Faculty and Research | Recent Publications
Our driven faculty at McCombs School of Business writes and publishes a large body of work each year that spans all areas of business expertise. Explore what McCombs research has to offer.
Short-Term Earnings Guidance and Accrual-Based Earnings Management.
Call, Andrew; Chen, Shuping; Miao, Bin; Tong, Yen
Review of Accounting Studies. June 2014, Vol. 19 Issue 2, p955-987.
Motivated by recent practitioners' concerns that short-term earnings guidance leads to managerial myopia, we investigate the impact of short-term earnings guidance on earnings management. Using a propensity-score matched control sample, we find strong and consistent evidence that the issuance of short-term quarterly earnings guidance is associated with less, rather than more, earnings management. We also find that regular guiders exhibit less earnings management than do less regular guiders. Our findings hold using both abnormal accruals and discretionary revenues to measure earnings management and after controlling for potential reverse causality concerns. Furthermore, in a setting where managers have particularly strong capital market incentives to manage earnings, we corroborate these findings by documenting that earnings guidance either has no impact on or mitigates earnings management. Overall, our evidence does not support the criticism from practitioners that short-term earnings guidance leads to more earnings management.
Labor Mobility: Implications for Asset Pricing.
Journal of Finance. June 2014, Vol. 69 Issue 3, p1321-1346.
Labor mobility is the flexibility of workers to walk away from an industry in response to better opportunities. I develop a model in which labor flows make bad times worse for shareholders who are left with capital that is less productive. The model shows that firms face greater operating leverage by providing flexibility to mobile workers. I construct an empirical measure of labor mobility consistent with the model and document an economically significant cross-sectional relation between mobility, operating leverage, and stock returns. I find that firms in mobile industries earn returns over 5% higher than those in less mobile industries.
Public Equity and Audit Pricing in the United States.
Badertscher, Brad; Jorgensen, Bjorn; Katz, Sharon; Kinney, William
Journal of Accounting Research. May 2014, Vol. 52 Issue 2, p303-339.
To what degree are audit fees for U.S. firms with publicly traded equity higher than fees for otherwise similar firms with private equity? The answer is potentially important for evaluating regulatory regime design efficiency and for understanding audit demand and production economics. For U.S. firms with publicly traded debt, we hold constant the regulatory regime, including mandated issuer reporting and auditor responsibilities. We vary equity ownership and thus public securities market contextual factors, including any related public firm audit fees from increased audit effort to reduce audit litigation risk and/or pure litigation risk premium (litigation channel effects). In cross-section, we find that audit fees for public equity firms are 20-22% higher than fees for otherwise similar private equity firms. Time-series comparisons for firms that change ownership status yield larger percentage fee increases (decreases) for those going public (private). Results are consistent with litigation channel effects giving rise to substantial incremental audit fees for U.S. firms with public equity ownership.
Do Ties Really Bind? The Effect of Knowledge and Commercialization Networks on Opposition to Standards.
Ranganathan, Ram; Rosenkopf, Lori
Academy of Management Journal. April 2014, Vol. 57 Issue 2, p515-540.
We examine how the multiplicity of interorganizational relationships affects strategic behavior by studying the influence of two such relationships--knowledge linkages and commercialization ties--on the voting behavior of firms in a technological standards-setting committee. We find that, while centrally positioned firms in the knowledge network exhibit lower opposition to the standard, centrally positioned firms in the commercialization network exhibit higher opposition to the standard. Thus, the influence of network position on coordination is contingent upon the type of interorganizational tie. Furthermore, when we consider these relationships jointly, knowledge centrality moderates the opposing effect of commercialization centrality, such that the commercialization centrality effect increases with decreasing levels of knowledge centrality. In other words, firms most likely to delay the standard are peripheral in the knowledge network yet central in the commercialization network, which suggests that they have the most to lose from changes to current technology.
Updating Inventories of Substitutable Resources in Response to Forecast Updates.
Bansal, Saurabh; Dyer, James S.
Production & Operations Management. March 2014, Vol. 23 Issue 3, p477-488.
We show simple yet optimal results to update the inventory/capacity levels, expected profit, fill rates, and service levels of substitutable resources in response to an updating of the mean demand forecasts for the resources. We find that a change in the mean demand of one resource does not affect the optimal inventory level of any other resource. The results are obtained for demands with location-scale distribution, and for a revenue structure satisfying a triangle property such that the manager will always use the inventory of a resource to meet her own demand first before using it for substitution. The results for updating the performance measures also extend to managers who maintain non-optimal inventory/capacity levels. Implications for procurement, sales and operational planning, and multi-store operations are discussed.
Optimal Per-Use Rentals and Sales of Durable Products and Their Distinct Roles in Price Discrimination.
Gilbert, Stephen M.; Randhawa, Ramandeep S.; Sun, Haoying
Production & Operations Management. March 2014, Vol. 23 Issue 3, p393-404.
We consider a setting in which consumers experience distinct instances of need for a durable product at random intervals. Each instance of need is associated with a random utility and the consumers are differentiated according to the frequency with which they experience such instances of need. We use our model of consumer utility to characterize the firm's optimal strategy of whether to sell, rent, or do a combination of both in terms of the transaction costs and consumers' usage characteristics. We find that the two modes of operation serve different roles in allowing the firm to price discriminate. While sales allow the firm to discriminate among consumers of different usage frequencies, rentals allow it to discriminate according to consumers' realized valuations. Consequently, even when transaction costs are negligible, it is often optimal for the firm to simultaneously rent and sell its product. In addition, we find that although sales and rentals are substitutes and that the offering of sales weakly increases rental prices, it is possible that the introduction of rentals to a pure selling operation can either increase or decrease the optimal sales prices.
Moderating Effects of the Relationship Between Private Label Share and Store Loyalty.
Koschate-Fischer, Nicole; Cramer, Johannes; Hoyer, Wayne D.
Journal of Marketing. March 2014, Vol. 78 Issue 2, p69-82.
A key benefit of private labels for retailers is their potential to increase customers' store loyalty. However, previous research has not examined how this relationship varies across customers and situations. This study contributes to knowledge in this area by developing a conceptual framework that guides the investigation of the role of four moderating factors in strengthening the private label brand share-store loyalty link: (1) customers' price-oriented behavior, (2) degree of commoditization of the product category, (3) product category involvement, and (4) the retailer's price positioning. This article draws on a large-scale empirical study using a household panel and questionnaire data for 35 diverse fast-moving consumer goods product categories. The results of this study show that the relationship between private label share and store loyalty is more complex than previous research has suggested. Specifically, the private label brand share-store loyalty link is stronger for customers with high priceoriented behavior, retailers with a low price positioning, and product categories that are less commoditized and have relatively higher involvement.
Beating the Recession Blues: Exploring the Link Between Family Ownership, Strategic Marketing Behavior and Firm Performance During Recessions.
Kashmiri, Saim; Mahajan, Vijay
International Journal of Research in Marketing. March 2014, Vol. 31 Issue 1, p78-93.
This study explores whether family firms exhibit unique marketing behavior and whether their unique behavior in turn helps them outperform non-family firms during periods of economic contraction. Findings based on a sample of 275 large publicly listed U.S. firms reveal that family firms outperform non-family firms during recessions. This superior performance is partially driven by family firms' proactive marketing behavior and their relatively strong emphasis on corporate social responsibility (CSR). During recessions, while non-family firms tend to decrease their advertising intensities and rates of new product introduction (NPI), family firms are likely to maintain relatively high levels of advertising intensity and rates of NPI. Unlike non-family firms, family firms are also likely to maintain high levels of corporate social performance (CSP) during recessions. These results underscore the benefits of proactive marketing behavior and a continued emphasis on CSR during economic downturns. The authors also add to the scant family-firm literature, demonstrating the family firm to be an effective organizational form.
Advancing the Empirical Research on Lobbying.
de Figueiredo, John M.; Richter, Brian Kelleher
Annual Review of Political Science. 2014, Vol. 17, p163-185.
This review identifies empirical facts about lobbying that are generally agreed upon in the literature. It then discusses challenges to empirical research in lobbying and provides examples of empirical methods that can be employed to overcome these challenges-with an emphasis on statistical measurement, identification, and casual inference. The article then discusses the advantages, disadvantages, and effective use of the main types of data available for research in lobbying. It closes with a number of open questions for researchers in the field and avenues for future work to advance empirical research on lobbying.
Effects of Social Networks on Prediction Markets: Examination in a Controlled Experiment.
Qiu, Liangfei; Rui, Huaxia; Whinston, Andrew B.
Journal of Management Information Systems. Spring 2014, Vol. 30 Issue 4, p235-268.
This paper examines the effect of a social network on prediction markets using a controlled laboratory experiment that allows us to identify causal relationships between a social network and the performance of an individual participant, as well as the performance of the prediction market as a whole. Through a randomized experiment, we first confirm the theoretical predictions that participants with more social connections are less likely to invest in information acquisition from outside information sources, but perform significantly better than other participants in prediction markets. We further show that when the cost of information acquisition is low, a social network-embedded prediction market outperforms a nonnetworked prediction market. We find strong support for peer effects in prediction accuracy among participants. These results have direct managerial implications for the business practice of prediction markets and are critical to understanding how to use social networks to improve the performance of prediction markets.