme examines the information asymmetry that exists between a firm and its customers and suppliers by investigating customer communication, payment practices, and supplier reputation. The second theme centers on firm integrity. In particular his work focuses on how managers learn and control corporate misconduct within the organization. His research in this area examines managerial monitoring of facilities, employee whistleblowing, and managerial retaliation against whistleblowers.
Professor Pérez Cavazos received a PhD in accounting and an MBA from The University of Chicago Booth School of Business. Prior to his graduate studies, he earned a bachelor’s degree in economics at the Instituto Tecnológico Autónomo de México (ITAM) and worked in investment banking at Barclays Capital.
We study the effects of headquarters’ visits on facility-level misconduct. We use the staggered introduction of airline routes to identify exogenous travel-time reductions between headquarters and facilities and test whether such reductions affect facility-level misconduct. We find that, on average, a travel-time reduction decreases the number of facility-level violations by 2% and associated penalties by 23.4%, indicating that management focuses on reducing costlier violations as opposed to simply reducing the number of violations. The effects are concentrated in firms with weaker control systems, suggesting that strong controls can act as substitutes for visits. Further, the introduction of broadband internet attenuates, but does not eliminate, the effect of visits on misconduct. Lastly, we find that visits result in greater facility-level misconduct when firms are subject to strong performance pressure. Overall, our study provides a nuanced understanding of the effects of on-site visits on facility-level misconduct.
This paper examines whether fraud allegations affect firms’ contracting with the government. Using a dataset of whistleblower allegations brought under the False Claims Act against firms accused of defrauding the government, we find that federal agencies do not reduce the total dollar volume of contracts with accused firms; however, they substitute approximately 14% of the harder-to-monitor cost-plus contracts for fixed-price contracts. This effect is concentrated in the procurement of services and explained by contract and service substitution. Lastly, we find that after the conclusion of the investigation, the government reduces the contract dollar volume by approximately 15% for cases that resulted in a settlement. Our findings indicate that contract-design changes are used to mitigate uncertainty in suppliers’ reputation.
I use a unique data set of loans to small business owners to examine whether lenders face adverse consequences when they grant debt forgiveness to borrowers. I provide evidence consistent with borrowers communicating their debt forgiveness to other borrowers, who then more often strategically default on their own obligations. This strategic default contagion is economically large. When the lender doubles debt forgiveness, the default rate increases by 10.9% on average. Using an exogenous shock to the lender's forgiveness policy, my findings suggest that as the lender learns about the extent of borrower communication, the lender tightens its debt forgiveness policy to mitigate default contagion.
This is a supplement to the “Accounting for Leases at American Airlines (A)” case. The (B) case describes American Airlines’ financial results for the first quarter of 2020, as well as the continuing effects of coronavirus on the airline industry.
In March 2020, as coronavirus reduced demand for air travel, an analyst was forecasting American Airlines’ (American’s) first quarter financial results. To develop a forecast, she needed to familiarize herself with Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842),” passed four years earlier by the Financial Accounting Standards Board. ASU 2016-02 required companies to disclose all leases on their balance sheets, but it made an exception for leases with variable payments, allowing companies to leave such leases off-balance sheet. The Wall Street Journal estimated that more than 50% of American’s leases remained off-balance sheet due to the exclusion of variable leases. Should American and other companies be allowed to leave variable lease payments off-balance sheet? How did the decision to leave these payments off-balance sheet affect companies’ risk profiles and valuations?
Heese, Jonas, Gerardo Pérez Cavazos, Eugene F. Soltes, and Grace Liu. "Creating Accountability in Afghanistan." Harvard Business School Teaching Note 120-030, August 2019.
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By early 2019, the United States had contributed $132 billion to the Afghan reconstruction. John Sopko, in his role as the Special Inspector General for Afghan Reconstruction (SIGAR), was in charge of providing accountability for U.S. aid funding. Sopko’s oversight faced severe limitations such as a growing on-budget assistance, pervasive corruption, and lack of transportation, infrastructure, and security for his staff. To fight those odds, SIGAR has implemented multiple strategies with relative success. For example, cultivating a network of sources and informants had allowed SIGAR to save the U.S. over $200 million from a fuel contract bid-rigging scheme. The SIGAR Fraud Hotline had received and reviewed over 3,200 reports. However, with the Afghan presidential elections and peace talks looming on the horizon, Sopko was wondering how SIGAR would have to adapt to a new reality that could potentially be much worse.
Sandino, Tatiana, Gerardo Pérez Cavazos, and Olivia Hull. "OXXO's Turf War Against Extra." Harvard Business School Teaching Note 119-083, February 2019.
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Pérez Cavazos, Gerardo, and Suraj Srinivasan. "Accounting for Political Risk at AES." Harvard Business School Teaching Note 118-032, November 2017. (Revised November 2017.)
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In 2006, Mexican convenience store chain OXXO faced a threat from a formidable competitor, the rival convenience chain Extra. OXXO had embarked on an initiative to fortify its corporate culture and operating system, but the threat of Extra raised the question of whether they should focus on opening as many stores as possible and as quickly as possible in order to maintain market leadership. CEO Eduardo Padilla had to define his strategy and decide whether to focus on improving culture and operations or on relentlessly beating his rival.
Marc Cohodes, a renowned short seller, has identified weaknesses in Signet's business strategy, which he argues is heavily reliant on providing loans to customers with subprime credit scores. He believes that the company accounts for its receivables portfolio using recency accounting to hide the problem. The case presents Cohodes' thesis, the response by Signet's management team, as well as the reactions by sell-side analysts.
As a global energy generating company, AES frequently faces challenges from political changes and instability. This is exacerbated by the fact that in many instances AES' primary customer is the government, which is also in charge of law-making. For example, AES' management team has encountered expropriation risks in Venezuela, collection problems in the Dominican Republic, and regulatory changes in the United States that have led to asset impairments. More recently, the Bulgarian energy regulator announced its intentions to seek a 30% price reduction on a power purchase agreement signed over ten years ago with AES. Accordingly, AES' management is evaluating whether the renegotiation will lead to any asset impairments and the overall effects on its financial statements.
