Editor: Glenn MacDonald
Managing Editor: Elaine McClary

Journal Acceptances

ECONOMICS

Siddhartha Chib: "Stochastic volatility with leverage: fast and efficient likelihood inference" with Y. Omori, N. Shephard and J. Nakajima, forthcoming in Journal of Econometrics.

Abstract: This paper is concerned with the Bayesian analysis of stochastic volatility (SV) models with leverage. Specifically, the paper shows how the often used Kim Shephard and Chib (98) method that was developed for SV models without leverage can be extended to models with leverage. The approach relies on the novel idea of approximating the joint distribution of the outcome and volatility innovations by a suitably constructed ten-component mixture of bivariate normal distributions. The resulting posterior distribution is summarized by MCMC methods and the small approximation error in working with the mixture approximation is corrected by a reweighting procedure. The overall procedure is fast and highly efficient. We illustrate the ideas on daily returns of the Tokyo Stock Price Index. Finally, extensions of the method are described for superposition models (where the log-volatility is made up of a linear combination of heterogeneous and independent auto regressions) and heavy-tailed error distributions (student and log-normal).

Siddhartha Chib: "Modeling and Calculating the Effect of Treatment at Baseline from Panel Outcomes" with L. Jacobi, forthcoming in Journal of Econometrics.

Abstract: We propose and examine a panel data model for isolating the effect of a treatment, taken once at baseline, from outcomes observed over subsequent time periods. In the model, the treatment intake and outcomes are assumed to be correlated, due to unobserved or unmeasured confounders. Intake is partly determined by a set of instrumental variables and the confounding on unobservables is modeled in a flexible way, varying both by time and treatment state. Covariate effects are assumed to be subject-specific and potentially correlated with other covariates. Estimation and inference is by Bayesian methods that are implemented by tuned Markov chain Monte Carlo methods. Because our analysis is based on the framework developed in Chib (2004), the modeling and estimation does not involve either the unknowable joint distribution of the potential outcomes or the missing counterfactuals. The problem of model choice through marginal likelihoods and Bayes factors is also considered. The methods are illustrated in simulation experiments and in an application dealing with the effect of participation in high school athletics on future labor market earnings.

FINANCE

Michael Faulkender: "Does the Source of Capital Affect Capital Structure?", with Mitchell Petersen published in the Spring 2006 edition of Review of Financial Studies.

Abstract: Prior work on leverage implicitly assumes capital availability depends solely on firm characteristics. However, market frictions that make capital structure relevant may also be associated with a firm's source of capital. Examining this intuition, we find firms that have access to the public bond markets, as measured by having a debt rating, have significantly more leverage. Although firms with a rating are fundamentally different, these differences do not explain our findings. Even after controlling for firm characteristics that determine observed capital structure, and instrumenting for the possible endogeneity of having a rating, firms with access have 35% more debt.

Ohad Kadan: "A Rational Expectations Theory of Kinks in Financial Reporting", forthcoming in the Accounting Review.

Abstract: We present a rational model of earnings management. An informed manager, whose compensation is linked to the stock price, trades off the benefit of boosting the stock price by inflating the reported earnings against the costs of such manipulation. The investors rationally interpret his actions and adjust the price accordingly. When the distribution of true earnings and the compensation scheme are smooth, the conventional equilibrium in this signaling framework is also smooth and fully revealing. In this paper, we show that in the same "Smooth" environment there exist equilibria in which kinks and discontinuities emerge endogenously in the distribution of reported earnings. The manager optimally chooses a partially pooling strategy, introducing endogenous noise into his report. The resulting vagueness enables the manager to reduce the average manipulation costs. The equilibrium has perfect revelation of earnings in the right and left tails of the distribution, while for intermediate earnings realizations we get one or more pools that manifest themselves as discontinuities in the distribution of reported earnings. We study the properties of these partially pooling equilibria and suggest applications to financial reporting.

Guofu Zhou: "Optimal Portfolio Choice with Parameter Uncertainty" with Raymond Kan, forthcoming in Journal of Financial and Quantitative Analysis.

Abstract: In this paper, we analytically derive the expected loss function associated with using sample means and covariance matrix of returns to estimate the optimal portfolio. Our analytical results show that the standard plug-in approach that replaces the population parameters by their sample estimates can lead to very poor out-of-sample performance. We further show that with parameter uncertainty, holding the sample tangency portfolio and the riskless asset is never optimal. An investor can benefit by holding some other risky portfolios that help reduce the estimation risk. In particular, we show that a portfolio that optimally combines the riskless asset, the sample tangency portfolio, and the sample global minimum-variance portfolio dominates a portfolio with just the riskless asset and the sample tangency portfolio, suggesting that the presence of estimation risk completely alters the theoretical recommendation of a two-fund portfolio.

Guofu Zhou: "Estimating and Testing Beta Pricing Models: Alternative Methods and Their Performance in Simulations", with Jay Shanken, accepted at Journal of Financial Economics.

Abstract: In this paper, we provide a comprehensive theoretical and small sample study of the Fama and MacBeth (1973) two-pass procedure that is fundamental in understanding to what extent cross-sectional expected returns/values are explained by certain factor attributes. While existing studies use almost exclusively this procedure, we show that alternative two-pass methods can have better small sample performance. In addition, we provide tractable GMM approaches that accommodate conditional heteroscedasticity of the data. Moreover, the risk premium estimates and t-ratios of the Fama and MacBeth procedure provide no information on whether the model is misspecified or not, and they can be misleadingly interpreted if the model is indeed misspecified. We not only provide formal model misspecification tests, but also how that various estimation methods are useful in detecting model misspecification.

MARKETING

Tat Chan: "Commentary on "Structural Modeling in Marketing", forthcoming in Marketing Science.

Abstract: Chintagunta, Erdem, Rossi and Wedel (2005) discuss many different issues related to the use of structural models in marketing. They use examples of structural models that involve both consumer demand and supply-side competition to provide a critical assessment of the strengths and weaknesses of structural modeling and its future in marketing. In this paper three issues raised in their paper are further discussed: (i) I argue the fact that behavioral assumptions are explicitly laid out in structural models can be a major strength instead of a weakness. (ii) I discuss various issues related to the validation exercise in structural models. (iii) I provide some examples related to how to use multiple data sources to allow for limited information for decision makers as well as relax some commonly made behavioral assumptions, in order to improve the richness and interpretation of structural models.

Dmitri Kuksov: "The Effects of Costs and Competition on Slotting Allowances", with Amit Pazgal, forthcoming in Marketing Science.

Abstract: We consider the optimal two-part tariff contract between a manufacturer and a retailer. We show that retail competition (in the presence of either fixed costs or bargaining power) may lead to slotting allowances in an optimal contract, even with a monopoly manufacturer and no information asymmetry. On the other hand, slotting allowances do not arise with a monopoly retailer and no information asymmetry, whether the manufacturer is a monopoly or not. We also show that more intense retail competition, higher retail bargaining power, larger retailer fixed costs, lower marginal costs of retailing, as well as larger relative retailer size (whether coming from a location or operating advantage) have a positive impact on the incidence and the magnitude of slotting allowances. The opposing effects of the fixed and marginal operating costs on slotting allowances, as well as the impact of competition and bargaining power on profits, underscore the importance of careful definitions of these variables in empirical research.

OPERATIONS AND MANUFACTURING MANAGEMENT

Ling Dong: "Equilibrium Forward Contracts on Nonstorable Commodity in the Presence of Market Power", with Hong Liu. Forthcoming in Operations Research

Abstract: Bilateral supply contracts are widely used despite the presence of spot markets. In this paper we provide a potential explanation for this prevalence of supply contracts even when spot markets are liquid and without delivery lag. Specifically, we consider the determination of an equilibrium forward contract on a nonstorable commodity between two firms that have mean-variance preferences over their risky profits and negotiate the forward contract through a Nash bargaining process. We derive the unique equilibrium forward in closed form and provide an extensive analysis of the equilibrium contract. We show that it is the risk hedging benefit from a forward that justifies its prevalence in spite of liquid spot markets. In addition, while a forward does not affect production decisions due to the presence of spot markets, it does affect inventory decisions of the storable input factor due to its hedging effect against the inventory risk. We also show that price volatilities and correlations are important determinants of the equilibrium contract. In particular, the equilibrium forward price can be nonmonotonic in the spot price volatility and can decrease as the initial spot price increases.

ORGANIZATIONAL BEHAVIOR

Stuart Bunderson: "Expertness diversity and interpersonal helping in teams: Why those who need the most help end up getting the least"with G.S. Van der Vegt and A. Ooesterhof, forthcoming in Academy of Management Journal.

Abstract: This paper develops and tests a multi-level theory of the intra-group dynamics and performance outcomes associated with diversity in levels of member se - "expertness diversity" - in task-oriented teams. Drawing from theories of power and dependence, it is argued that in groups where members differ in their perceived expertness, members will be more committed to and more likely to help those seen as more expert, a dynamic which frustrates intra-group learning and compromises group performance. These hypotheses were strongly supported in a multi-period, multi-level analysis of social relations and performance outcomes in a sample of student research teams.

Michael Price: "Judgments about cooperators and freeriders on a Shuar work team",forthcoming at Organizational Behavior and Human Decision Processes.

Abstract: Evolutionary theory predicts that (1) members of a social group will tend to judge cooperative co-members favorably, and freeriding co-members negatively, and (2) group members who themselves cooperate more frequently will be especially likely to make these social judgments. An experiment tested these predictions among Shuar hunter-horticulturalists. Subjects were presented with a scenario describing a work team project, and shown depictions of pairs of workers who varied in the extent to which they had behaved altruistically, or selfishly, as members of the team. Subjects were then asked to judge which worker deserved more respect, and which deserved more punishment. As predicted, subjects in general tended to favor cooperators and disfavor freeriders, and subjects who themselves participated frequently in work teams were especially likely to make these judgments.

STRATEGY

Anne Marie Knott: "Entrepreneurial Risk and Market Entry",with Brian Wu, forthcoming in Management Science.

Abstract: This paper attempts to reconcile the risk-bearing characterization of entrepreneurs with the stylized fact that entrepreneurs exhibit conventional risk aversion profiles. We propose that the disparity arises from confounding two distinct dimensions of uncertainty: demand uncertainty and ability uncertainty. We further propose that entrepreneurs will be risk averse with respect to demand uncertainty, yet "apparent risk-seeking" (or overconfident) with respect to ability uncertainty. To examine this view we construct a reduced form model of the entrepreneur's entry decision, which we aggregate to the market level then test empirically. We find that entrepreneurs in aggregate behave as we predict. Accordingly, risk-averse entrepreneurs are willing to bear market risk when the degree of ability uncertainty is comparable to the degree of demand uncertainty. Potential market failures exist in instances where there is a high demand uncertainty, but low performance dispersion (insufficient entry) or low demand uncertainty, but high performance dispersion (excess entry).

Jackson Nickerson: "Why do firms make and buy? Efficiency, appropriability and competition in the trucking industry", with Daifeng He, in Strategic Organization, 2006 4: 43-69.

Abstract: Most literature examining firms' "make or buy" decision fails to explore when firms use both governance structures for similar transactions. We examine this phenomenon in the trucking industry where it is common for a carrier to use both employee drivers and outsourcing at the same time. We argue that efficiency, appropriability, and competition concerns lead carriers to organize on a haul-by-haul basis. We empirically examine our theory using a unique data from a small trucking firm in St. Louis, MO, and find broad support for our hypotheses. We also discuss the possibility of alternatives explanations of market power, capacity constraint, agency theory, and property right theory for the use of make and buy. We conclude that these alternative explanations do not explain this phenomenon in the trucking industry. Thus, we conclude that it is the interaction of efficiency, appropriability, and competition concerns that drive the decision to make and buy in the trucking industry. We further postulate that these concerns can manifest in other industries suggesting that our theory has applicability beyond trucking.

Books & Conference Volumes

ORGANIZATIONAL BEHAVIOR

Kurt Dirks: "Rebuilding trust and restoring positive relationships: A commitment-based view of trust", with M.G. Pratt. In J.E. Dutton & B.R. Raggins (Eds.) Exploring Positive Relationships at Work: Building a Theoretical and Research Foundation.(in press)

Conference Acceptances/Presentations

ACCOUNTING

Tzachi Zach: Presented "Conflicts of Interest and stock recommendations - the effect of the Global Settlement and related regulations" at the Financial Accounting Research System midyear meetings in Atlanta, GA. In January 2006.

Tzachi Zach:Presented "Accrual determinants, sales changes and their impact on empirical accrual models"at the New York University accounting workshop series in February 2006.

ECONOMICS

Siddhartha Chib: Presented "Stochastic volatility with leverage: fast and efficient likelihood inference"at University of California - Irvine in March 2006.

Siddhartha Chib: Presented "Calculating the Effect of Treatment at Baseline from Panel Outcomes" at the University of Michigan in March 2006.

Jeroen Swinkels: Presenting at Princeton on May 5 the paper "Moral Hazard with Bounded Payments"joint with Ohad Kadan.

FINANCE

Mike Faulkender: Will be a discussant at the American Finance Association Conference for "Information Asymmetries, Cross-Product Banking Mergers, and the Effects on Corporate Borrowers" by Steven Drucker (Columbia University)

Mike Faulkender: Presented"Why are Firms Using Interest Rate Swaps to Time the Yield Curve?"(with Todd Milbourn and Sergey Chernenko) at Harvard Business School in March 2006, and will present the same paper at the University of North Carolina in April, and the Western Finance Association in June.

Michael Faulkender and Todd Milbourn: Will present their paper "Why are Firms Using Interest Rate Swaps to Time the Yield Curve", (joint with Sergey Chernenko) at the 2006 Western Finance Association Conference in Keystone, Colorado.

Dirk Hackbarth: Invited to present "Corporate Bond Credit Spreads and Forecast Dispersion" (with L. Guntay) at the 3rd Annual Conference of The Caesarea Center for Capital Markets and Risk Management at IDC, Herzliya, May 15-16, 2006.

Dirk Hackbarth: Invited to discuss " Are Overconfident Managers Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers " by M. Billet and Y. Qian and 3rd Annual Conference "People & Money" at DePaul University, Chicago, March 24-25.

Ohad Kadan: Presented "Moral Hazard with Bounded Payments" at the North American Meeting of the Econometric Society.

Ohad Kadan: Will present " Conflicts of Interest and Stock Recommendations - The Effect of the Global Settlement and Related Regulations " at the Conference on Conflicts of Interest in Financial Markets at Vanderbilt University, and the Financial Intermediation Research Society Conference in Shanghai.

Ohad Kadan: Will present "Stocks or Options - Moral Hazard, Firm Viability and the Design of Compensation Contracts" at the Financial Intermediation Research Society Conference in Shanghai.

OPERATIONS AND MANUFACTURING MANAGEMENT

Yossi Aviv: Presented at the University of Texas at Austin "On the Benefits of Collaborative Forecasting Partnerships: Production and Inventory considerations", November 2005.

Ling Dong: Invited to be a discussant at Conference "Integrated Risk Management in Operations and Global Supply Chain Management: Risk, Contracts and Insurance," to be held at the University of Michigan, Ann Arbor, on June 3-4, 2006.

Tava Olsen: Presented research paper "Service Level Agreements in Call Centers: Perils and Prescriptions" at New York University, Stern School of Business, December 2005.

Tava Olsen: Presented research paper "Service Level Agreements in Call Centers: Perils and Prescriptions" at University of Maryland, Smith School of Business, March 2006.

STRATEGY

Anne Marie Knott: Will present "R&D/Returns Causality: Absorptive Capacity or Organizational IQ"at the Academy of Management and also the Atlanta Competitive Advantage Conference.

Anne Marie Knott: Will present "Redesigning routines for replication"(with Anuja Gupta and David Hoopes) at the Academy of Management.

Jackson Nickerson: Presented"Envy, Comparison Costs and the Economic Theory of the Firm"at INSEAD and University of Southern California.

HONORS

ECONOMICS

Martin Cripps: Invited to join the editorial boards at the Journal of Economic Theory and at Games and Economic Behavior.

FINANCE

Michael Faulkender: Invited to serve on risk management panel at Forum on Corporate Finance at the University of North Carolina in May 2006.

Michael Faulkender: Will serve as Program Chair for a Corporate Finance Conference sponsored by the finance department and CRES at Wash U in May.

OPERATIONS AND MANUFACTURING MANAGEMENT

Tava Olsen: Appointed as Associate Editor for the Manufacturing & Service Operations Management journal, in January 2006.

ORGANIZATIONAL BEHAVIOR

Kurt Dirks: Appointed to the editorial board of the Journal of Leadership and Organizational Studies.

STRATEGY

Anne Marie Knott: Appointed a Senior Editor at Organization Science.

Future Events

FINANCE

The Financial Intermediation Research Society has planned a Conference on Banking, Corporate Finance and Intermediation for June 1-3, 2006 at the Grand Hyatt Hotel in Shanghai, China.

Workshops Held

ACCOUNTING

Friday, December 2, 2005	Tony Chen(Georgia State University) "Value Drive and Performance Measurement: Evidence from Retail Chain Stores"
Friday, December 9, 2005	Maria Nondorf(University of California at Berkeley) "Accounting for Human Capital in Mergers and Acquisitions" MNAcqOptions_12012005.pdf
Friday, January 20, 2006	Shannon Anderson(Rice University) "Explaining cross-sectional variation in goals and performance following bonus plan introduction: Integrating economic and behavioral theory"
Friday, February 3, 2006	Anne Beatty(Ohio State University) "Conservatism and Debt" Conservatism.pdf
Wednesday, March 15, 2006	Ramji Balakrishnan(University of Iowa) "Capacity Utilization and Unit Variable Cost: Evidence from California Hospitals"

ECONOMICS/STRATEGY/CRES

Wednesday, February 15, 2006	Ichiro Obara(University of California, Los Angeles) "Approximate Implementability with Ex Post Budget Balance"
Wednesday, February 22, 2006	Ariel Pakes(Harvard University) Moment Inequalities and Their Application
Monday, March 6, 2006	Thomas Hellmann(The University of British Columbia) The Importance of Trust for Investment: Evidence from Venture Capital.pdf
Wednesday, March 15, 2006	William Fuchs(University of Chicago) Contracting with Repeated Moral Hazard and Private Evaluations
Wednesday, March 22, 2006	Ted Bergstrom(University of California at Santa Barbara) On the Economics of Polygyny

FINANCE

Friday, March 3, 2006	Bart Lambrecht(Lancaster University) "Debt and Managerial Rents in a Real-Options Model of the Firm"
Friday, March 10, 2006	Tan Wang(University of British Columbia) "International Risk Sharing, Investment Restrictions and Asset Prices" TanWang.pdf

MARKETING

Wednesday, February 15, 2006	Wes Hartmann(Stanford University) "Quantity-Based Price Discrimination Using Frequency Reward Programs"
Wednesday, February 22, 2006	Ying Xie (Rutgers University) "The Role of Targeted Communication and Contagion in Product Adoption"
Friday, February 24, 2006	Young-Hoon Park (Cornell University) TBA
Wednesday, March 22, 2006	Dipankar Chakravarti(Colorado University) "Channel Negotiations with Information Asymmetries: Contingent Influences of Communication and Trustworthiness Reputations"

OPERATIONS AND MANUFACTURING MANAGEMENT/BCTIM

Wednesday, January 18, 2006	OMM Brown Bag Seminar(Washington University in St. Louis) "OMM Faculty Group Brown Bag Seminar"
Friday, January 20, 2006	Qian Lin (Columbia University) "Strategic Capacity Rationing to Induce Early Purchases"
Friday, January 27, 2006	Guillermo Gallego (Columbia University) "Inter-Temporal Valuations, Product Design and Revenue Management"
Wednesday, February 1, 2006	Elodie Adida(MIT) "Dynamic Pricing and Inventory Control: Uncertainty and Competition"
Wednesday February 8, 2006	Annabelle Feng(University of Texas - Dallas) "A Two-Stage Newsvendor Problem with a Long-Term Service Target"
Friday, February 10, 2006	David Simchi-Levi(MIT) "Risk Aversion in Inventory Management"see PDF
Monday, February 13, 2006	Robert Hampshire(Princeton University) "Fluid and Diffusion Limits for Transient Sojourn Times of Processor Sharing Queues with Time Varying Rates"see PDF
Wednesday, February 22, 2006	Maria Mayorga(University of Michigan) "Optimal Retail Assortment and Stocking Decisions"see PDF

ORGANIZATIONAL BEHAVIOR

Thursday, October 27, 2005	Art Brief(Tulane University) "Community Matters"
Friday, February 24, 2006	Katherine Klein(University of Pennsylvania) "To be announced."

Recruiting Seminars

ACCOUNTING

Thursday, March 30, 2006	David Piercey(University of Illinois at Urbana-Champaign) "Reasonably Possible or Substantial Doubt? Documentation Requirements, Persuasion Tactics, and Verbal (vs. Numerical) Audit Risk Assessment"
Friday, March 24, 2006	Tony Davila(University of Navarra, Spain) "Early-Stage Startup Companies: The Role of Management Accounting in the Evolving Portfolio of Management Control Systems"
Thursday, March 23, 2006	Amy Zang(Duke University) "Evidence on the Tradeoff between Real Manipulation and Accrual Manipulation"
Tuesday, March 21, 2006	Shane Heitzman(University of Arizona) "Equity Grants to Target CEOs Prior to Acquisitions"
Friday, March 17, 2006	Yan Cao(University of Rochester) "What Explains the 'Abnormal Accruals' around Equity Carve-outs?"
Tuesday, March 14, 2006	Laura Yue Li(Tulane University) "Strategic Forecast Timing: Theory and Evidence"
Friday, March 10, 2006	Yong Yu(Pennsylvania State University) "Do Investors Overreact or Underreact to Accruals? A Reexamination of the Accrual Anomaly"
Thursday, February 23, 2006	Susan Kulp(Harvard Business School) "Transient Institutional Ownership and CEO Contracting"
Friday, February 17, 2006	Weili Ge(University of Michigan) "Off-balance-sheet activities, earnings persistence and stock prices: Evidence from operating leases"
Thursday, February 16, 2006	Tjomme Rusticus(The Wharton School) "Executive Severance Agreements"
Tuesday, February 14, 2006	Michelle Liu(MIT) "Accruals and Managerial Operating Decisions Over the Firm Life Cycle"
Friday, January 20, 2006	Shannon Anderson(Rice University) "Explaining cross-sectional variation in goals and performance following bonus plan introduction: Integrating economic and behavioral theory"

FINANCE

Tuesday, February 28, 2006	Leandro Saita(Stanford University) "The Puzzling Price of Corporate Default Risk"
Friday, February 17, 2006	Juhani Linnainmaa(UCLA) "Learning and Stock Market Participation"
Tuesday, February 14, 2006	Riccardo Colacito(New York University) "Risks for the long run and the real exchange rate"
Thursday, February 9, 2006	Dana Kiku(Duke University) "Is the Value Premium a Puzzle?"
Wednesday, February 8, 2006	Berk Sensoy(University of Chicago) "Incentives and mutual fund benchmarks"
Friday, February 3, 2006	Zhi Da(Kellogg School of Management) "Clientele Change, Liquidity Shock and the Return on Financially Distressed Stocks"
Tuesday, January 31, 2006	Georgios Skoulakis(Kellogg School of Management) "Dynamic Porfolio Choice with Bayesian Learning"
Friday, January 27, 2006	Yuhai Xuan(Harvard University) "Essays in Financial Economics"
Tuesday, January 24, 2006	Todd Gormley(MIT) "Banking Competition in Developing Countries: Does Foreign Bank Entry Improve Credit Access?"
Friday, January 20, 2006	Radha Gopalan(University of Michigan) "Large Shareholder Trading and Takeovers: The Disciplinary Role of Voting With Your Feet"
Tuesday, January 17, 2006	Lukasz Pomorski(University of Chicago) "Follow the Leader: Peer Effects in Mutual Fund Porfolio Decisions"
Tuesday, December 13, 2005	Robert Marquez(University of Maryland) "The Aggregation of Information in Tender Offers"
Friday, December 2, 2005	Chris Malloy(London Business School) "Supply and Demand Shifts in the Shorting Market"

MARKETING

Thursday, December 8, 2005	Jackie Luan(Yale School of Management) "Optimal Inter-Release Timing for Sequential Releases"
Wednesday, December 7, 2005	Sanjib Mohanty(Simon School of Business) "Firm Level Adoption of a New Industrial Product: The Case of Checkout Scanners"
Wednesday, November 16, 2005	Selin Malkoc(University of North Carolina, Chapel Hill) "When Should I Have It? The Effect of Consumption Concreteness on Consumer Impatience"
Tuesday, November 15, 2005	Yesim Orhun(University of California, Berkeley) "Optimal Product Line Design with Choice Set dependent Preferences"
Wednesday, November 9, 2005	Andres Musalem(Wharton School) "Estimating Consumer Preferences and Coupon Usage from Aggregate Information"
Wednesday, November 2, 2005	Juanjuan Zhang(University of California, Berkeley) "The Sound of Silence"
Friday, October 28, 2005	Ozge Turut(Harvard Business School) "When Should a Firm Go Radical? Signaling Marketing Potential Through Innovation Strategy"
Wednesday, October 26, 2005	Paulo Albuquerque(UCLA) "Measuring Consumer Switching to a New Brand across Local Markets"
Friday, October 21, 2005	Michal Herzenstein(University of Rochester) "Adoption of New and Really New Products: The Effects of Self-Regulation Systems and Risk Salience"
Wednesday, October 19, 2005	Jeff Shulman(Kellogg School of Management) "Optimal Product Returns Policies and Information Obfuscation: When Reducing Returns Reduces Profit"
Wednesday, October 12, 2005	Garrett Sonnier(UCLA) "Estimating Wilingness to Pay with Random Coefficient Choice Models"
Friday, October 7, 2005	Himanshu Mishra(University of Iowa) "Ignorance is Bliss: The Information Malleability Effect"
Wednesday, October 5, 2005	Jane Gu(New York University) "Celebrity Endorsement Advertising and Product Adoption Through Social Networks"

ORGANIZATIONAL BEHAVIOR

Friday, January 27, 2006	Donald Lange(University of Texas at Austin) "A study of controversial organizational action: Organizational action and audience reaction in the contrext of financial restatement"
Wednesday, January 25, 2006	Markus Baer(University of Illinois) "Innovation in Organizations: From Creativity to Idea Implementation"
Thursday, January 19, 2006	Jennifer Dunn(The Wharton School) "Affective and Cognitive Influences on Trust and Reputation-Building"
Tuesday, January 17, 2006	Shelley Brickson(London Business School) "TBA"
Friday, December 16, 2005	Lisa Jones(University of North Carolina at Chapel Hill) "He Thinks, Therefore I Am: An Examination of Social Influence on Commitment to Change and Implementation Behaviors"
Tuesday, December 6, 2005	Elizabeth Mullins(Northwestern University) "The Influence of Moral Conviction on People's Perceptions of Fairness and Willingness to Comply with Authorities"

STRATEGY

Wednesday, February 8, 2006	Anne Marie Knott(Washington University) "Entrepreneurial Risk and Market Entry"
Monday, February 6, 2006	Raul Gonzalez(Universitat Pompeu Fabra) "From the Lab to the Market: The Commercialization Strategy of Patented Inventions"
Wednesday, February 1, 2006	Ronnie Chatterji(University of California, Berkeley) "Spawned with a Silver Spoon? Entrepreneurship and Innovation in the Medical Devices"
Monday, January 30, 2006	Nico Lacetera(MIT) "Multiple Missions and Academic Entrepreneurship"
Wednesday, January 25, 2006	Tyson Mackey(The Ohio State University) "Is there a diversification discount? Diversification, Payout Policy, and the Value of a Firm"
Monday, January 23, 2006	Alison Mackey(The Ohio State University) "Dynamics in Executive Labor Markets: CEO Effects, Executive-Firm Matching, and Rent Appropriation"
Wednesday, January 18, 2006	Sharon James-Wade(University of Minnesota) "When Do Firm Voluntarily Disclose Qualitative Information About R&D Projects?"
Wednesday, January 11, 2006	April Franco(University of Iowa) "Covenants not to Compete, Labor Mobility, and Industry Dynamics"

Ph.D. MILESTONES

FINANCE

Jason Smith Dissertation Title: "Topics in Corporate Finance""

Abstract: Many papers document the effect of stock prices on corporate investment. We know high stock prices imply high investment, but we know little about what low stock prices imply, other than the implied flip side (low investment). This paper studies the behavior of low stock price firms and adds to this literature in several ways. First, a theoretical model is developed reconciling this finding with the existing investment-stock price dependence empirical results. If investment is likely to increase the interim stock price, the manager will invest and monitor costs less pertinaciously. Second, a new dimension of corporate behavior that is stock price dependent is documented. Low stock prices precede a lower cost structure. Third, empirical tests provide strong support for the model. In particular, low stock prices predate lower costs, investments, and higher cash flows. Robustness checks reveal that the results are not driven by firms' financial constraints or issuance of debt and equity securities.

Abstract: We present a model in which private equity emerges endogenously as a form of financial intermediation. The key to the model is twofold. First, investors have different levels of alignment with the manager. Second, trading in public markets results in little surplus for those with high alignment. Private equity investors solve a coordination problem created in the public market by competition. For each potential private equity investor with a high level of alignment with the manager, any trading creates a frenzy in which the marginal surplus is zero. Thus, forming a coalition of private equity investors and extracting benefit from the higher alignment provides more surplus than the cost of forming the coalition. The benefit is greatest when the public market has a low level of alignment and a large amount of volatility. The firm's benefit for issuing private equity is the gain from having investors with a higher level of alignment. If equity scrutiny is likely to result in an unfavorable opinion of the project, debt will be selected. Further, if the asset-substitution problem is large, then public debt is not an option and private debt will be selected in order to monitor project choice.

Rong Wang Dissertation Title: "Essays in Corporate Finance".

Abstract: 1. Executive Incentives and Financial Constraints In this paper, we theoretically and empirically analyze the effects of firm-level financial constraints on executive compensation. The existing corporate finance literature highlights that financial constraints affect corporate behavior. The apparent difficulty in managing financially constrained firms suggests that shareholders in constrained firms should use higher-powered compensation contracts than those in unconstrained firms. In the framework of a standard principal-agent model, we show a negative relation between pay-performance sensitivities and better access to the capital markets. Empirical results demonstrate that CEO pay-performance sensitivities in financially constrained firms are statistically and economically higher than the pay-performance sensitivities in financially unconstrained firms. Moreover, we find that the total value of CEO's compensation package is higher in constrained firms than in unconstrained firms.

2. Corporate Financial Policy and the Value of Cash We examine the cross-sectional variation in the marginal value of corporate cash holdings that arises from differences in corporate financial policy. We begin by providing semi-quantitative predictions for the value of an extra dollar of cash depending upon the likely use of that dollar, and derive a set of intuitive hypotheses to test empirically. By examining the variation in excess stock returns over the fiscal year, we find that the marginal value of cash declines with larger cash holdings, higher leverage, better access to capital markets, and greater as firms choose cash distribution via dividends rather than repurchases.

3. Conflicts of Interest and Stock Recommendations - The Effects of the Global Settlement and Related Regulations Prior research has shown that sell-side analysts who are facing conflicts of interest driven by underwriting relationships, issue overly optimistic recommendations. This paper studies the effect of regulations on sell-side analysts' research. These regulations - Rule NASD 2711, Rule NYSE 472, and the "Global Analyst Research Settlement" - attempted to mitigate the interdependence between research and investment bank departments of US brokerage houses. The results suggest that the regulations have partially achieved their goal of curbing the conflicts of interest's influence over analysts' stock recommendations. After the adoption of the regulations, the likelihood of receiving an optimistic recommendation no longer depends on whether a firm had undergone an IPO/SEO or whether the brokerage house had participated in any such IPO/SEO as an underwriter. However, analysts are still reluctant to issue pessimistic recommendations for IPO/SEO firms, and affiliated analysts are even more reluctant to be pessimistic about these stocks. We also document that following the regulations most major brokerage houses have migrated from the traditional 5-tier rating system into a 3-tier rating system, imposing an overall shift in the distribution of recommendations towards less optimistic recommendations. Abnormal price and volume reactions to recommendations following the regulations suggest that investors react rationally to the overall change in the distribution of recommendations, but they are partially misled by underwriting relationships.

MARKETING

Yuanfang Lin Dissertation Title: "Essays on Competitive Strategies;"

Abstract: This dissertation deals with issues that arise in firms' multidimensional strategic decisions focusing on how those strategies interact in terms of one reinforce or constrain another. The common theme is addressed in two self-contained essays. In the first essay, I explore manufacturer's problem of designing product line using persuasive advertising to enhance consumers' product valuation. Analysis of monopoly model indicates a firm will use persuasive appeals to the entire product line when there is no competition. This is driven by the opportunity of completely appropriating increased surplus due to advertising from one market segment at the cost of giving up a bit more to the other segment. When firms have to manage both intra firm cannibalization and inter firm competition at the same time, I find they tend to pursue a more targeted advertising strategy with focus on high end of the product line. The explanation comes from the negative strategic effect on one market segment which is due to the competition for the other market segment and transformed through product line cannibalization. Thus the selective use of persuasive advertising is found to be an important tool, together with other marketing mix variables (product, pricing) for firms handling multiple strategic issues simultaneously. The second essay looks at product and service decision of retailer store in competitive environment with primary interest on retailer's incentive to provide informational service to consumers. I find there is trade off of service provision under different consumer heterogeneity and information environment. When consumers have uncertainty on product valuation and the service can be freely acquired, it is the low-quality store that has incentive to provide service. However the store carrying high quality product will be the one offering service when consumers are also heterogeneous in shopping cost, or their uncertainty is on physical product attribute. Service decision is further studied in combined with multi-product choice to explore the strategic interaction between product assortment and service. The study thus provides important managerial guidance to retailer stores about the use of service as additional strategic tool along with product and pricing to achieve competitive advantage.

OPERATIONS AND MANUFACTURING MANAGEMENT

Ping Su Dissertation Title: "Essays on Supply Chain and Technology Management under Global Competition and Stochastically Evolving Markets;"

Abstract: My dissertation research includes the essays on two major topics: (1) Modeling and analysis and deepened understanding of how operational hedging approaches benefit firms facing global competition in environments of uncertain exchange rates and stochastic demands (co-work with Lingxiu Dong and Panos Kouvelis; (2) Timing of technology adoption in duopolistic settings with stochastically evolving markets through the use of real options, game theory, and optimal stopping time analysis tools (co-work with Chester Chamber and Panos Kouvelis).

In the operational hedging essays, my review paper, "Global supply chain management" serves as a tutorial to introduce the global supply chain topics by using classical papers in the literature. It includes two parts: Part I discusses the Structure of Global Supply Chains and Part II, Risk Management in Global Supply Chains. In Part I, we summarize the key issues in the global logistics, introduce three classical conceptual frameworks for facility network design and demonstrate some practices in designing the global supply chain network. Finally we explore the importance and implications of global factors on the network design, such as financing considerations, local content rules, taxation and transfer pricing.

The second essay on operational hedging investigates the impact of operational flexibility on firms' economic exposure to currency fluctuations in the presence of global competition. We consider a global firm who sells as a monopolist in the domestic market, and also sells to a foreign market facing competition there from a local incumbent of certain capacity. We compare the effects of three operational strategies of the global firm, namely, with no operational flexibility but matching currency footprints (the advocated as "natural hedge" in the literature), with postponement flexibility, and with both postponement and allocation flexibility. For a two-stage stochastic model, we derive the optimal capacity and selling decisions for the global firm, and from the comparative statics analysis of our model with respect to the exchange rate volatility and capacity in the foreign market we infer useful managerial insights.

We find that operational flexibility enables the global firm to exploit the possible high exchange rate (i.e., devalued home currency) realizations for profit improvement, and thus increases in the long run the firm's expected profit. Furthermore, operational flexibility allows for downside risk control as the exchange rate becomes more volatile, since the postponement and/or resource pooling options cleverly exercised minimize the impact of unfavorable currency realizations. The global firm's operational flexibility increases its competitor's downside risk, but may also benefit competitors' expected profit since a flexible global firm may decide not to compete when the exchange rate is not favorable.

We also illustrate how the global firm can use financial derivative contracts on currency exchange rates to effectively hedge some of the profit risk. When comparing operational and financial hedging, we show that operational flexibility delivers more robust expected profit performance. The performance of financial hedges deteriorates when the nature of the competition is not clear in advance and the firm, mostly due to transaction costs, is restricted in the number of financial contracts to engage. In conclusion, our paper substantiates that "natural hedges" are not effective from a profit maximization perspective, and financial hedges often fail to effectively reduce risks when the competitive exposure to exchanges rates is hard to predict. On the other hand, we clearly illustrate the robust profit maximizing performance and reasonable downside control of operational hedging approaches.

In the technology management essay, we are concerned with the problem of the adoption of technology that will reduce unit production costs by duopolists sharing a single market. We develop 2 models; one involving competition in output rates, and another which considers quality-based competition. In both settings an evolution of the market is manifested by changes in a market-specific parameter. In the first model market size will change. In the second model, we assume the taste for quality of the most quality conscious consumer changes. We capture this evolution by assuming that the critical market-specific parameter experiences shocks described by Geometric Brownian Motion (GBM.) We derive optimal adoption points for both firms allowing them to have differing initial costs, where adoption involves a discrete investment that is firm-specific, and offers a new cost parameter that is also firm specific.

We study how the nature of competition changes the order and/or timing of adoption. We explore these issues by modeling markets with undifferentiated products where market clearing prices are driven by total output and the firms are involved in a one stage game. Similarly, we consider settings with vertically differentiated products where firms choose quality levels and prices in a two stage game. The distinction is important because the nature of competition and the market's characteristics determine whether adoption by one firm increases or decreases the subsequent value of adoption by the rival firm.

We also analyze the case under which the order of technology adoption is known a'priori, the implications for technology adoption behavior and social welfare. Such scenarios may result from contractual arrangements, patent protections, or strategic choices of the firms involved. More commonly, such an arrangement results from the unique role that one of the firms has in the development of the cost reducing practice or technology. Consequently, if a firm has the ability to reduce its cost in a way that his rival has not developed, he may find it optimal to keep this innovation off of the plant floor, because he knows that as soon as it is implemented, it will be copied. We will show that in some cases the negative impact of the rival's anticipated adoption exceeds the positive impact of the developer's immediate adoption and he is motivated to delay adoption indefinitely.

While intuition strongly suggests that the high cost producer will be the most eager to adopt cost reducing technology, our analysis refines this intuition by focusing on cases which expand or contradict this intuition. For example, our results show that under Cournot competition the lower cost producer is likely to be the first to adopt if the market is growing rapidly, or its growth is highly volatile. We also find that increasing the quality of a lower quality good often makes technology adoption less attractive for the producer of the higher quality good. Generally, we conclude that the inclusion of deferral options within the analysis of these competitive games yields insights that were under-developed to this point.

Dennis (Zhenxin) Yu Dissertation Title: "How social factors in exchange generate employee trust and cooperation""

Abstract: My dissertation focuses on the manufacturer's choices on product variety, pricing and capacity investment in supply chain management. The objective of this interdisciplinary research is to enhance the understanding of how product and supply chain strategies interact in the presence of customer demand uncertainty and heterogeneity in customer preferences. The dissertation consists of three main essays. The first essay investigates a monopolist manufacturer's optimal decisions on product positioning and product line design in a heterogeneous customer market, and associated capacity investments in the presence of market size uncertainty. In the second essay, the modeling framework is extended to study the manufacturers' equilibrium strategies of product design and production capacity investment under duopoly competition. The third essay presents a manufacturer's optimal choices on the product variety and pricing with consideration of operations cost and production capacity investment.

ORGANIZATIONAL BEHAVIOR

Alexandra Mislin Dissertation Title: "How social factors in exchange generate employee trust and cooperation""

Abstract: Employees often provide effort that is beyond the scope of their employment contract, and while such behavior is of great importance in cultivating innovation and efficiency in organizations, management-related theories are often derived from assumptions of rational self-interested maximization which cannot account for such behaviors. These faulty assumptions not only produce poor theories, but lead managers to overlook other motives that influence human behavior. My research helps fill this gap in our understanding of what motivates people to act in the interest of others. In particular, I examine how organizational choices and settings interact with social factors that emerge from exchange between the employee and manager to motivate behavior. In the first essay I use a meta-analytic approach to investigate the circumstances under which individuals across different societies are willing to trust in anonymous counterparts by taking risky action within a social context. In the second essay I shift from looking at how individuals contract with each other in a simple, anonymous, and strictly controlled exchange to a more complex setting involving social factors that emerge from exchange and incentive-based employment contracts. I develop an enhanced model of agency relationships which builds on the foundation of agency theory and uses non-cooperative game theory to integrate theories of social exchange and emotions. The final essay tests the theoretical predictions in a laboratory experiment and offers new insights into the costs and benefits of different motives.

STRATEGY

Chih-Mao Hsieh Dissertation Title: "Essays in technological entrepreneurship"

Abstract: The dissertation comprises chapters focusing on the birth of entrepreneurial activity, the valuation of opportunities, and the appropriation of value from R&D. In the headlining chapter, I investigate who decides to become self-employed according to principles from cognitive psychology. The prior research argues that entrepreneurs are jacks-of-all-trades and not specialists (Lazear, 2002), and I extend this theory by examining the difference between learning information domains separately versus together. I hypothesize that learning information domains together more likely leads to entrepreneurship due to an associativeness effect. Furthermore I hypothesize that the effects of learning such domains separately are more sensitive to individual intelligence. Longitudinal survey data from scientists and engineers provides broad support. The second chapter attempts to guide the estimation of unique, specific opportunities via complexity theory. Patent data provides the empirical test. The final chapter asks why US companies are relocating their global R&D to overseas countries with weak intellectual property rights. While recent research highlights the importance of organizational controls to this phenomenon, my theory addresses the relevance of the selection of R&D projects. Insofar that moderately complex projects tend to deliver the most value, such relocation may be fundamentally rational.