Our Research

Title: "How Deep Is the Labor Market for Female Directors? Evidence from Mandated Director Appointments"

Presenter: Daniel Greene, Department of Finance

Abstract: We examine the depth of the labor market for female directors following an exogenous shock to demand caused by California Senate Bill 826 (SB 826). Despite a surge in female appointments to California firms, director qualifications remain stable when benchmarked to (1) new male directors appointed to California firm boards and (2) new female directors appointed to non-California firm boards over the same period. We likewise find that announcement returns to new female director appointments post-SB 826 are similar to those of control groups, indicating that the market does not view appointments of female California directors more negatively following the law. These results hold for both voluntary and mandated female director appointments. Generalizability tests suggest that if faced with a similar demand shock, other U.S. states should have a sufficient supply of female director candidates to increase female representation on boards without harming director quality.

Title: "Achieving Sustainability through the Appointment of Chief Sustainability Officers: The Role of Marketing Experience and Managerial Discretion in Top Management Teams"

Presenter: Pravin Nath, Department of Marketing

Abstract: In the challenge to be sustainable, a critical action that firms can and do take is the appointment of a Chief Sustainability Officer (CSO) to the top management team (TMT). However, sustainability requires firm-wide adoption of initiatives, making the TMT important for the CSO's success in this regard. The authors explore this issue by positing that TMT marketing experience should matter to the impact that CSOs can have on corporate social performance, i.e., the overall sustainability efforts of the firm. Specifically, they study the Chief Marketing Officer's (CMO) presence and the marketing experience of the CEO and that of the remaining TMT executives. Furthermore, they propose that this impact depends on these executives' managerial discretion, which they operationalize in multiple ways. They test their conceptual model in a quasi-experimental setting wherein US public firms that appoint a CSO are identified over a 10-year window and matched to firms that don't. Results show that each type of TMT marketing experience helps CSOs improve corporate social performance when there is greater discretion, but the type of discretion is different for the CEO, TMT, and CMO. This study extends the sustainability and upper echelons literatures in marketing while guiding firms pursuing corporate social performance.

Presenter: Sayan Gupta, Department of Marketing

Abstract: There has been a gradual rise of brands engaging in political conversations and facing consequences, good and bad, on purchase intentions, market shares and stock market returns. The period of March - April 2022 saw escalations of tensions between Disney and the then-GOP presidential contender, Governor Ron DeSantis, over Florida Senate's enactment of the Parental Rights in Education legislation that limits instruction on gender identity and sexual orientation to children before they enter fourth grade. Disney's CEO came out with a public statement condemning the bill which triggered a boycott movement against the brand from consumers on social media and culminated in DeSantis stripping Disney of its self-governance privileges. In this study, we use this event to set up a quasi-experiment to document and quantify its impact on the currently popular practice of "review bombing" - an attack against a brand on product review websites by groups of internet users in an attempt to harm the sales or popularity of the brand's product offering. A triple differences-in-differences analysis of "Unverified" versus "Verified" audience movie reviews on Rotten Tomatoes shows that the former has, on average, lower ratings than the former - i.e., fake or unverified reviews are usually more negative. However, in the aftermath of the event, the gap between these ratings increased even further for movies produced or distributed by Disney while it decreased for other studio houses, including and especially Disney's competitors (such as Warner Bros.) - thus providing evidence of politically motivated review bombing. These results are replicated under several robustness checks. Additional analyses further show that although Rotten Tomatoes doesn't prominently display the unverified ratings on its website, they may hold significant explanatory power on the box office performance of Disney movies in this period.

Presenter: He Li, Department of Management

Abstract: Businesses' extensive investment in digitalizing information assets and operations has significantly increased their cybersecurity risks. This calls for strategies to invest in cybersecurity protection effectively. This presentation overviews three studies examining how firms' cyber investments influence their cybersecurity breaches. The first study shows the heterogeneous effects of investing in different cybersecurity protection systems on internal and external breaches. We demonstrate the need to align cybersecurity investments with digital transformation strategies by delineating the moderating effects of two important digital transformation strategies, i.e., investing in digital systems and embeddedness in the outsourcing networks. The second study examines how a firm's cloud storage implementation affects different types of security breaches in both the short and long term. Building on the attention-based view, we find that cloud storage implementation increases external breaches in the short term but not over time. We also determine that cloud storage can reduce accidental internal breaches over the long term. Findings highlight the need for firms to strategically direct limited resources to security risks differently in the short- and long-term of cloud storage implementation. The third study shows that not only how firms invest in cybersecurity but how they learn to invest matters. Accordingly, we uncover the mechanisms of how firms vicariously learn from local peers in cybersecurity investments. We document that vicarious learning from local peers' cybersecurity investments can reduce malicious data breaches if the local peers have more diverse failure and nonfailure experiences. Taken together, these three studies contribute to our understanding of cybersecurity risks in firms' digital transformation and how firms should strategically invest in cybersecurity protection systems.

Presenter: Lily Shen, Department of Finance

Abstract: Despite the prevalence and high cost of real estate agents, there is limited empirical evidence as to the nature or efficacy of their services. In this paper, we estimate real estate agents' value-added when both selling and buying homes using micro data from three large Multiple Listing Services (MLS). We find that homeowners who forgo a conventional real estate agent but list their homes on the MLS via a flat-fee broker sell for between 1 and 4 percent more on average before commission while taking only a few days longer to sell. However, there is an important trade-off as these sellers are significantly less likely to complete a sale. We further show that these average effects mask a significant amount of real estate agent heterogeneity. Using a novel aspect of our data, which allows us to identify and track agents over time, we estimate the distributions of real estate agent fixed effects in both hedonic and time-on-the-market models. We document a large amount of heterogeneity across agents in both outcomes. Finally, we identify and characterize top-performing agents and show that their performance is persistent, they are rewarded by the market in terms of future business, and they appear to perform their best in cold markets when properties are more difficult to sell.

Presenter: Babak Mammadov, School of Accountancy

Abstract: This study investigates whether providing quality employment-based health insurance has implications for financial reporting outcomes. Recent studies suggest that a company's entire workforce plays an important role in the financial reporting process. Using the conservation of resources theory, we argue that access to health insurance (or better health insurance) reduces stress for rank-and-file employees, allowing them to focus on their jobs. We argue that employees who are less distracted with healthcare stress are likely to make fewer errors, identify and fix abnormalities, and provide higher quality information to superiors. We predict that the improved informational environment from better-performing rank-and-file employees will translate into better financial reporting outcomes. Results are consistent with our predictions. We show that firms offering healthcare insurance (or higher quality healthcare insurance) have higher quality earnings and are less likely to report costly restatements and internal control weaknesses. We conduct a series of tests to demonstrate that the results do not suffer from endogeneity issues (e.g., Heckman's two-step procedure, two-stage least squares regression, firm-fixed effect analysis, changes-on-changes model, difference-in-difference model, propensity-score matched sample and entropy-balanced model). Results suggest that providing employment-based healthcare coverage is a corporate social responsibility that benefits both employees and investors.

Presenter: Paul Wilson, John E. Walker Department of Economics

Abstract: Additive, directional distance functions (DDFs) introduced by Chambers et al. (1996, Journal of Economic Theory) are widely used to measure efficiency of production in the presence of fixed subsets of inputs or outputs, in the presence of ``bad'' outputs, or for measuring profit efficiency as suggested by Chambers et al.  However, the additive feature of DDFs often makes interpretation of results awkward, whereas multiplicative measures allow one to describe inefficiency in terms of percentages, which is arguably more convenient.  This paper describes a multiplicative, generalized hyperbolic distance function that allows the researcher to hold a subset of inputs or outputs fixed.  Statistical properties of both free-disposal hull and data envelopment analysis estimators of full efficiency, as well as estimators of order-alpha quantile partial efficiency and order-$m$ expected partial efficiency are developed. The statistical results enable inference about efficiency in a wide variety of settings. An empirical illustration using data on U.S.~credit unions is provided, as well as Monte Carlo evidence on the performance of the estimators.