Faculty Research
During the early COVID-19 market crash, stocks in firms with higher ratings for their environmental and social policies enjoyed significantly higher returns, lower return volatility, and higher operating profit margins, found Seidner Family Faculty Fellow and Professor of Finance Rui Albuquerque and colleagues. Their study appears in this November’s special issue of the The Review of Corporate Finance Studies.
The more frequent and recent the news coverage of a firm, the stronger the market reaction to sell-side analysts’ research revisions, according to Professor and Chairperson of Accounting Mark Bradshaw and co-authors. Their study, “Soft Information in the Financial Press and Analyst Revisions,” is forthcoming in the The Accounting Review. And Bradshaw has another paper, “Analyst Target Prices and Forecast Accuracy Around the World,” forthcoming in the Journal of Accounting Research.
In 2017, Oregon became the first state to launch an auto-IRA program, in which workers without employer-sponsored retirement plans are automatically enrolled in Individual Retirement Accounts. The Center for Retirement Research tracked a cohort of employees in the plan for a 12-month period and published their findings in The Journal of Retirement. The co-authors of the study were: Peter F. Drucker Chair in Management Sciences Alicia Munnell, director of the Center; Laura D. Quinby, research economist; Wenliang Hou, senior research advisor; Anek Belbase, research fellow; and Geoffrey Sanzenbacher, research fellow and associate professor of the practice of economics in Boston College’s Morrissey College of Arts and Sciences.
Professor of Business Analytics Jiri Chod concludes that the benefits of resource flexibility are underestimated, in an article forthcoming in Management Science. And in another study published in that same journal, Chod and a co-author develop a theory of financing entrepreneurial ventures via crypto tokens.
The Review of Financial Studies published “Political Influence and the Renegotiation of Government Contracts,” co-authored by Ran Duchin, professor of Finance. Duchin, who is also the Giuriceo Family Faculty Fellow, and his colleagues found that politically connected firms bid low on government contracts to give the appearance of fairness, but then extract higher payments through renegotiations during the often years-long duration of the contract.
Assistant Professor Marios Kokkodis published two studies in Information Systems Research. With his Information Systems colleague Professor and William S. McKernan ’78 Family Faculty Fellow Sam Ransbotham, he published “From Lurkers to Workers: Predicting Voluntary Contribution and Community Welfare,” which explores how managers of online communities can engage inactive members who are likely to become active. And with an outside colleague, Kokkodis published “Your Hometown Matters: Popularity-Difference Bias in Online Reputation Platforms,” which found that when tourists review a restaurant online, their ratings can be skewed by the popularity of the visitors’ own hometowns, relative to their destination cities. For example, a tourist who hails from San Antonio (a fairly popular destination) might be inclined to give a lukewarm rating to a restaurant in Oklahoma City (a less visited destination) but a high rating to a restaurant in Chicago (a very popular city to visit).
At a special session of the American Marketing Association’s Summer Academic Conference, Associate Professor of Marketing Gergana Nenkov and co-authors presented their paper “Knowing What It Makes: How Product Transformation Salience Increases Recycling,” the winner of the prestigious H. Paul Root Award. The study suggested that consumers will be more likely to recycle when they’re shown what new products the old recyclables will be turned into.
If reforms aren’t made to the national security whistleblower process, then even stronger First Amendment protections might be necessary in order to empower traditional and social media sources to report on the claims made by internal whistleblowers. So concluded Professor of Management and Organization Richard Nielsen in a paper appearing in Administration and Society. Nielsen also co-authored a study published in the Business and Professional Ethics Journal that seeks to address shortcomings in the ways that employees engage with business ethics cases.
Stemming from an incident in which a worker wrote “whore board” on an overtime sign-up sheet, the Constellium Rolled Products decision provides the basis for an article by Christine Neylon O’Brien, professor of Business Law & Society. “Twenty-First Century Labor Law: Striking the Right Balance between Workplace Civility Rules that Accommodate Equal Employment Opportunity Obligations and the Loss of Protection for Concerted Activities Under the National Labor Relations Act” is forthcoming in William & Mary Business Law Review. O’Brien’s article was a Top Ten Download on SSRN on eight different days this past summer.
In a paper forthcoming in Current Opinion in Psychology, Associate Professor of Marketing Nailya Ordabayeva and colleagues propose that the psychology of luxury consumption is governed by a set of tensions between what luxury means to the self and the external forces that define luxury consumption.
How can employees respond to organizational dysfunction? Associate Professor of Management and Organization Bess Rouse and a colleague offer some answers in a paper accepted by the Academy of Management Journal.
Investors flocked to the trading app Robinhood during the COVID-19 lockdown this past spring, and all that activity boosted the stock market, say Haub Family Professor of Finance Ronnie Sadka and collaborators. Fintech innovations have eased retail investors’ access to the market, and while that access might carry some unintended risks, in this case it helped the market avoid a large liquidity crisis, Sadka told BC News, which reported on his team’s study. Sadka is also chairperson of Finance and senior associate dean for faculty.
How do friendships form in a virtual workplace? Assistant Professor of Management and Organization Beth Schinoff was exploring this question even before the pandemic. She and colleagues focused on a Fortune 500 technology firm with a largely virtual workforce. Their study, “Virtually (In)separable: The Centrality of Relational Cadence in the Formation of Virtual Multiplex Relationships,” is forthcoming in the Academy of Management Journal.
Associate Professor of Accounting Susan Shu and colleagues found that social media can be a “rumor mill” of merger speculation that distorts the price of a stock for weeks. The Journal of Accounting and Economics published their findings.
Professor of the Practice and Assistant Chairperson of the Management and Organization Department Richard Spinello has completed the seventh edition of the textbook Cyberethics: Morality and Law in Cyberspace, forthcoming from Jones & Bartlett Learning. Spinello also contributed a chapter, “Ethics in Cyberspace: Freedom, Rights, and Cybersecurity,” to Cambridge University Press’s Next-Generation Ethics: Engineering a Better Society.
Banks faced the largest-ever increase in liquidity demand in March, but they were able to accommodate it thanks to inflows of funds from the Federal Reserve and depositors, as well as strong pre-shock capital, found Professor of Finance Philip Strahan, the John L. Collins, S.J., Chair, along with Ph.D. candidate Song Zhang and an outside colleague. Their study appears in the special November issue of the Review of Corporate Finance Studies.
As part of their series “Management on the Cutting Edge,” MIT Press and MIT Sloan Management Review will publish Digital Competitive Strategy: How Firms can Unlock the Value of Data from Digital Ecosystems, by Mohan Subramaniam, associate professor of Management and Organization.
Assistant Professor of Information Systems Mike Teodorescu and colleagues at the MIT D-Lab (where he was a visiting scholar) completed a USAID-sponsored research project, Exploring Fairness for Machine Learning in International Development. The report provides a framework for bias-free machine learning applications in international development work.
Do investors expect a higher amount of risk in the stock market during economic downturns? According to Assistant Professor of Finance Nancy Xu, who studied monthly U.S. data from 1959 to 2014, the answer is: not always. The cash flow risk in fact decreases during bad times—dividend growth becomes less sensitive to fundamental economic shocks or risk factors. Two possible reasons for this? Firms choose to smooth dividend payouts, and financial wealth is now a smaller fraction of investors’ total wealth. Xu’s findings appear in the Journal of Financial Economics.
The Accounting Review will publish an article co-authored by Ben Yost, assistant professor of Accounting, finding evidence that the structure and value of an acquisition can be affected by the tax liabilities of the target firm’s CEO. Yost also has an article forthcoming in the Journal of Accounting Research finding evidence that in mergers, acquiring firms strategically generate news that they expect will depress the target’s stock price while the takeover price is being negotiated.
In the News
Exchange-traded funds have democratized investing, but this year’s downturn has revealed problems with that model, making it perhaps too easy for unsophisticated investors to buy risky, complicated financial products, Assistant Professor of Finance Rawley Heimer told MarketWatch: “There are absolutely reasons to try to protect uninformed investors from themselves.”
The Wall Street Journal published the first of a series of excerpts from Professor of Information Systems Gerald Kane’s forthcoming book about how companies are responding to COVID-19. The first installment concerns health insurance company Anthem, where the crisis has intensified a drive to go digital-first. In Deloitte Insights, Kane writes that if the rapid shift to virtual meetings and contactless business models prompted by the pandemic resembles a physician’s emergency response to an acute medical event, then the future will require companies to deal with the disruption as a chronic condition. Kane and colleagues cite continual learning, cross-functional teaming and agility, and communication of a strategic vision as digital transformation principles that will continue to apply in the COVID-19 era, and beyond.
Alicia Munnell unpacked the tax plan of presidential candidate Joe Biden in a blog post for MarketWatch. Specifically, Munnell, who is director of the Center for Retirement Research as well as the Peter F. Drucker Chair in Management Sciences, focused on Biden’s proposal to change the tax incentive for retirement from a deduction to a flat, refundable tax credit. She concluded that Biden’s credit would make the system more equitable for lower-income workers and would not lead to lower contributions. Munnell also weighed in on the financial challenges facing Baby Boomers during the pandemic, many of whom have found themselves out of work or employed in a job that can't be done from home. Too young to collect Social Security but at higher risk for health complications should they contract COVID-19, older workers also have greater difficulty finding a new job in general, much less a remote one. Many are tightening their budgets and reassessing their retirement plans, Munnell told the Wall Street Journal. She has also been cited in Forbes, Bloomberg, Barron’s, and the Financial Times, among other news outlets.
The pandemic presents a rare opportunity to restructure society to make it more equitable, a group of experts including Associate Professor of Marketing Nailya Ordabayeva wrote in the online magazine Behavioral Scientist.
Wired reported on a survey conducted by Sam Ransbotham (Information Systems) and colleagues which found that just one in ten businesses are reaping “sizable” returns on investments in artificial intelligence. Ransbotham, who is the William S. McKiernan ’78 Family Faculty Fellow, shared with Wired the secrets of success for that minority of AI leaders. His team’s full report was published in MIT Sloan Management Review. Ransbotham has also begun co-hosting a new podcast, Me, Myself, and AI, a joint production of Sloan and the Boston Consulting Group. The podcast features interviews with business leaders who are doing AI right.
“People don’t know what they don’t know,” Associate Professor of Finance Jonathan Reuter told MarketWatch in a report on Regulation Best Interest, a new Securities and Exchange Commission rule that took effect this summer. The rule is intended to force broker-dealers to disclose any conflicts of interest, but Reuter is skeptical that many clients will read the fine print. However, he sees it as a positive first step toward transparency.
When the chief executive is a narcissistic bully, it can make for a dysfunctional organization. Associate Professor of Management and Organization Bess Rouse and a colleague have studied the limited options open to middle managers stuck in a toxic workplace. They shared their findings in a blog post for the London School of Economics and Political Science.
Missing the rapport you had with your office crew? Take heart. Beth Schinoff (Management and Organization) studied virtual work relationships even before the pandemic necessitated more of them. She told the Toronto Sun that it is possible to replicate online “the emotional and psychological closeness that we feel with our face-to-face colleagues.” The keys, she said, are both predictability and a little spontaneity. Be the kind of co-worker who is reliable and responds promptly. And don’t be afraid to share a funny story or something personal. “Small actions like these can unlock a rich friendship,” said Schinoff, who also co-wrote an article on the topic for MIT Sloan Management Review.
Associate Professor and Chairperson of Marketing Gerald Smith weighed in on the question of why chain supermarkets are selling their own branded milk at below cost. It might be that customers walk in to buy the cheap milk, only to add higher-priced items to their basket. “That kind of cognitive laziness will then turn into loyalty,” Smith explained during a Marketplace segment.
In making the iPhone’s encryption unbreakable, Apple is guided by a “privacy absolutism” that fails to consider the moral and legal limits to the right to privacy, wrote Professor of the Practice and Assistant Chairperson of the Management and Organization Department Richard Spinello, in Public Discourse, an online publication of the Witherspoon Institute.
Legacy businesses can get in on the digital economy, thanks to sensors and related technologies, Associate Professor of Management and Organization Mohan Subramaniam and a colleague wrote in MIT Sloan Management Review. As an example, the authors cited Ford vehicles equipped with voice-activated technology and traffic data that allow drivers to order coffee from Starbucks, pay for it in advance, and have it ready just in time.
Awards, Appointments, and Distinctions
Four recent Accounting graduates won the prestigious Elijah Watt Sells Award for high scores on the CPA exam last year. The four were among just about 135 to win the award, out of 75,000 test-takers.
Curtis Chan, assistant professor of Management and Organization, was appointed to the editorial review board of the Academy of Management Review. His three-year term begins in 2021.
Professor of Accounting Jeffrey Cohen has been reappointed an editor of Contemporary Accounting Research.
Lourdes German, assistant professor of the practice of Business Law and Society and co-director of the Managing for Social Impact & the Public Good co-concentration, is pedagogical lead for a new initiative launched by Bloomberg Philanthropies. The Fiscal Health and Equity Initiative aims to help city leaders tackle economic recovery from COVID-19 with equity-centered interventions.
Lian Fen Lee, associate professor of Accounting and the William S. McKiernan ’78 Family Faculty Fellow, received the Outstanding Reviewer Award from The Accounting Review.
Nan Liu, associate professor of Business Analytics, won the 2020 Wickham-Skinner Award for the best paper published in Production and Operations Management in the previous year. Out of 160 papers published in 2019, the Production and Operations Management Society conferred the honor on Liu’s and his co-authors’ study “Integrated Scheduling and Capacity Planning with Considerations for Patients’ Length-of-Stays.” Liu was also recently named an associate editor of Operations Research.
Alvis Lo, associate professor of Accounting and the Ernst & Young Faculty Fellow, received the Outstanding Reviewer Award from The Accounting Review.
Associate Professor of Marketing Gergana Nenkov earned the Outstanding Area Editor Award from the Journal of the Academy of Marketing Science.
The Society for Business Ethics named Richard Nielsen, professor and chairperson of Management and Organization, one of its Academic Pioneers in Business Ethics.
Associate Professor of Marketing Nailya Ordabayeva was named one of the Poets & Quants Favorite MBA Professors of the Year for 2020. She was also appointed to the editorial review board of the Journal of Marketing and appointed an associate editor at the Journal of Marketing Research. In addition, Ordabayeva has been elected to a two-year term as the at-large director for the Association for Consumer Research, at whose conference in October she delivered three presentations. Her paper “The Impostor Syndrome from Luxury Consumption” earned an honorable mention for the Journal of Consumer Research Ferber Award.
O’Connor Professor of Management and Organization Michael Pratt’s article “Toward a Model of Organizational Mourning: The Case of Former Lehman Brothers Bankers” was a finalist for the Best Paper in the Academy of Management Journal.
Associate Professor of Finance Jonathan Reuter and co-authors won the 2020 Call for Research award from the International Centre for Pension Management for their study “Portfolio delegation and 401(k) plan participant responses to COVID-19.”
Mike Teodorescu, assistant professor of Information Systems, has been appointed to the editorial board of the Strategic Management Journal for a three-year term. Moreover, a paper by Teodorescu and co-authors including Professor of Information Systems Gerald Kane, “A Framework for Fairer Machine Learning in Organizations,” was a finalist for the Best Paper award at the Society for Business Ethics’ 2020 Virtual Conference. Lastly, Teodorescu was appointed as a research affiliate at the MIT D-Lab for this academic year.
The Institute for Quantitative Research in Europe awarded Assistant Professor of Finance Nancy Xu and colleagues including Assistant Professor of Finance Rawley Heimer a research grant for their project “Uncertainty Shocks and Personal Investment: Evidence from a Global Brokerage.”
The Marketing Science Institute (MSI) named Associate Professor of Marketing Min Zhao an MSI Scholar, a biennial honor given to mid-career faculty "who are among the most prominent marketing scholars in the world.”