Journal of International Business Studies, 2024, Advanced online publication

This study explores how shared and improved auditing standards, prompted by the Public Company Accounting Oversight Board (PCAOB)’s inspections of non-US auditors, help global exporting firms enhance their operations and engage in global value chains (GVCs).

Using data from US waterway imports from global suppliers in 36 countries, the study investigates the impact of PCAOB international inspections on export activities and product complexity.

Key findings:

• PCAOB inspections lead to significantly increased exports to US buyers, especially for intermediate and capital goods.
• Exporters upgrade their product complexity following these inspections, indicating better information quality and reduced informational barriers with importers.
• These benefits are more pronounced for exporters with initial lower reporting quality, smaller market shares, or those in countries with weaker institutions or higher geopolitical risks with the US.
• PCAOB inspections also prolong the duration of business relationships between suppliers and their buyers, and encourage suppliers to make investments specifically tailored to their relationship with that buyer.
• US importers working with a greater proportion of PCAOB-inspected suppliers experience better financial outcomes.

Overall, the findings suggest that audit oversight by PCAOB facilitates the formation, upgrading, and performance of GVCs. This highlights the importance of strong auditing standards in promoting global trade efficiency and reliability.

Production and Operations Management, 2024, 33(8), 1679-1699

This study explores the transmission of risk factors within supply chain networks, an area that has not been widely researched. It uses stock price crashes as an indicator to reveal how risk can spread from major customers to their suppliers.

The study investigates the contagion effect of risk by analysing stock price crashes and their impact on suppliers. It also examines the role of supplier information opacity in this process.

Key findings:

• The risk of stock price crashes can transfer from major customers to their suppliers with a delay of up to two weeks.
• Suppliers with less transparent information are more susceptible to this delayed risk contagion.
• This contagion effect is stronger for more important customers.
• Customer operational incidents have a stronger contagion effect on suppliers than customer financial incidents.
• In response to stock price crashes of major customers, suppliers adopt strategic measures such as diversifying their customer base, enhancing operational efficiency, and improving product quality. However, only enhancing operational efficiency effectively mitigates the adverse impact of customer stock price crashes on suppliers.

Overall, the findings provide new insights into how risk factors are distributed across supply chain networks. They highlight the critical role of operational improvements in strengthening the resilience of firms to supply chain risks.

Journal of Operations Management, 2024, 70(4), 568–599

This study explores the under-researched but critical role of information security in the selection of vendors for electronic medical record systems (EMRS) by hospitals. This focus is especially important given the increasing digitisation and networking of medical data and personal health information, which heightens the risk of data breaches.

The study analyses data from US hospitals spanning 12 years, using a combination of coarsened exact matching (CEM) and a difference-in-differences (DiD) approach to understand the impact of data breaches on vender selection.

Key findings:

• Hospitals tend to replace their EMRS vendors after experiencing data breaches.
• Following a data breach, hospitals tend to prioritise information security by switching to top-rated (star) vendors and adopting a single-sourcing strategy.
• The impacts of data breaches are mitigated as the relationship between breached hospitals and vendors matures or when the hospitals belong to large healthcare systems.
• The effects of data breaches are short-term and depend on the scale of the breach.

The findings highlight the importance of information security in vendor selection processes for hospitals. This research provides valuable insights for both academics and industry professionals about the necessity of strong information security measures in managing health data.

Management Science, Accepted

This study investigates how often there are large disagreements in human judgment, particularly in expert assessments of numerical values. The common belief in the literature is that judgment errors follow a normal distribution.

The study examines this question using 73 data sets from four different sources, which include over 169,000 estimates and forecasts.

Key findings:

• The study finds clear evidence of ‘fat tails’, meaning there are more extreme disagreements than a normal distribution would predict.
• Despite the diversity in the data, the frequency of large disagreements is surprisingly consistent across different levels of uncertainty, expertise, and sophistication of those making the judgments.
• By fitting a generalised normal distribution to the data, the study finds most shape parameters fall between 0.9 and 1.6 (where 1 is a double-exponential distribution, and 2 is a normal distribution).

These findings have important implications, particularly for combining expert estimates and forecasts, and for constructing confidence intervals. The study introduces optimal Bayesian aggregation methods that account for fat tails, and proposes a simple average-median average heuristic (AMA) that performs well across the observed data distributions.

The Accounting Review, 2024, 99 (5): 65–95

This paper examines the influence of labor market power in the audit profession. Using a dataset of online job postings, we confirm that audit offices in more concentrated labor markets have greater labor market power and exercise it in the form of higher skill requirements and greater required effort from their auditors, at similar or slightly lower wages. We then show that client firms of audit offices in more concentrated labor markets are less likely to restate their earnings and have lower absolute discretionary accruals. These findings are only present when employees have lower mobility across professions and geographies, consistent with audit offices’ power in the local labor market explaining the results. Collectively, our findings highlight the importance of labor market power in understanding audit quality.

Management Science, 2024, Online publication

Using detailed household data, we find that households working in locally agglomerated economies have high mortgage loans and are more likely to have mortgage loans. Channel testing shows that local agglomeration increases housing and mortgage demand as well as mortgage supply. The increase in mortgage loans is driven by purchases of larger houses and smaller down payments. Mechanism analyses document that local agglomeration affects mortgage loans by increasing career upward potential and providing downside protection. Specifically, we find that the impact of local agglomeration is stronger for skilled employees with enhanced prospects. In addition, local agglomeration weakens the negative relation between unemployment and mortgage loans, which supports the downside-protection role of local agglomeration. These results hold under instrumental variables analysis, difference-in-difference analysis, and a set of robustness checks. Overall, our findings highlight the importance of local labor market composition in household mortgage debt.

Contemporary Accounting Research, 2024, 41(3), 1577–1607

We investigate the impact of firm-level political risk on loan contracting. We find that firm-level political risk is positively associated with bank loan cost and that this effect is stronger for firms experiencing increased operational uncertainty and higher default risks. Firm-level political risk also leads to more unfavorable non-pricing loan terms. To alleviate endogeneity concerns, we use an instrumental variable approach and placebo tests. We further find that political connections and relationship-based borrowing can attenuate the adverse effect of firm-level political risk on loan contracting.

Management Science, 2024, Online publication

With the London Interbank Offered Rate (LIBOR) being replaced by risk-free rate (RFR)-based alternative reference rates, the fundamental differences between the two benchmarking frameworks impose significant risks on banks. Exploiting the Financial Conduct Authority (FCA)’s announcement of the phase-out of LIBOR, we conduct a difference-in-differences analysis based on banks’ reliance on LIBOR and show that LIBOR discontinuation entails higher interest rate spread of bank loans. The result implies that banks tend to compensate for the LIBOR-to-RFR risks by passing on the transition costs to borrowers. This effect is attenuated if multiple benchmarks are already in use, for relationship lending, and among banks operating in a competitive environment. We further find that LIBOR discontinuation leads to more collateral and covenant requirements in loan terms. After the FCA announcement, banks are inclined to switch away from LIBOR dependence by referencing alternative rates.

MIS Quarterly, 2024, Forthcoming

Laws requiring firms to disclose privacy breaches to their customers have been adopted extensively worldwide. However, the manner in which these laws affect the security protection behavior of disclosing firms is poorly understood. To shed light on this issue, we leverage institutional theory and examine how the data breach notification laws (DBNLs) across the states of the U.S., under which firms must notify customers of personal information breaches, influence firm-level incidence of security breakage and how such influences manifest heterogeneously across firms. Exploiting the staggered enactments of DBNLs in a difference-in-differences analysis, we find that firms experience a significant reduction in data breach incidents after DBNLs. This effect is more pronounced when firms rely more on sensitive customer data, operate in stricter privacy protection environments, and hold more intangible and digital assets. We document evidence that, compared to non-subject firms, DBNL-subject firms are more likely to appoint IT-specialized executives and remediate IT-related internal control weaknesses, which suggests potential channels that may facilitate DBNLs’ curbing of data breaches. We also find that the reduction in breach incidence after DBNL-mandated disclosure relates to both endogenous breaches and exogenous cyberattacks.

Contemporary Accounting Research, 2024, 41(3), 1477–1512

This study examines the relationship between government subsidies and income smoothing using a sample of US-listed firms. We find that subsidized firms smooth their earnings more aggressively than their unsubsidized peers. This finding is consistent with the reasoning that subsidized firms bear higher political costs and have more incentives to smooth earnings to avoid public attention. In addition, smoothing by subsidized firms is more pronounced when the subsidies are granted through non-tax-related channels than through tax-based channels, and the positive association between government subsidies and income smoothing is stronger for firms under higher public scrutiny and with less transparent information environments. Further analysis shows that smoothing by subsidized firms serves mainly to obfuscate earnings and that subsidized firms that smooth earnings tend to continue receiving subsidies in the future. Overall, our results help explain the role of government subsidies in shaping firms' accounting and disclosure choices.

Journal of Applied Psychology, 2024, 109(7), 1004–1021

This research aims to understand why both low and high subordinate performance can induce abusive supervision. Drawing on the framework of affective events theory and research on anger and envy, we posit that low performance incurs abuse due to supervisor anger, whereas high performance elicits abuse due to supervisor envy. More specifically, subordinate performance has a decreasing curvilinear relationship with supervisor anger (i.e., a negative effect that gradually dissipates) and an increasing curvilinear relationship with supervisor envy (i.e., a positive effect that gradually emerges). Through supervisor anger and envy, subordinate performance therefore presents different curvilinear indirect relationships with abusive supervision. The results from two vignette-based experiments and a multiwave, multisource field study support these hypotheses. We further find that supervisor comparison orientation augments the curvilinear emergence of supervisor envy and ensuing abuse in response to higher subordinate performance. However, regardless of their level of performance orientation, supervisors are prone to higher anger and subsequent abusive supervision in response to lower subordinate performance.

Journal of Personality and Social Psychology, 2024, Advanced online publication

Status researchers have recognized virtue, competence, and dominance as distinct, viable routes to attaining status. While acknowledging that these routes could be compatible and may not operate independently, prior research relying on a variable-centered perspective has largely neglected their potentially complex interactions. This article integrates a person-centered perspective with the variable-centered perspective to explore how different routes conjointly shape workplace status. Study 1A (N = 537) employs latent profile analysis, an inductive person-centered method, to re-analyze existing survey data, identifying seven distinct profiles of virtue, competence, and dominance that people use to attain status. Study 1B (N = 988) confirms the existence of these profiles in an independent sample of full-time U.S. workers, albeit with nuanced differences in levels. Across our initial studies, these profiles differ in status attainment, with a profile characterized by high virtue and competence but low dominance associated with the highest status—a key discovery challenging to uncover using the variable-centered approach alone. Study 2 (N = 792), a preregistered experiment manipulating the three routes in hypothetical scenarios, gathers causal evidence confirming these profiles’ varying effectiveness. Study 3 (N = 785), another preregistered experiment using refined manipulations, corroborates the findings of Study 2 and provides evidence for the relevance of these causal insights to real-life workplace contexts. This research has several crucial implications: reaching the top requires a combination of multiple routes; conflating virtue and competence under the umbrella of “prestige” obscures their unique contributions; and dominance’s positive effect on status is not universally applicable.

Journal of Finance, 2024, 79(2): 1147-1197

We propose a model for dynamic investment, spinoffs, financing, and risk management suitable for a multidivision firm facing expensive external finance. Our analysis formalises the following insights: (i) Resource allocation within firms is influenced not only by the productivity of a division, but also by its risk profile; (ii) firms may voluntarily spin off productive divisions to increase liquidity; (iii) diversifying investments across divisions can reduce a firm’s value in periods of low liquidity, as it increases the cost of spinning off a division and complicates liquidity management; (iv) an approach that spreads resources evenly across all divisions makes liquidity less essential; and (v) investments in each division are determined by the balance between the marginal benefit and the marginal value of cash.

The Accounting Review, forthcoming

This study examines how company boards adjust performance targets in response to CEO overconfidence. Focusing on the annual bonus targets for the CEOs of S&P 1500 firms, the research finds that boards set higher performance targets for overconfident CEOs compared with those for non-overconfident CEOs. This trend holds even after thorough robustness checks. The findings further show that in firms with strong monitoring environments, performance targets for overconfident CEOs are increased even more. Collectively, the study suggests that a CEO’s confidence level is a key factor that boards consider when setting performance targets, offering new insights into how CEOs' personal traits influence their annual bonus performance targets.

Strategic Management Journal, 2024, 45(6): 1151-1179

This study investigates how large companies organise their businesses to handle pollution-heavy operations. It looks at whether these companies place such activities in their less visible subsidiaries to protect the main company from legal issues related to environmental laws. Understanding this is crucial because it reveals a potential loophole in environmental regulations. If companies can simply move their polluting activities to a different part of their business to avoid scrutiny, then current laws may not be as effective as intended. The research examined 7400 US-based business units owned by the 67 largest US-headquartered chemical manufacturers. It found evidence that these companies indeed conduct their most polluting work in their lower-tier subsidiaries, especially in states with stricter environmental laws. The study findings suggest that companies might be using their complex structures to sidestep environmental responsibilities, which could undermine efforts to protect the environment. It highlights the need for regulators to consider the entire corporate group when enforcing environmental laws, not just the parent company.

Journal of Management Information Systems, 2023, 40(4), 1139-1170

This study investigates the potential security risks that arise when firms adopt new information technologies (IT). It focuses on how these technologies might inadvertently increase the chances of unauthorised access to sensitive data. Despite widespread concern about the security risks of new technologies, there has been little concrete research on how these innovations may lead to data breaches. Our study provides empirical evidence to address this gap.

Using a sample of data breaches that occurred between 2013 and 2021, we find a positive association between a firm’s proclivity to adopt new technologies and an increased risk of data breaches. However, we also find that this risk is lessened if managers are IT experts or if firms have strong board connections with cybersecurity managers. Interestingly, we also note that the risk is heightened in complex technological environments, but not necessarily in ones that are dynamic or well-resourced.

The study findings highlight the importance of firms taking a cautious approach towards adopting new technologies and carefully considering the implications. The study emphasises the significance of firms learning from past data breaches and adapting to their specific technological context to mitigate the potential risks associated with new IT innovations.

Journal of Financial and Quantitative Analysis, 2024, 59(2): 474-520

We build a novel comprehensive data set of new product trademarks as an output measure of product development innovation. We show that risk-taking incentives in CEO compensation motivate this type of innovation and that this innovation improves firm performance. Using an exogenous shock to executive compensation, we find that reductions in stock option compensation cause reductions in new product development. We also find that firms undertaking new product development experience increases in future cash flow from operations and return on assets. These findings suggest the importance of product development innovation to firms and new trademarks as a novel innovation measure.

Management Science, 2024, 70(1): 54–77

International Financial Reporting Standard (IFRS) 9 is of practical relevance to banks because it requires intense monitoring of borrowers to record timely loan losses. Using data from 50 countries, we find that accounting-driven bank monitoring due to IFRS 9 adoption reduces firms’ reliance on bank debt relative to public debt. This finding is consistent with firms experiencing more costly bank monitoring after a shift in regulatory reporting that requires banks to monitor borrowers more intensely. In further analyses, we find that the negative effect of IFRS 9 adoption on bank debt reliance is more pronounced with more stringent regulatory supervision of banks, consistent with regulatory stringency exacerbating costly bank monitoring for firms. We also find that the negative effect is stronger when firms can more easily switch from bank debt to public debt financing, consistent with the relevance of switching costs in firms’ decisions to avoid costly bank monitoring.

The Accounting Review, 2024, 1-28

This study examines whether politicians exhibit hometown favoritism in assigning preferential corporate income tax rates. We find that firms with hometown connections to incumbent provincial leaders experience favorable tax treatment. This effect is more pronounced when provincial leaders have strong hometown preferences and weaker when these leaders have a strong motivation for promotion, suggesting that social incentives are the primary drivers of the effect of hometown favoritism by politicians on corporate tax benefits. Moreover, this effect is intensified when senior management of firms has personal connections with the provincial leader. The mechanism test reveals that the provincial governments tend to qualify connected firms for preferential tax policies under their jurisdictions. Overall, our results suggest that hometown favoritism by politicians promotes tax benefits for business entities.

Review of Accounting Studies, 2024, 29:809–851

We explore the informational properties of earnings that compensation contracting requires for performance measurement. While conditional conservatism could be desirable because it can help to alleviate agency conflicts, its downside relates to the trade-off between conservatism and other important properties, such as persistence. We infer boards’ performance measurement preferences from a novel dataset of earnings realizations used to calculate executive bonus payouts (which we label compensation earnings), which can be either GAAP or non-GAAP. On average, compensation earnings do not exhibit any conditional conservatism in the full sample. The lack of conservatism holds even in subsamples with strong corporate governance and subsamples with high ex ante agency costs, suggesting optimal contract design rather than opportunism. Finally, our analyses indicate that compensation earnings are more persistent and informative than GAAP earnings. Overall our results suggest that boards trade off conservatism for other properties in measuring performance for executive compensation.

Journal of Applied Psychology, 2023, 108(12), 2040–2052

Although people often value the challenge and mastery of performing an activity, their satisfaction may suffer when the tasks comprising the activity are perceived as difficult. Thus, it is important to understand the factors that influence subjective judgments of difficulty. In this research, we introduce an easily actionable and effective tactic to reduce perceptions of the overall difficulty of an activity: We find that concluding a sequence of difficult tasks with a few easy tasks can decrease perceived difficulty of the aggregate activity. While appending extra tasks to a constant sequence should increase the objective amount of effort necessary to complete all the tasks, we find that more tasks can paradoxically be perceived as less effortful. We coin this phenomenon the easy addendum effect and demonstrate that it is less likely to occur when an overall activity is conceptualized as consisting of a single category rather than two distinct categories—that is, a set of difficult tasks followed by a set of easy tasks. We further show downstream consequences of this effect—through lower perceived difficulty, the easy addendum effect can lead to greater satisfaction, persistence, and more tasks performed overall.

The Accounting Review, 2023, 98(6),299-325

This study examines the informational value of local news outlets, and how they affect insider trading by providing public information about local companies. We hypothesise that local news coverage is a critical channel that enables outsiders to acquire local information, thus restricting the ability of insiders to profit from their information advantage. We argue that a loss of local news coverage makes it more difficult for outsiders to access local information, while making it easier for insiders to seize profitable trading opportunities. By exploring the closure of local newspapers in the United States over time, we present new evidence that insiders from counties where newspapers have closed trade more profitably after such closures. This is particularly evident in small firms that are not covered by alternative news sources. We also find that increased trading profits after the closure of local newspapers is unlikely to be wholly driven by regional economic conditions. It is instead likely driven by increased information asymmetry between insiders and outsiders, which allows insiders to take advantage of their information advantage. Our study shows that local news outlets play a meaningful role in reducing information asymmetry between insiders and outsiders, thereby limiting opportunities for insider trading.

INFORMS Journal on Computing, 2023, 35(1): 178-195

We consider the optimal sourcing problem, i.e. how to choose the best suppliers, when the available suppliers may face different problems that affect their ability to deliver goods. This problem is motivated by the increasing severity of supply risks and the difficulty of evaluating common sources of vulnerability in upstream supply chains. These are problems reported by many surveys of goods-producing firms.

We propose a distributionally robust model that (i) accommodates multiple levels of supply disruption, not only full delivery or no delivery, and (ii) uses data-driven estimates of the underlying correlation to develop sourcing strategies in situations where the true correlation structure is ambiguous.

Using this model, we explore a worst-case scenario of supply distribution and show why it is appealing to use such a scenario due to the severe consequences associated with supply chain risks. We also show how our model can help firms decide whether to exert additional effort to better understand the prevailing correlation structure. We test our model using extensive computational experiments to further demonstrate the performance of our distributionally robust approach and show how supplier characteristics and the type of supply uncertainty affect the optimal sourcing decision.

Journal of Management Information Systems, accepted

This research paper explores how language changes affect the analysis of sentiment in financial texts such as annual reports, conference calls, and financial news. This type of analysis, called sentiment analysis, is often used to predict market trends. We propose a new algorithm, Word List Vector for Sentiment (WOLVES), which uses machine learning to understand how the meanings and sentiment strength of words evolve over time—a key feature often overlooked by predefined dictionaries used for sentiment analysis. When the algorithm was tested on different types of financial texts, it revealed that sentiment intensity was relatively stable over time, except for a decrease in negative sentiment in annual reports. This decrease suggests a strategic choice of language by managers to control perceived sentiment. The study further validated these findings using the Sarbanes–Oxley Act and the release of a popular financial sentiment dictionary as key events that could influence sentiment. We found that the improved sentiment measures provided by WOLVES were effective predictors of market reaction, earnings performance, and accounting fraud. The study contributes a new way to analyse sentiment that leverages both human domain knowledge and machine learning. It reconciles some inconsistent findings in the previous literature, and offers insights into strategic language adjustment in corporate communications.

Proceedings of the National Academy of Sciences - PNAS, 2023, 120(47)

Medical errors in hospitals not only lead to staggering costs but, more critically, can result in patient fatalities, with approximately one million deaths annually. While the technical and structural reasons for these errors have been extensively studied, the role of team dynamics within hospitals has received less attention. Our research fills this gap by exploring how 'faultlines' within hospital teams – divisions based on attributes like gender and race – impact patient care and safety. We found that dividing hospital teams into homogeneous subgroups based on these faultlines often leads to a decrease in civility among staff members. This lack of civility is a significant concern, as our study linked it to increased rates of medical errors and patient deaths. Specifically, we observed that a 10% rise in incivility within a unit correlated with up to an 8.87% increase in healthcare-associated infections and a 10.59% increase in patient mortality rates. However, there is a silver lining. In hospital units that foster a strong culture of collaborative conflict management – characterised by mutual respect, active listening, and openness to diverse opinions – the negative effects of these faultlines are significantly mitigated. Patients in such environments experienced fewer adverse events and a lower likelihood of mortality, regardless of the presence of strong faultlines. Our research underscores the importance of training healthcare staff in collaborative conflict resolution and equipping them with tools to understand and improve their own conflict management styles. This approach could be crucial for hospitals aiming to enhance patient care and reduce the incidence of medical errors.

Contemporary Accounting Research, forthcoming

This paper presents new evidence on the economic benefits arising from common institutional ownership. We find a negative and significant effect of common institutional ownership on stock price crash risk. This effect is robust to a battery of robustness checks and is causal according to some identification tests, including difference-in-differences (DiD) analyses on financial institution mergers. We find evidence that the negative effect is attributable to the monitoring role of common institutional owners—a role that is enabled by common owners’ lower information processing cost and greater monitoring incentives owing to governance externalities. We also find that common owners negatively influence crash risk through constraining bad news hoarding and that common owners are more likely to force chief executive officer (CEO) turnover when a firm has higher crash risk. Overall, our results suggest that common institutional shareholders play a unique and effective monitoring role that fends off stock price crashes.

Journal of Finance, forthcoming

We arranged for trained undercover men and women to pose as potential clients and visit all 65 local financial advisory firms in Hong Kong. At financial planning firms, but not at securities firms, women were more likely than men to receive advice to buy only individual or only local securities. Women clients who signaled that they were highly confident, highly risk tolerant or had a domestic outlook, were especially likely to receive this suboptimal advice. Our theoretical model explains these patterns as the result of statistical discrimination interacting with advisors’ incentives. Taste-based discrimination is unlikely to explain the results.

Management Science, advance online publication, 2023

Although prior research suggests strict, fair value–based securities accounting rules cause banks to sell securities into negative liquidity shocks, a value-destroying behavior called “liquidity feedback trading,” the mechanism is uncertain. We find the sooner chief executive officers (CEOs) are permitted to cash out of their stock and option grants, the more prone are their banks to feedback trading. Furthermore, the sooner CEOs can cash out, the more positive their banks’ stock price reaction to news of accounting rule relaxation. We conclude incentives for managerial short-term focus are a mechanism by which stricter accounting rules cause feedback trading. We also find evidence that regulatory compliance concerns play a role.

Journal of Accounting Research, 2023, 61(4), 1263-1312

We investigate how the mandatory adoption of International Financial Reporting Standards (IFRS) by publicly listed firms in the European Union affects peer private firms. We find that private firms’ capital investment decreases significantly after the IFRS mandate, relative to public firms. Private firms also display decreased investment when benchmarked against firms relatively insulated from the impact of the IFRS mandate, but the magnitude of the effect is smaller in this case. These results are consistent with the hypothesis that mandatory IFRS reporting (combined with other reforms), while increasing public firms’ financing and investment, crowds out funding for private firms. The effect is more pronounced for larger private firms and in industries where public peers have greater external financing needs. Our evidence suggests that financial reporting regulations cause shifts in resource allocation in an economy.

The Accounting Review, 2023, 98 (6): 97–124

The larger association between earnings and contemporaneous returns for negative returns than for positive returns is often attributed to conditional conservatism. We reason that this asymmetry may also be driven by the lack of timeliness with which stock price incorporates bad news relative to good news. Consistent with our reasoning, we show that when stock price incorporates bad news with delay, the asymmetry can exist in the absence of conditional conservatism. This suggests the testable hypothesis that the asymmetry decreases (increases) with factors that facilitate (impede) the incorporation of bad news into stock price. Using stock liquidity to test this hypothesis, we find that the earnings-return asymmetry decreases as stock liquidity increases. Our findings support the view that variation in the earnings-return asymmetry also reflects variation in the quality of the return generation process.

Journal of Financial and Quantitative Analysis (JFQA), accepted

We document the causal effects of single-name options trading on the absolute level of information content of prices (stock price informativeness) by exploiting the Penny Pilot Program as an exogenous shock to options trading volume. We find that options trading increases underlying stock price informativeness and information acquisition by both option and stock investors, consistent with the framework of Goldstein and Yang (2015). The findings are driven by firms for which options are more important sources for information and firms with more efficiently priced options. Options market introduction in a sample of 25 other economies also leads to higher price informativeness.

Production and Operations Management, 2023, 32(9), 2825–2845

This study focuses on a broadly adopted but largely underexplored cashback strategy, the praise cashback strategy (PCS), which aims to entice consumers to keep purchases and post positive online reviews. The literature acknowledges the impact of cashback strategies on consumers’ purchase and review behaviors; however, it does not focus on how they affect consumers’ return behaviors. Moreover, there are few studies on the effect of cashback strategies on consumer surplus and social welfare in the presence of strategic consumers, especially in relation to analyzing the proportion of fake reviews. By incorporating consumers’ review and return behaviors into a newsvendor model, we establish a sequential procedure for merchants to determine pricing, inventory, and PCS decisions, and then examine the conditions under which merchants prefer to adopt a PCS and its impact. Our results reveal that the adoption of a PCS is a typical prisoner’s dilemma for merchants in markets where PCSs are prevalent. Only when the PCS phenomenon is pervasive in the market, will merchants adopt a PCS with a small cashback amount. A PCS market negatively impacts consumer surplus and social welfare; however, merchants and consumers may benefit from a small cashback amount. Contrary to the common belief that a PCS undermines the organic evolution of online reviews and reduces return rates, we show that a PCS only elicits a few fake reviews, while merchants may face higher return rates from adopting it. These results benefit future studies on cashback strategies and fake reviews and provide evidence that supports the scientific governance of PCSs.

The Accounting Review, 2023, 98(2), 361-387

This study uses data on earnings targets in annual bonus plans to develop a measure of target difficulty at the beginning of the year. We show that target difficulty is negatively associated with market uncertainty, retention concerns, and CEO entrenchment. We present several key findings about the impact of target difficulty on performance and CEO compensation.

First, when annual bonus targets are more difficult to achieve, this is associated with significantly lower CEO cash compensation and decreases in other compensation awards. Second, moderately challenging targets are associated with abnormally poor fourth-quarter performance, particularly after abnormally favourable third-quarter performance. Finally, greater target difficulty is associated with higher abnormal earnings in the same year, but lower earnings and stock returns in the following year.

Combined, our findings suggest that target difficulty is an important factor for companies to consider when designing incentive plans for CEOs as it affects both company performance and executive compensation.

INFORMS Journal on Computing, 2022, 34(3):1819-1840

Electricity wholesale markets are complex, and renewable energy sources can cause electricity prices to be more volatile because of the intermittent nature of renewable sources. Independent power producers (IPPs) who own both traditional coal-fired thermal generators and renewables face significant challenges when submitting offers to sell electricity.

This paper proposes a new plan called an integrated stochastic optimal strategy to help IPPs participate in both the day-ahead and real-time markets (i.e., two-settlement electricity markets) and sell electricity at the best price possible. This strategy involves the IPP submitting an offer for all periods to the day-ahead market and using a multistage stochastic programming setting to provide real-time market offers for each period.

This strategy has the advantage of achieving maximum profits for both markets over a given operational time horizon. It has been proven to be more profitable than alternative self-scheduling strategies that do not take into account real-time information about renewable energy output and electricity prices.

To make the plan more efficient, we explore using polyhedral structures to derive strong valid inequalities, including convex hull descriptions for certain special cases, which strengthens the proposed model’s formulation. Polynomial-time separation algorithms are then established to speed up the branch-and-cut process. Finally, both numerical and real case studies demonstrate the potential of the proposed strategy to improve profits for IPPs.

Production and Operations Management, advance online publication, 2023

Online platforms are experimenting with various methods such as content screening to moderate the effects of fake, biased, and inflammatory content. However, they face a challenge in using machine learning algorithms to manage online content due to the labelling problem. This means that labelled data used to train the model are limited and expensive to obtain.

To address this issue, we propose a domain-adaptive approach that leverages human judgment to improve fake content detection. We start with a source domain dataset that includes both deceptive and trustworthy general news compiled from a large collection of labelled news sources based on human judgments and opinions.

Next, we use advanced deep learning models to extract distinguishing linguistic features commonly found in the source domain news. We transfer these features associated with the source domain to improve fake content detection in three target domains: political news, financial news, and online reviews. We show that domain-invariant linguistic features learned from a source domain with abundant labelled examples can significantly improve fake content detection in a target domain with very few or highly unbalanced labelled data. We further show that these linguistic features are most useful when there is a high level of transferability between source and target domains.

Our study provides insights into managing online content and resources when applying machine learning for fake content detection. We also outline a modular architecture that can be used to develop content screening tools in a wide range of fields.

Academy of Management Journal, advance online publication, 2023

Pay transparency is an important issue in the workplace as it can promote fairness and help close pay gaps. However, our study reveals some unintended consequences of this practice. We surveyed over 100 medical device firms and discovered that as pay becomes more transparent, managers are more likely to avoid challenging discussions about pay differences by nudging everyone towards a standardised salary (pay compression), which often falls at the lower end of an acceptable range. Consequently, high-performing employees may seek alternative forms of recognition, leading to negotiations with their supervisors for personalised benefits and bonuses (i-deals). Ironically, this shift towards opaque negotiations concerning total compensation packages undermines efforts to reduce pay gaps, as managers may compensate employees in less transparent ways.

Our study implies that while pay transparency can be a step towards a more equitable workplace, it is not a one-size-fits-all solution. Companies need to consider the broader implications of their compensation policies, including non-monetary rewards, and ensure that their efforts towards transparency truly promote fairness and understanding among employees.

MIS Quarterly, 2023, 47(1), 63-96

Unstructured multimedia data (text and audio) provides unprecedented opportunities to derive actionable decision-making in the financial industry, in areas such as portfolio and risk management. However, due to formidable methodological challenges, the promise of business value from unstructured multimedia data has not materialized. In this study, we use a design science approach to develop DeepVoice, a novel nonverbal predictive analysis system for financial risk prediction, in the setting of quarterly earnings conference calls. DeepVoice forecasts financial risk by leveraging not only what managers say (verbal linguistic cues) but also how managers say it (vocal cues) during the earnings conference calls. The design of DeepVoice addresses several challenges associated with the analysis of nonverbal communication. We also propose a two-stage deep learning model to effectively integrate managers’ sequential vocal and verbal cues. Using a unique dataset of 6,047 earnings call samples (audio recordings and textual transcripts) of S&P 500 firms across four years, we show that DeepVoice yields remarkably lower risk forecast errors than that achieved by previous efforts. The improvement can also translate into nontrivial economic gains in options trading. The theoretical and practical implications of analyzing vocal cues are discussed.

MIS Quarterly, 2023, 47(1), 391-422

The COVID-19 pandemic has underscored the urgent need for healthcare entities to develop resilient strategies to cope with disruptions caused by the pandemic. This study focuses on the digital resilience of certified physicians who adopted an online healthcare community (OHC) to acquire patients and conduct telemedicine services during the pandemic. We synthesize the resilience literature and identify two effects of digital resilience—the resistance effect and the recovery effect. We use a proprietary dataset that matches online and offline data sources to study the digital resilience of physicians. A difference-in-differences (DID) analysis shows that physicians who adopted an OHC had strong resistance and recovery effects during the pandemic. Remarkably, after the COVID-19 outbreak, these physicians had 35.0% less reduction in medical consultations in the immediate period and 31.0% more bounce-back in the subsequent period as compared to physicians who did not adopt the OHC. We further analyze the sources of physicians’ digital resilience by distinguishing between new and existing patients from both online and offline channels. Our subgroup analysis shows that, in general, digital resilience is more pronounced when physicians have a higher online reputation rating or have more positive interactions with patients on the OHC platform, providing further support for the mechanisms underlying digital resilience. Our research has significant theoretical and managerial implications beyond the context of the pandemic.

Journal of Financial and Quantitative Analysis, 2023, 58(2), 647-676

We study the importance of peer effects among sell-side analysts who work at the same brokerage house, but cover different firms. By mapping the information network within each brokerage, we identify analysts who occupy central positions in the network. Central analysts incorporate more information from their coworkers and produce better research. Using shocks to network structures around brokerage mergers, we identify the influence of peer effects and the importance of industry expertise on analysts’ performance. A portfolio strategy that exploits the forecast revisions of central analysts earns up to 24% per annum.

Journal of Personality and Social Psychology, 2023, 124(3), 461–482

In the context of COVID-19 government-ordered lockdowns, more individualistic people might be less willing to leave their homes to protect their own health, or they might be more willing to go out to relieve their boredom. Using an Australian sample, a pilot study found that people’s lay theories were consistent with the latter possibility, that individualism would be associated with a greater willingness to violate lockdown orders. Using a longitudinal data set containing location records of about 18 million smartphones across the United States, Study 1 found that people in more individualistic states were less likely to comply with social distancing rules following lockdown orders. Additional analyses replicated this finding with reference to counties’ residential mobility, which is associated with increased individualism. In a longitudinal data set containing mobility data across 79 countries and regions, Study 2 found that people in more individualistic countries and regions were also less likely to follow social distancing rules. Preregistered Study 3 replicated these findings at the individual level: People scoring higher on an individualism scale indicated that they had violated social distancing rules more often during the COVID-19 pandemic. Study 4 found that the effect of individualism on violating social distancing rules was mediated by people’s selfishness and boredom. Overall, our findings document a cultural antecedent of individuals’ socially responsible behavior during a pandemic and suggest an additional explanation for why the COVID-19 pandemic has been much harder to contain in some parts of the world than in others.

Journal of Personality and Social Psychology, 2022, 123(6), 1223–1242

People are excessively confident that they can judge others’ characteristics from their appearance. This research identifies a novel antecedent of this phenomenon. Ten studies (N = 2,967, 4 preregistered) find that the more people believe that appearance reveals character, the more confident they are in their appearance-based judgments, and therefore, the more they support the use of facial profiling technologies in law enforcement, education, and business. Specifically, people who believe that appearance reveals character support the use of facial profiling in general (Studies 1a and 1b), and even when they themselves are the target of profiling (Studies 1c and 1d). Experimentally inducing people to believe that appearance reveals character increases their support for facial profiling (Study 2), because it increases their confidence in the ability to make appearance-based judgments (Study 3). An intervention that undermines people’s confidence in their appearance-based judgments reduces their support for facial profiling (Study 4). The relationship between the lay theory and support for facial profiling is weaker among people with a growth mindset about personality, as facial profiling presumes a relatively unchanging character (Study 5a). This relationship is also weaker among people who believe in free will, as facial profiling presumes that individuals have limited free will (Study 5b). The appearance reveals character lay theory is a stronger predictor of support for profiling than analogous beliefs in other domains, such as the belief that Facebook likes reveal personality (Study 6). These findings identify a novel lay theory that underpins people’s meta-cognitions about their confidence in appearance-related judgments and their policy positions.

Operations Research, 69(5): 1349-1650, 2021

The authors propose a model that allows publishers of online advertising to balance the trade-off between short-term profit and long-term benefit.

Online publishers sell their advertising resources via either an upfront market or a spot market. In the upfront market, the publisher enters into a contract with each advertiser, guaranteeing an agreed number of impressions over a specified period at a fixed price. These contracts often vary in length, so the publisher has many contracts at any given time, each with a varying time span. In the spot market, the publisher auctions off its remaining advertising resources in real time among advertisers who want to display their ads during the current period.

This practice of ad delivery suffers from two major inefficiencies. First, the upfront market and the spot market are often managed separately. This ignores the value of coordination and integration and thus misses potential profit. The second inefficiency is related to how advertising is sold in the spot market: simple auction mechanisms are theoretically appealing, but have many drawbacks in practice.

The authors propose integrating ad delivery planning for guaranteed ads and spot market ads. They study how an online advertising publisher should allocate its advertising resources to different guaranteed ads and to spot market ads, considering the uncertain supply of ad resources, the requirement of guaranteed ads, and the bids submitted from advertisers in the spot market.

The proposed integrated planning of guaranteed and non-guaranteed ads is shown to be capable of achieving higher profit and also ensuring effective delivery of guaranteed ads.

Journal of Applied Psychology, advance online publication, 2022

Despite the universal norm of reciprocity that one ought to reciprocate what they have received, help recipients do not always return the favour.,

Organisational life requires that employees help each other, supporting their co-workers and thus enhancing work relationships and work performance. Yet an employee who benefits from a supportive relationship might sabotage the person who supports them in the relationship. The authors propose an explanation for this “biting the hand that feeds” phenomenon.

Their results show that help recipients develop negative perceptions of help givers if they perceive the help givers as more competent than they are. This causes them to experience a threat to their status and feelings of envy towards the help givers. The more envy that help recipients experience toward help givers, the more likely they are to undermine those who help them. In this way, help givers are sometimes even punished for helping. Help recipients are even more likely to respond negatively if are motivated by a desire for higher status.

The authors’ findings are in contrast to social exchange theory, which suggests that after receiving help, people reciprocate by helping the original help giver. Instead, these findings underscore the importance of status dynamics in helping interactions by highlighting that help recipients, especially those motivated by a desire for higher status, may paradoxically undermine help givers when they perceive help givers as a threat to their own status.

Journal of Marketing, 86(6), 95-115 (2022)

The authors shed new light on how marketers can design influencer marketing campaigns to maximise their effectiveness. They reveal how the effectiveness of engaging social-media influencers to promote a firm’s offerings depends on factors related to the influencers themselves, their followers, and the content of sponsored posts.

Many marketers have turned to online influencers to promote their brands and products on social media as consumers grow increasingly skeptical toward traditional marketing. This has propelled the growth of influencer marketing, a communication strategy in which a firm selects and incentivises online influencers to engage their followers on social media in an attempt to promote the firm’s offerings. A firm selects and pays online influencers who have built networks of followers on social media. Influencers share content while weaving brand endorsements into their personal stories and posts. This results in content that appears authentic and provides consumption value.

However, limited research has considered the costs of paying influencers to promote a firm’s offerings. When might such a marketing strategy woo potential customers, and when might it put them off?

The authors examine how the effectiveness of using influencers to market a firm’s offerings is determined by factors related to the sender of a message (the influencer), the receiver of the message (the influencer's followers), and the message itself (the influencer's posts).

Their findings show that the effectiveness of paying influencers to promote a firm’s offerings is enhanced by influencer originality, follower size, and sponsor salience; while effectiveness is diminished by posts that announce new product launches. They also find that tensions arise when firms select influencers and manage their content. The effectiveness of influencer marketing is affected in an inverted U-shaped pattern by the frequency of influencer activity, follower–brand fit, and the degree of positivity of a post. This suggests that firms that adopt a balanced approach towards these variables can achieve greater marketing effectiveness.

Management Science, advance online publication, 2022

Operating under both supply-side and demand-side uncertainties, a mobile-promotion platform conducts advertising campaigns for individual advertisers. Campaigns arrive dynamically over time, which is divided into seasons; each campaign requires the platform to deliver a target number of mobile impressions from a desired set of locations over a desired time interval. The platform fulfills these campaigns by procuring impressions from publishers, who supply advertising space on apps via real-time bidding on ad exchanges. Each location is characterized by its win curve, that is, the relationship between the bid price and the probability of winning an impression at that bid. The win curves at the various locations of interest are initially unknown to the platform, and it learns them on the fly based on the bids it places to win impressions and the realized outcomes. Each acquired impression is allocated to one of the ongoing campaigns. The platform’s objective is to minimize its total cost (the amount spent in procuring impressions and the penalty incurred due to unmet targets of the campaigns) over the time horizon of interest. Our main result is a bidding and allocation policy for this problem. We show that our policy is the best possible (asymptotically tight) for the problem using the notion of regret under a policy, namely the difference between the expected total cost under that policy and the optimal cost for the clairvoyant problem (i.e., one in which the platform has full information about the win curves at all the locations in advance): The lower bound on the regret under any policy is of the order of the square root of the number of seasons, and the regret under our policy matches this lower bound. We demonstrate the performance of our policy through numerical experiments on a test bed of instances whose input parameters are based on our observations at a real-world mobile-promotion platform.

MIS Quarterly, 46(2), 1135-1164

A herding cue is a lean information signal that an individual receives about the aggregate number of others who have engaged in a behavior that may result in herd behavior. Given the ease with which they can be leveraged as implementation interventions or design features on online sites, herding cues hold the promise to provide a means to influence adoption behaviors. Yet, little attention has been devoted in the IS adoption literature to understanding the effects of herding cues. Given that herding cues are just one of several forms of social influence on adoption behaviors and are relatively lean in nature, understanding their viability as an implementation intervention necessitates understanding their effects in the presence of (1) other forms of social influence, which also serve to reduce uncertainty and signal the appropriateness of technology adoption, and (2) an individual’s own beliefs about adopting. In this vein, we conducted a randomized field experiment to examine the use of a herding cue as an implementation intervention to hasten adoption behaviors. The research model was evaluated using survival analysis by combining the data from the field experiment with two waves of surveys, and archival logs of adoption. Our results show that a herding cue (1) directly impacts the time it takes an individual to adopt a technology, (2) amplifies the effects of peer behaviors (another type of informative social influence), but has no impact on the effect of subjective norm (a form of normative social influence), and (3) dampens the effects of an individual’s private beliefs about the usefulness of a technology. Our paper disentangles herding information signals to define a herding cue as distinct from other herd behavior triggers, explores how it may interact with other forms of social influences and private beliefs to influence adoption behaviors, and, on a practical level, provides evidence of how a herding cue can be a tangible intervention to accelerate technology adoption.

Journal of Marketing Research, 58(5), 968–980

Consumption of used products has the potential to symbolically connect present and previous users of these products, something that may appeal to lonely consumers. Accordingly, across seven studies, feeling lonely increased consumers’ preference for previously owned products. Specifically, the authors found that the proportion of lone shoppers was higher in a used versus a regular bookstore, lone individuals (vs. those sitting in pairs) were more likely to select a used over a new product, people without (vs. with) a date on Valentine’s Day expressed stronger preference for used products, and individual differences in loneliness during the COVID-19 pandemic predicted interest in used products. Other studies documented that the desire to symbolically connect underlies the effect of loneliness on consumption. At a time when loneliness is on the rise, the authors discuss implications for the marketing of used products and how loneliness might motivate consumers to reduce waste.

Journal of Management Information Systems, 38, 4, 2021, 898-930

How do fake news flags affect the spread of fake news? How do forwarding restrictions affect the spread of fake news and its ability to survive?

The authors study the impact of two kinds of intervention by China’s largest social media platform to prevent the spread of fake news stories: flagging individual fake-news stories, and imposing a forwarding restriction on accounts that publish fake news stories.

They show that a fake news flag significantly alters the spread of fake news. The forwarding behaviour of followers with strong ties to the focal account is not greatly affected by a fake news flag as these followers are more likely to have the same views and beliefs as the focal account, and are affected by confirmation bias. Such followers also tend to be influential social media users. However, more distant followers, who are less likely to have the same views and beliefs as the focal account, are less likely to forward a story that has been marked as false. The fake news flag thus prevents a story from spreading farther and more broadly in a ripple effect.

Marketing Science, forthcoming

The authors study owner behaviours on a leading peer-to-peer (P2P) car sharing platform in China with the aim of improving matching efficiency on P2P sharing platforms.

P2P sharing platforms act as marketplaces that enable the sharing of idle resources. When a renter requests an owner's resource, the owner needs to decide whether to accept the request: accepting it helps the renter fill up the idle periods of the resource and generate a payoff, but reduces the flexibility to serve a future request for a longer duration.

The authors develop a framework that helps owners understand the trade-offs that they face on P2P platforms when deciding whether to accept a renter’s request. Owners can use this framework to optimise their decisions, while platforms can use this framework to improve their operations.

The paper identifies two types of owners: myopic owners make their acceptance decisions for each incoming request in isolation, while forward-looking owners make their acceptance decisions after taking into account a) how their decision will affect the availability state of their car, and b) the possible arrival of future requests. Both groups of owners are similar in number but forward looking, strategic owners are more likely to be female, experienced, and younger.

Journal of Financial and Quantitative Analysis, forthcoming

We find that organization capital is negatively related to the cost of bank loans. This finding is robust to additional analyses including those that address omitted variable bias and reverse causality. In addition, we find that organization capital reduces all-in-spread-undrawn. When we decompose the bank loan cost, we find that organization capital increases facility fees due to its risk-engendering characteristics. Finally, we find that organization capital is positively associated with a high likelihood of the presence of inventors and innovation output, consistent with the argument that organization capital is embedded in the key talent within a firm.

Academy of Management Journal, forthcoming

Although teams of negotiators are widely assumed to be better at unlocking integrative solutions than individual negotiators, the interteam negotiation context is characterized by unique challenges which can make effective collaboration between teams difficult. We extend our theoretical understanding of interteam negotiations by offering novel insights about when and why teams realize their potential in integrative negotiations. Specifically, we propose a theoretical model that explains how hierarchical team structures reduce information elaboration within teams, which reinforces “fixed-pie” assumptions that prompt the reliance on value claiming behaviors between teams and lower high-quality outcomes such as the joint gain achieved. Across four studies, each involving interactive team-on-team negotiations, we provide support for the hypothesized effects of formal intrateam hierarchies on joint gain, and test a useful intervention to mitigate the harmful effects of hierarchically structured teams at the negotiation table. Contributions to the literatures on team negotiations, interteam collaboration, and hierarchical differences within teams are discussed.

Academy of Management Journal, forthcoming

Organizations need to both differentiate themselves while conforming to their audiences’ expectations. To meet this demand, organizations may span different categories. However, valuing spanners is challenging for audiences. We contend that spanners’ valuation depends on category nesting, as the congruence of informational cues varies between basic categories and subcategories. Furthermore, we expect that more expert audiences find spanners to be more congruent (and hence, more valuable) at a subordinate level than at a basic level of categorization. We test our hypotheses using a mixed methods design in the context of venture capital investments. We analyze observational data on more than 29,000 venture capital deals and develop two experimental studies. Our findings support our hypotheses that subcategory-spanning lowers valuation, and that this effect is attenuated as investors’ expertise increases. Our experimental studies further show that congruence is a causal mechanism explaining these effects. Our findings have important implications for research on organizational conformity and optimal distinctiveness, categorization in markets from an information processing perspective, and the impact of expertise on valuation.

Journal of Applied Psychology, 107, 193-220

Although workplace incivility has received increasing attention in organizational research over the past two decades, there have been recurring questions about its construct validity, especially vis-à-vis other forms of workplace mistreatment. Also, the antecedents of experienced incivility remain understudied, leaving an incomplete understanding of its nomological network. In this meta-analysis, we validate the construct of incivility by testing its reliability, convergent and discriminant validity, as well as its incremental predictive validity over other forms of mistreatment. We also extend its nomological network by drawing on the perpetrator predation framework to systematically study the antecedents of experienced incivility. Based on 105 independent samples and 51,008 participants, we find extensive support for incivility's construct validity. Besides, we demonstrate that demographic characteristics (gender, race, rank, and tenure), personality traits (agreeableness, conscientiousness, neuroticism, negative affectivity, and self-esteem), and contextual factors (perceived uncivil climate and socially supportive climate) are important antecedents of experienced incivility, with contextual factors displaying a stronger association with incivility. In a supplementary primary study with 457 participants, we find further support for the construct validity of incivility. We discuss the theoretical and practical implications of this study.

The Accounting Review, forthcoming

The Securities and Exchange Commission (SEC) regulates and monitors, under the securities laws, the financial reporting and disclosure of SEC registrants (companies) to increase transparency and protect investors. The securities laws also consider the companies’ interests and allow them to make confidential treatment requests to redact certain information in SEC filings and not publicly disclose such information for a specified period of time, if the information is both proprietary and immaterial to investors - proprietary in the sense that disclosure may reveal trade secrets or information about profitability that harm companies’ competitiveness. There has been an overall uptick in confidential treatment requests in recent years.

Although prior studies provide evidence that companies use redactions to protect proprietary information from their competitors, anecdotal evidence suggests otherwise. For example, Tesla, in the two fiscal quarters ending June 30 and September 30, 2017, in which the company lost $955 million, made an unusually high number of confidential treatment requests, allowing the company to generate almost 3,000 redactions. In another example, TheStreet questioned SolarCity’s redactions in 2015, speculating that the withheld information was unfavourable to investors. In yet another example, Asensio.com questioned the Universal Display Corporation’s heavy redaction in its supply and licensing agreements with Samsung, which potentially allows the company to withhold unfavourable information regarding its red emitter sales.

Journal of Applied Psychology, forthcoming

Colquitt et al. (Journal of Applied Psychology, 2000, 85, p. 678) integrative theory based on meta-analysis and model testing has served as the foundation for the authors' understanding of training motivation. However, the applicability of the theory today may be limited for several reasons. There has been significant growth in training motivation research since Colquitt et al. (Journal of Applied Psychology, 2000, 85, p. 678) proposed and tested their theory. Also, advances in meta-analysis and model testing allow for a more complete and rigorous test of the theory than was previously possible. As a result, the authors propose and test a contemporary and comprehensive theory of training motivation based on Colquitt et al. (Journal of Applied Psychology, 2000, 85, p. 678) and other studies conducted over the last 20 years. To do so, they conducted an updated meta-analytic review of 167 independent studies and tested a mediation model of training motivation theory using both conventional meta-analytic structural equation modeling (MASEM) and full-information MASEM (FIMASEM). The results support a partially mediated model of training motivation that includes additional antecedents (e.g., openness to experience, extroversion, agreeableness, and goal orientation) and learning outcomes (e.g., turnover intentions and job satisfaction) not included in Colquitt et al. (Journal of Applied Psychology, 2000, 85, p. 678). In addition, the authors conducted exploratory analyses to understand the relative importance of the antecedents of both motivation to learn and learning outcomes and the moderating role of training and studying characteristics on the relationships between motivation to learn and its antecedents and consequences. Finally, they discuss the implications of the results for theory, practice, and future research directions.

Journal of Applied Psychology, forthcoming

Conventional research on gratitude has focused on the benefits of expressing or experiencing gratitude for the individual. However, recent theory and research have highlighted that there may too be benefits associated with receiving others’ gratitude. Grounded in the Work-Home Resources model, the authors develop a conceptual model to understand whether, how, and for whom service providers (i.e., healthcare professionals) benefit from receiving service beneficiaries’ (i.e., patients) gratitude in their daily work. They hypothesize that perceived gratitude from service beneficiaries enhances service providers’ relational energy at work, which spills over to benefit their family lives later in the day. In addition, they hypothesize that the effect of gratitude on relational energy and its subsequent spillover effect to the family are contingent on employees’ occupational identity. Two experience sampling studies with data collected from healthcare professionals and their spouses for two consecutive weeks (each) provided support for the hypothesized model. The authors conclude by discussing the theoretical and practical implications of their work.

Journal of Financial Economics, 141(1), 372-393 (2021)

Using a comprehensive US hedge fund activism dataset from 2003 to 2018, the authors find that activist hedge funds are about 52% more likely to target firms with female CEOs compared to firms with male CEOs. They find that firm fundamentals, the existence of a “glass cliff,” gender discrimination bias, and hedge fund activists’ inherent characteristics do not explain the observed gender effect. They also find that the transformational leadership style of female CEOs is a plausible explanation for this gender effect: instead of being self-defensive, female CEOs are more likely to communicate and cooperate with hedge fund activists to achieve intervention goals. Finally, the authors find that female-led targets experience greater increases in market and operational performance subsequent to hedge fund targeting.

Management Science, forthcoming

The authors study how daily labour supply responds to unanticipated earnings shocks among Singapore's taxi drivers using a novel identification strategy that makes use of idiosyncratic variation in booking cancellations and passenger no-shows (CNS) that drivers repeatedly receive. The results provide new and more compelling evidence in support of the income-targeting model of labour supply. Not only the average responses on the extensive margin, but also the responses on the intensive margin as well as the heterogeneous response at different income levels and across driver characteristics are all consistent with the income-targeting model. Drivers work longer and earn more per hour following CNS. The CNS effects exhibit a U-shaped pattern, are strongest when cumulative income is close to the average shift income, and become insignificant when the income level is too low or too high. The effects are most pronounced in the first hour of CNS and fade away quickly afterward. Drivers achieve higher productivity by reducing break time, taking more jobs, driving faster, driving to places with more earning opportunities, and having more time with passengers on board. They choose the response strategies that are complementary to their ability and circumstance such as schedule flexibility and potential for productivity improvement: Those with flexible working schedules tend to prolong their shifts further, while those with flexibility in earnings rate tend to increase their subsequent productivity more. The authors’ novel identification strategy strengthens the empirical literature on daily labour supply, while their findings of the heterogeneity effects offer new insights on income-targeting behaviours.

Journal of Financial Economics ,forthcoming

Journal of Accounting and Economics, 70(1), 101334 (2020)

One of the fundamental questions in financial economics is how information affects the capital market. Social media, with user-generated content, speed and wide reach, has the potential to facilitate the aggregation of information and help stock price formation (crowd wisdom effect). It also provides fertile ground for disinformation to spread and hinder price discovery (rumor mill effect).

The authors of this paper investigate whether social media can play a negative information role by hindering price discovery in the presence of highly speculative rumors with a focus on merger rumors. They examine Twitter activity and price evolution around merger rumors, using a sample of 304 rumors about mergers and acquisitions that appeared in the media from 2009 to 2014.

The investigation finds evidence of the rumor mill effect in the presence of highly speculative rumors. Specifically, user Twitter activity around merger rumors distorts, rather than facilitates, price discovery.

Operations Research, forthcoming

Customer reward programs are widely used as a means to foster customer loyalty, increase acquisition and retention, and boost long-term profitability. Although these programs are becoming more complex, most of them have one thing in common - consumers purchasing and accumulating a specified number of points (redemption threshold), often within a given time period (expiration term) can redeem the points for rewards. Together these requirements are referred to as “redemption hurdles” in this paper.

The authors study the role of redemption hurdles in shaping consumer behavior and reward program profitability with a focus on the popular "Buy X, Get One Free" (BXGO) programs, which set a redemption threshold (X), and possibly an expiration term for the reward (free products/services). In their modeling framework, forward-looking consumers repeatedly interact with the seller (a monopolistic firm offering a nondurable product) over a long time horizon, and strategically make purchase and redemption decisions.

Contemporary Accounting Research, forthcoming

Understanding the association between quasi-indexer ownership and insider trading is important given the externalities that insider trading can impose on shareholders, the importance of quasi-indexers in the capital markets, and their mixed monitoring incentives. The prior literature has produced a mixed set of results regarding this association. These results are difficult to interpret because the association between them is likely endogenous and prior studies have not employed effective identification strategies to address this issue. In this study, the authors examine the effects of quasi-indexer institutional ownership on insider trading using the plausibly exogenous discontinuity in quasi-indexer ownership around the Russell 1000/2000 index cutoff. Using both regression discontinuity and instrumental variable research designs, they find higher quasi-indexer ownership leads to less insider trading (both buys and sells) and less profitable sell trades. The effects for sells are concentrated among insider trades that, ex ante, are more likely to be based on private information. Their evidence on the profitability of buys is mixed. In addition, they find firms with higher quasi-indexer ownership are more likely to have and/or more strictly enforce blackout policies. Overall, the results suggest that quasi-indexers can reduce the agency costs associated with insider trading through their direct and indirect monitoring activities.

Management Science, forthcoming

The authors study the impacts of social interactions on competing firms’ quality differentiation, pricing decisions, and profit performance. Two forms of social interactions are identified and analyzed: (1) market-expansion effect (MEE) - the total market expands as a result of both firms’ sales - and (2) value-enhancement effect (VEE) - a consumer gains additional utility of purchasing from one firm based on this firm’s previous and/or current sales volume. The authors consider a two-stage duopoly competition framework, in which both firms select quality levels in the first stage simultaneously and engage in a two-period price competition in the second stage. In the main model, they assume that each firm sets a single price and commits to it across two selling periods. They find that both forms of social interactions tend to lower prices and intensify price competition for given quality levels. However, MEE weakens the product-quality differentiation and is benign to both high-quality and low-quality firms. It also benefits consumers and improves social welfare. By contrast, VEE enlarges the quality differentiation and only benefits high-quality firms, but is particularly malignant to low-quality firms. It further reduces the consumers’ monetary surplus. Such impact is consistent, regardless of whether the VEE interactions involve previous or current consumers. The authors further discuss several model extensions, including dynamic pricing, combined social effects, and various cost structures, and verify that the aforementioned impacts of MEE and VEE are qualitatively robust to those extensions. Their results provide important managerial insights for firms in competitive markets and suggest that they need to not only be aware of the consumers’ social interactions, but also, more importantly, distinguish the predominant form of the interactions so as to apply proper marketing strategies.

Journal of Applied Psychology, 106(2), 250-267 (2021)

Drawing upon social comparison theory, the authors developed and tested a model to examine potential negative coworker reactions toward proactive employees. They theorized that a focal employee’s proactive personality is positively related with his or her high relative standing in the group, which in turn exposes him or her to being the target of coworker envy. This may then reduce the focal employee’s received help from coworkers and give rise to coworker undermining. The authors further reasoned that employee prosocial motivation moderates the serial mediated relationships. Their hypotheses were generally supported in 3 field studies involving a total of 1,069 employees from 223 groups. Proactive personality was negatively and indirectly related to received help from coworkers, via relative leader-member exchange (RLMX) and relative job performance, and then via being envied by coworkers (Study 1). Results also generally supported the positive and indirect effect of proactive personality on coworker undermining via the same set of sequential mediators (e.g., RLMX and then being envied, Study 2). The indirect effects of proactive personality on coworker helping and undermining (e.g., via relative job performance and coworker envy) were only significant when employees’ prosocial motivation was low (Study 3). This research contributes to a more complete and balanced theorization of the influences of proactive personality in organizations.

INFORMS Journal on Computing, 33(1), 86–104 (2021)

Most existing facility location models assume that the facility cost is either a fixed setup cost or made up of a fixed setup and a problem-specific concave or submodular cost term. This structural property plays a critical role in developing fast branch-and-price, Lagrangian relaxation, constant ratio approximation, and conic integer programming reformulation approaches for these NP-hard problems. Many practical considerations and complicating factors, however, can make the facility cost no longer concave or submodular. By removing this restrictive assumption, the authors study a new location model that considers general nonlinear costs to operate facilities in the facility location framework. The general model does not even admit any approximation algorithms unless P = NP because it takes the unsplittable hard-capacitated metric facility location problem as a special case. They first reformulate this general model as a set-partitioning model and then propose a branch-and-price approach. Although the corresponding pricing problem is NP-hard, they effectively analyse its structural properties and design an algorithm to solve it efficiently. The numerical results obtained from two implementation examples of the general model demonstrate the effectiveness of the solution approach, reveal the managerial implications, and validate the importance to study the general framework.

Journal of Financial and Quantitative Analysis, forthcoming

The authors examine the value impact of independent directors nominated by activists (Activist IDs). Firms appointing Activist IDs experience larger value increases than firms appointing other directors, particularly when Activist IDs have private firm experience and when their nominators remain as shareholders. This value increase persists over a long period and is greater than that of activism events without director appointments. The increase is also higher among firms with greater monitoring needs and entrenched boards. Moreover, the appointments of Activist IDs are greeted more positively by the market, and Activist IDs obtain more favourable shareholder votes and additional future directorships.

Journal of Financial Economics, forthcoming

This paper studies the disciplinary spillover effects of proxy contests on companies that share directors with target firms, that is, interlocked firms. In difference-in-differences tests, the author finds that interlocked firms reduce excess cash holdings, increase shareholder payouts, cut CEO compensation, and engage in less earnings management in the year after proxy contests. The effects are more pronounced when both the interlocked and target firms have a unitary board and when the interlocking director is up for election, is younger, or has shorter tenure. Overall, the evidence highlights the importance of directors’ career concerns in policy spillovers across firms with board interlocks.

The Accounting Review, 95 (5): 149–184 (2020)

The authors investigate the relationship between societal trust and managers' decisions to voluntarily issue earnings forecasts. They reason that managers are more likely to issue earnings forecasts in high-trust countries than in low-trust countries because investors view these voluntary disclosures as more credible information about the firm's future profitability. They find evidence consistent with these predictions, suggesting that societal trust fosters corporate voluntary disclosure. The authors also document that societal trust works as a substitute for country-level formal institutions in terms of its implications for management earnings forecast (MEF) issuance. Additionally, they find a stronger relationship between firm-level commitment to credible disclosure and MEFs in low-trust countries, suggesting that country-level societal trust relates to the effectiveness of firm-level credibility-enhancing mechanisms. Finally, they show that firms from countries with higher societal trust issue more precise and accurate MEFs that contain more information about multiple items.

Contemporary Accounting Research, 37(2), 1107–1139 (2020)

Political uncertainty has attracted considerable attention in both research and public policy circles in recent years. For corporates, it may generate demand uncertainty, a major determinant of cost behaviour, and affect corporate activities. Uncertainty over a possible shift in national leadership may disturb firms’ regular operations and shapes economic outcomes. Such uncertainty reaches its peak during election periods when competing parties formulate their regulatory and economic policies and outline their platforms for stimulating growth.

This study analyses the impact of election-driven political uncertainty on firms’ cost stickiness (varied cost responses to activity changes). By analysing a large panel of elections in 55 countries, the authors show that political uncertainty surrounding elections can affect cost stickiness. They find that the variation in cost behaviours is more obvious during election years and the importance of political uncertainty to cost stickiness is greater in countries with sound political and legal institutions. Their results imply that managers retain slack resources when political uncertainty is high but will be resolved soon.

Journal of Applied Psychology, forthcoming

Literature on personality development mainly adopts two theoretical perspectives. From the classic trait perspective, environmental factors cannot change adult personality traits because personality traits are endogenous. From the transactional perspective, the environment can influence adult personality development, although rarely dramatically. Organizational research mostly assumes that personality traits cause work behaviours and attitudes, not vice versa.

This study looks at personality development from the new angle of work roles (role-based perspective) and examines what, how, and why personality traits develop after one’s adoption of leadership roles. It investigates whether and how transitioning from an employee into a supervisory role (leadership emergence) shapes one’s personality development. The authors propose that during such role transitions, individuals experience increases in job role demands and expectations, fostering growth in conscientiousness and emotional stability. Their findings show that becoming a leader causes subsequent small but substantial increases in conscientiousness over time to cope with new job role demands. The relationship between becoming a leader and change of emotional stability is not significant. Findings of this research provide important implications for both organizations and employees in better planning leadership succession and managing career development.

Contemporary Accounting Research, forthcoming

Using a large U.S. sample, the authors find a significant and positive relation between patents and corporate tax planning, and the effect is incremental to the effect of R&D on tax planning. They employ a quasi-natural experiment based on staggered industry-level innovation shocks to identify the positive causal effect of patents on corporate tax planning. They also find that patents are not associated with tax planning for domestic firms, but their association with tax planning is concentrated in multinational firms, which have the ability to shift domestic income to low-tax countries. Moreover, the authors find that the identified effect mainly exists in the post-check-the-box (CTB) rule period when shifting income among affiliates becomes more flexible and convenient. Finally, they use two income shifting models and find that patents, rather than R&D, facilitate tax planning through an income shifting channel. Overall, their results suggest that R&D and patents facilitate firms’ tax planning in distinct ways: R&D facilitates tax planning as intended through tax credits and deductions, whereas patents are used to avoid taxes aggressively by taxpayers through income shifting.

Management Science, forthcoming

Firms often register trademarks as they launch new products or services. The authors find that the number of new trademark registrations positively predicts firm profitability, stock returns, and underreaction by analysts in their earnings forecasts. Using the Federal Trademark Dilution Act (FTDA) as an exogenous shock to trademark protection, they find that greater trademark protection strengthens the predictability of new trademark registrations. Together, their evidence suggests that investors undervalue new trademark registrations.

Journal of Financial and Quantitative Analysis, forthcoming

How does social capital affect trust? Evidence from a Chinese peer-to-peer lending platform shows regional social capital affects the trustee’s trustworthiness and the trustor’s trust propensity. Ceteris paribus, borrowers from higher social capital regions receive larger bid from individual lenders, have higher funding success, larger loan size, and lower default rates, especially for low-quality borrowers. Lenders from higher social capital regions take higher risks and have higher default rates, especially for inexperienced lenders. Cross-region transactions are most (least) likely to be realized between parties from high (low) social capital regions.

The Accounting Review, 95(3), 343–370 (2020)

This study examines how cross-firm differences in financial reporting practices affect how peer-firm accounting information is used to evaluate CEO performance. The author proposes that efficient relative evaluation using accounting performance requires peer firms to have comparable financial reporting systems, allowing boards to reduce the information processing costs associated with differences in firms’ financial reporting practices. Supporting this view, when peer selection takes financial reporting comparability into account, he finds evidence that the earnings of peer firms with high financial reporting comparability serve as a performance benchmark for determining CEOs’ cash compensation. His paper empirically corroborates the substantial anecdotal evidence of the use of peer firms’ accounting performance as a significant element in boards’ evaluation of CEO performance.

Management Science, forthcoming

This study examines the effects of jurisdictions’ corporate taxes and other policies on firms’ headquarters (HQ) location decisions. Using changes in state corporate income tax rates across time and states as the setting, the authors find that a one-percentage-point increase in the HQ state corporate income tax rate increases the likelihood of firms relocating their HQ out of the state by 16.8%, and an equivalent decrease in the HQ state rate decreases the likelihood of HQ relocations by 9.1%. Exploiting the unique tax policy features within the state apportionment system lends strong support to the interpretation that taxation drives this effect. Their analyses also demonstrate that state income tax features affect the destination of the HQ move. They contribute to the literature on corporate decision-making by showing how state income taxation affects a real corporate decision that has significant economic consequences for the company and the state.

INFORMS Journal on Computing, forthcoming

A solar power plant is a large-scale photovoltaic (PV) system designed to supply usable solar power to the electricity grid. Building a solar power plant needs consideration of arrangements of several important components, such as PV arrays, solar inverters, combiner boxes, cables, and other electrical accessories. The design of solar power plants is very complex because of various optimization parameters and design regulations. In this study, the authors address the cable-routing problem arising in the planning of large-scale solar power plants, which aims to determine the partition of the PV arrays, the location of combiner boxes, and cable routing such that the installation cost of the cables connecting the components is minimized. They formulate the problem as a mathematical programming problem, which can be viewed as a generalized capacitated minimum spanning tree (CMST) problem, and then devise a branch-and-price-and-cut (BPC) algorithm to solve it. The BPC algorithm uses two important valid inequalities, namely the capacity inequalities and the subset-row inequalities, to tighten the lower bounds. The authors also adopt several acceleration strategies to speed up the algorithm. Using real-world data sets, they show by numerical experiments that their BPC algorithm is superior to the typical manual-based planning approach used by many electric power planning companies. In addition, when solving the CMST problem with unitary demands, their algorithm is highly competitive compared with the best exact algorithm in the literature.

Strategic Management Journal, 41(10), 1933-1951 (2020)

This study draws attention to the impact of prior board experiences on the variation in new insider CEOs' degree of “insiderness” in terms of commitment to the status quo and their propensity to make strategic change. The authors theorize and find that new insider CEOs' prior board experience at the focal firm has a negative effect on strategic change, whereas their prior board experience at other firms has a positive effect. Moreover, the positive effect of prior board experience at other firms is stronger (weaker) for new insider CEOs who have less (more) prior board experience at the focal firm. Their study contributes to upper echelons theory and research on new CEOs, and has important implications for organizational practices regarding CEO succession and strategic change.