2024 Tenth Issue
Coles Research Magazine
Now in its tenth year, the Coles Research Magazine is dedicated to highlighting the innovative, actionable research conducted by the faculty and students of the Michael J. Coles College of Business. Their work not only enhances Kennesaw State University’s reputation as a thought leader in business theory, but also solidifies the University’s position as a valued partner in the decision-making processes of countless firms. Research featured in the 10th edition of The Coles Research Magazine includes six papers published in Financial Times Top 50 journals; research from recipients of the Coles College Distinguished Journal Publication, Outstanding Impact Publication, and Community Engagement awards; the work of recent Coles Working Paper Series award winners; papers presented at the Coles Research Symposium on Homeland Security; and two Ph.D. candidate executive summaries. The research presented here includes digestible, easy-to-understand outlines alongside lists of key takeaways. From studies warning of the dangers surrounding ‘rubber stamp’ boardrooms, to research into how the media’s perception of a CEO can impact financial performance, and even a look at the effect physical attractiveness has on auditor selection, the conclusions outlined here are accessible to academics and real-world businesspeople alike. I invite you to explore the tenth edition of The Coles Research Magazine and discover how cutting-edge research conducted by our faculty and students is evolving our understanding of business.
Robin Cheramie Dean, Michael J. Coles College of Business Tony and Jack Dinos Eminent Scholar Chair of Entrepreneurial Management Kennesaw State University
TABLE OF CONTENTS
Journal Publications - Financial Times Top 50 Journals 8 The Impact of Voluntary Sustainability Reporting on Firm Value: Insights From Signaling Theory By Wesley Friske, Seth A. Hoelscher, and Atanas Nik Nikolov 10 An Examination of Ethical Values of Management Accountants By Donald L. Ariail , Katherine Taken Smith, Lawrence Murphy Smith, and Amine Khayati 12 How Government Spending Impacts Tax Compliance By Diana Falsetta, Jennifer K. Schafer , and George T. Tsakumis 14 Does Greater Access to Employees With Information Technology Capability Improve Financial Reporting Quality? By John L. Abernathy , Jan (J.) Philipp Klaus, Linh Le, and Adi Masli 16 Coordinated Inattention and Disclosure Complexity By Hong Qu, Jared Williams, Ran Zhao, and Tony Kwasnica 18 Currency Carry Trade by Trucks: The Curious Case of China's Massive Imports from Itself By Xuepeng Liu , Heiwai Tang, Zhi Wang, and Shang-Jin Wei Journal Publication - Distinguished Journal 20 The Role of Stress Mindsets and Coping in Improving the Personal Growth, Engagement, and Health of Small Business Owners By Samantha C. Paustian-Underdahl, Joshua C. Palmer , Cynthia Saldanha Halliday, and Fred R. Blass Journal Publication - Outstanding Impact 22 Services Development and Comparative Advantage in Manufacturing By Xuepeng Liu , Aaditya Mattoo, Zhi Wang, and Shang-Jin Wei Community Engagement 24 Leadership Through Service - A Journey Impacting Workforce and Economics Development in the Diital Health Ecosystem in Georgia By Sweta Sneha
TABLE OF CONTENTS
PhD Summaries 26 The Beauty of Auditor Selection: The Effects of Auditor Attractiveness and Auditee Goals on Procuring Governmental Audit Services By Marena M. Messina, Jennifer K. Schafer, Chad M. Stefaniak, and Hong Qu 28 Buyer-Supplier Relationships: A Case Investigation in the Rug and Textile Industry By Obie Paul Byrum, Raj Veliyath, Yoon Hee Kim, and Sina Golara Coles Research Symposium 30 A Model of Fortification Using Bayesian Persuasion By Abhra Roy and Jomon A. Paul 32 The Effect of Media Bias on Conflict and the Provision Of a Public Good in a Model of Location Choice By Abhra Roy 34 When Does a Country Attack an Adversary? The Joint Role of Cost of Attack and Quality of Information By Aniruddha Bagchi 36 Using Honeypot Data to Detect Adversarial Tactic, Technique, and Procedure Changes Based on Victim Geolocation By Andy Green 38 To Report or Not to Report? Exploring Protection Motivation Theory to Understand Decision-Making of Cybersecurity Researchers Who Discover Vulnerabilities By Andy Green, Dejarvis Oliver, and Amy Woszczynski 40 Fortifying Healthcare: An Action Research Approach to Developing an Effective SETA Program By Jason Williams, Humayun Zafar, and Saurabh Gupta 42 A Differential Game Analysis of Attack-Defense Strategies Involving Cybersecurity By Leo MacDonald and Jomon A. Paul
* Coles College of Business faculty highlighted in bold.
TABLE OF CONTENTS
Summer Research Fellowship 44 Invest or Not to Invest: Accounting for Cloud Computing for Utility Companies By Kelly Ha 46 Performance Aspiration and Rent-Seeking By Sergey Lebedev 48 CEO Outside Board Directorships and CEO Turnover By Sunay Mutlu Working Papers 50 Gender in IS Research: Who's on Top? By Aaron French, Amy Woszczynski, Carole Hollingsworth, and David Rusk 52 Making the Grade: An Analysis of Sustainability Reporting Standards and GRI Adherence Ratings By Atanas Nik Nikolov , Wesley Friske, and Todd Morgan 54 Characteristics of a Rubber Stamp Board: The Curious Case of Enron By Lucy F. Ackert, Amine Khayati, and James G. Tompkins 56 Supplier Financing Agreements and Cash Flows By Bryan Brockbank, Mary S. Hill, and Sunay Mutlu 58 Media Attention Fiven to Six CEO News Types and Its
Influence on Consumer Evaluations By Prachi Gala and Samuel Staebler
60 OUR RESEARCH
* Coles College of Business faculty highlighted in bold.
The Impact of Voluntary Sustainability Reporting on Firm Value: Insights From Signaling Theory Wesley Friske, Seth A. Hoelscher, and Atanas Nik Nikolov
Journal of the Academy of Marketing Science, Vol. 51, 372-392(2023)
OVERVIEW
This study examined the relationship between voluntary sustainability reporting and firm financial value. We test three main hypotheses developed from signaling theory and the sustainability reporting literature on a large panel of reporting and non-reporting organizations for the 2011–2020 period. The results of a fixed effects panel model suggest that, in general, sustainability reporting is negatively related to financial value. However, the results also indicate that the relationship between sustainability reporting and value becomes increasingly positive over time. We conclude that sustainability reporting is initially a costly signal, but it eventually enhances firm value as companies learn how to better communicate sustainability initiatives to stakeholders and investors learn how to properly evaluate reports. Finally, in an analysis of sustainability reporting organizations, we find that external assurance of sustainability reports is positively associated with firm financial value. External audits appear to increase the credibility of reports. Implications for marketing theory and practice are discussed.
8 | Journal Publications - Financial Times Top 50 Journals
EXECUTIVE TAKEAWAYS
■ Sustainability reporting is value-generating. ■ To enhance its value contribution, firms should use external assurance.
Atanas Nik Nikolov, Assistant Professor of Marketing
An Examination of Ethical Values of Management Accountants Donald L. Ariail, Katherine Taken Smith, Lawrence Murphy Smith, and Amine Khayati
Journal of Business Ethics, 2024
OVERVIEW
The success of business firms and other organizations relies on the trustworthiness of reports and other documents prepared by management accountants. This study examines the personal ethical values and ethical value types of management accountants. Data was obtained from a survey of members of the Institute of Management Accountants (IMA). The survey, composed of the Rokeach Values Survey and demographic questions, was delivered by the IMA Research Lab to membership samples. Importantly, the results indicated that the highest-ranked values were consistent with values included in the IMA’s Statement of Ethical Professional Practice. That management accountants hold high ethical values better enables them to provide reliable and meaningful work to business firms and other organizations. Another important finding is that older management accountants are more concerned with moral values than their younger colleagues. This finding has notable implications for the future of the profession.
10 | Journal Publications - Financial Times Top 50 Journals
EXECUTIVE TAKEAWAYS
■ IMAs prioritized the values of honest, capable, responsible, broadminded, and helpful. ■ These values can be directly or indirectly related to the IMA Code of Ethics. ■ Older IMAs chose moral type values, while younger IMAs chose competence type values. ■ The generational change away from moral values may present a challenge to IMA ethics.
Donald L. Ariail, Professor of Accounting Amine Khayati, Clinical Assistant Professor of Finance
How Government Spending Impacts Tax Compliance Diana Falsetta, Jennifer K. Schafer, and George T. Tsakumis
Journal of Business Ethics, Vol. 190, No. 2 (2023), pp. 513-530
OVERVIEW
This study examines how taxpayer support for government spending can improve tax compliance. While there is ample evidence on the deterrent effect of audit probability on taxpayer noncompliance, there is no evidence related to the moderating role that taxpayer support may have on compliance behavior. We also examine the moderating role that taxpayer ethics plays in compliance decisions. Results of our study indicate that the level of taxpayer support influences taxpayer compliance decisions, in that those with greater support for how tax dollars are spent report higher amounts of taxable income. In addition, we find that audit probability influences taxpayer compliance decisions when there is support for the government’s use of tax dollars for non-welfare programs, such as defense. However, for welfare programs, such as healthcare, taxpayer support leads to increased compliance regardless of audit rate. When taxpayers do not support government programs, their compliance is lower regardless of the audit probability. This highlights the importance of gaining taxpayer support for government programs and indicates that attempts to align the interests of taxpayers with those of the government may increase voluntary compliance among taxpayers. Finally, we find that taxpayer ethics influences compliance such that, for individuals who have lower ethical standards, a high audit rate as well as support for a program may be necessary to improve compliance behavior.
12 | Journal Publications - Financial Times Top 50 Journals
EXECUTIVE TAKEAWAYS Executive Takeaways
■ Taxpayers are more likely to report income that is not directly observable by the IRS when they are in higher agreement with the government's use of their tax dollars. ■ Higher IRS audit rates only improve taxpayer compliance when taxpayers support government programs. ■ Taxpayers view government spending on non-welfare programs, such as defense, distinctly from social welfare programs, such as healthcare, when making compliance decisions. ■ Providing taxpayers with a better understanding of why they are being taxed and how they benefit from government spending of tax revenues may improve compliance.
Jennifer Schafer, Associate Professor of Accounting
Does Greater Access to Employees With Information Technology Capability Improve Financial Reporting Quality? John L. Abernathy, Jan (J.) Philipp Klaus, Linh Le, and Adi Masli
Contemporary Accounting Research, Vol. 40, No. 3 (Fall 2023), pp. 2071-2105
OVERVIEW
Information technology (IT) plays an essential role in financial reporting. However, many companies today lack sufficient human capabilities to utilize IT competently. We examine the association between a firm's access to IT-capable labor and financial reporting quality (FRQ). We proxy for access to IT-capable labor using workforce measures in the metropolitan statistical area (MSA) where the firm operates, including (1) the number of IT-related college degrees relative to the total active workforce, (2) the level of education of IT graduates, (3) the income level of IT graduates, and (4) a composite measure. We find that firms in MSAs with a higher IT-competent labor force are associated with fewer financial reporting misstatements and internal control issues. Our results suggest that firms with access to more capable IT employees are associated with higher quality financial reporting.
14 | Journal Publications - Financial Times Top 50 Journals
EXECUTIVE TAKEAWAYS Executive Takeaways
■ Geographic labor characteristics impact firm-level outcomes. ■ IT capability of the labor force plays a role in financial reporting quality. ■ Integrating IT into the general education curriculum may provide accounting benefits.
John L. Abernathy, Associate Professor of Accounting
Coordinated Inattention and Disclosure Complexity Hong Qu, Jared Williams, Ran Zhao, and Tony Kwasnica
Management Science, 2024
OVERVIEW
We examine a beauty contest game with an option to analyze an additional disclosure. We analytically prove that in some scenarios, coordination incentives cause sophisticated players who can comprehend disclosures to choose not to analyze them to match unsophisticated players’ actions, a phenomenon we call “coordinated inattention.” Laboratory experiments provide support for the coordinated inattention mechanism: Coordination incentives reduce sophisticated subjects’ propensity to analyze disclosures, especially when they believe others are unlikely to comprehend them. We further find that psychological biases help reduce coordinated inattention. Subjects are overconfident, sophisticated subjects overestimate others’ ability to comprehend disclosures, and both biases are associated with a higher tendency to analyze disclosures. Our analysis suggests that unsophisticated decision makers’ inability to comprehend complex disclosures has a negative spillover effect by reducing sophisticated decision makers’ attention to disclosures. Our results highlight the importance of the SEC’s and FASB’s recent efforts to make disclosures easier to comprehend.
16 | Journal Publications - Financial Times Top 50 Journals
EXECUTIVE TAKEAWAYS Executive Takeaways
■ Sophisticated investors ignore disclosure to coordinate with unsophisticated investors. ■ Disclosure complexity is a key driver of coordinated inattention. ■ Overconfidence and biased beliefs about others reduce coordinated inattention.
Hong Qu, Assistant Professor of Accounting
Currency Carry Trade by Trucks: The Curious Case of China's Massive Imports from Itself Xuepeng Liu, Heiwai Tang, Zhi Wang, and Shang-Jin Wei
Review of Finance, Vol. 27, No. 2 (March 2023), pp. 469-493
OVERVIEW
Currency carry trade – a form of risky arbitrage involving borrowing in one currency with a low interest rate and lending in another currency with a higher interest rate – normally takes place in the financial market. In many countries, especially developing countries, however, there are restrictions and even outright bans on cross-border financial transactions. China is one such country with capital controls. Yet, as the incentive for carry trade still exists, some agents may look for other ways, such as trade in goods, to bypass the restrictions. Using detailed trade data reported by both mainland China and Hong Kong, we present evidence that indirect currency carry trade likely takes place via round-trip reimports between mainland China and Hong Kong, through Shenzhen by trucks.
18 | Journal Publications - Financial Times Top 50 Journals
EXECUTIVE TAKEAWAYS Executive Takeaways
■ Currency carry trade, a form of arbitrage, normally takes place in the financial market. ■ With capital controls in mainland China, trade in goods may be used to bypass the control. ■ Indirect carry trade takes place via round-trip reimports between mainland and Hong Kong. ■ Goods traded between mainland and Hong Kong are mostly through Shenzhen by trucks. ■ Greater state control in terms of more state-owned firms does not reduce such carry trade.
Xuepeng Liu, Professor of Economics
The Role of Stress Mindsets and Coping in Improving the Personal Growth, Engagement, and Health of Small Business Owners Samantha C. Paustian-Underdahl, Joshua C. Palmer, Cynthia Saldanha Halliday, and Fred R. Blass
Journal of Organizational Behavior, Vol. 43, No. 8 (October 2022), pp. 1310-1329
OVERVIEW
Abstract: The COVID-19 pandemic has had a devastating impact on small businesses and non- profit organizations worldwide, resulting in rising stress and worry for many small business owners. While stress is typically considered to be harmful to health and well-being, recent work suggests that improving one's mindset about the benefits of stress can help one to respond to stress more effectively. In the current study, we use a preintervention and postintervention design and latent change score analysis to examine the impact of changing one's stress mindset on changes in personal growth, engagement, and health among small business owners—via changes in coping behaviors. Further, we examine how the perceived likelihood of needing to permanently close one's business may strengthen the effects of changing one's stress mindset on changes in approach and avoidance coping, and subsequent outcomes. In doing so, we begin to uncover the theoretical mechanisms underlying how having a stress-is-enhancing mindset can bring about changes in personal growth, engagement, and health. We also incorporate qualitative data to better contextualize the stress and coping-related attitudes and behaviors of small business owners during the pandemic. This work has significant practical implications for small business owners and others experiencing work-related stressors.
20 | Distinguished Journal
EXECUTIVE TAKEAWAYS Executive Takeaways
■ COVID-19 had devastating impacts on the stress of small business/non- profit = owners. ■ A stress is enhancing mindset can influence owner coping, burnout, engagement, and health. ■ Used a pre/post-intervention design to assess stress mindsets impact on owners/businesses. ■ The likelihood of business closure had both inhibiting and motivating effects on owners. ■ Stress mindsets play a vital role in entrepreneurial success during crises.
Joshua Palmer, Assistant Professor of Organizational Behavior/Human Resources Management
Services Development and Comparative Advantage in Manufacturing Xuepeng Liu, Aaditya Mattoo, Zhi Wang, and Shang-Jin Wei
Journal of Development Economics, Vol. 144, 102438 (May 2020)
OVERVIEW
We examine how the development of domestic financial and business services sectors may affect the export performance of downstream manufacturing sectors, taking into account the services input intensities of manufacturing sectors. We show that the indirect exports of services (as inputs for manufacturing production) are surprisingly high for a number of countries, especially developing or emerging economies, even though most of these countries’ direct exports of services are relatively small. We find that the manufacturing sectors that use these services intensively as inputs benefit more from domestic services development. We also find that countries may bypass their inefficient domestic services sectors by importing services inputs. This suggests that services trade liberalization may help these countries to overcome inefficient domestic service provision.
22 | Outstanding Impact
EXECUTIVE TAKEAWAYS Executive Takeaways
■ From the value chain perspective, services are crucial inputs for manufacturing sectors. ■ We develop a method to quantify the indirect role of services in trade in goods. ■ We find that services development is a key determinant of manufacturing competitiveness. ■ Countries may bypass inefficient domestic services sectors by importing services inputs. ■ Services trade liberalization can help to overcome inefficient domestic service provision.
Xuepeng Liu, Professor of Economics
Leadership Through Service - A Journey Impacting Workforce and Economic Development in the Digital Health Ecosystem in Georgia Sweta Sneha
OVERVIEW
Dr. Sweta Sneha has been serving on the TAG-Digital Health advisory board for over a decade. This was a position offered by invitation only to the leaders and subject matter experts in health tech representing academia, industry, payors, providers, start-ups, and venture capitalists. Over the past decade, Dr. Sneha has provided strategic leadership to the TAG Digital Health ecosystem in Georgia to innovate, engage, and grow the health-technology ecosystem in Georgia participating in the development and launch of national and global professional events launching Atlanta as the Health IT Capitol of the nation thereby impacting workforce, economic development, and funding to sustain the growth. She has also led KSU’s representation at TAG affording access to all our faculty and students to the various networking, and career/professional development events hosted by TAG. Dr. Sneha served on the strategic committee to launch the first Health IT Leadership Summit, the first Clinical Research in Georgia, has been a speaker at the TAG Tech Summit, established internship opportunities for students with TAG, and has also led competitive grant applications with TAG and KSU to support educational and workforce development initiatives. In 2023 Dr. Sneha was awarded the prestigious TAG Technology Leader of the Year Award in recognition of her extensive service and support to support the health-tech ecosystem in Georgia with growth, innovation, and engagement. The Tech Leader award is selected annually by a panel of industry leaders and is given to an individual who has provided strategic leadership in enhancing the footprint of innovation and workforce development to support and sustain the tech corridor in Georgia.
24 | Community Engagement
EXECUTIVE TAKEAWAYS Executive Takeaways
■ Tech Leader of the Year - 2023 ■ Strategic leadership in launching Atlanta as the Health IT Capitol of the nation. ■ Growth in workforce and economic development including fundraising. ■ Speaking at the Tech Summit - the largest conglomerate of technology meetup in Georgia for industry and academia. ■ Mentoring and providing professional development, networking, internship, and growth opportunities to KSU students and faculty.
Sweta Sneha, Professor of Information Systems
The Beauty of Auditor Selection: The Effects of Auditor Attractiveness and Auditee Goals on Procuring Governmental Audit Services
Marena M. Messina (Ph.D. Graduate) Jennifer K. Schafer (Dissertation Chair) Chad M. Stefaniak (Committee Second) Hong Qu (Reader)
OVERVIEW
This study examines the impact of auditor attractiveness and auditee goals on hiring decisions within the framework of audit partner selection, using the governmental request for proposal setting. Using 140 participants, the experiment investigates how perceived attractiveness influences recommendations during the auditor hiring process within two audit outcome goals, a meticulous and a procedural audit. Participants were provided an audit partner biography, which contained either a photo that was rated as more attractive, rated as less attractive, or contained no photo. The findings illuminate that attractiveness significantly sways hiring preferences when auditees have procedural audit goals but not when auditee goals are for the audit to provide thorough scrutiny. These results indicate there is a "beauty premium" in auditor selection. There is no discernible penalty for being less attractive compared to when no visual cues are provided. Such insights reveal underlying biases that could potentially compromise audit quality, offering valuable considerations for audit firms, their clients, and regulatory bodies in refining auditor hiring and evaluation practices.
26 | PhD Summaries
EXECUTIVE TAKEAWAYS Executive Takeaways
■ More attractive auditors are preferred when auditees have procedural goals. ■ Audit partner attractiveness has no effect when auditees have meticulous goals. ■ Less attractive auditors are not penalized when compared to no photo, regardless of the auditee's goal. ■ Attractiveness biases and auditee goal preferences could impact audit quality.
Marena M. Messina, Ph.D. Graduate Jennifer K. Schafer, Associate Professor of Accounting Hong Qu, Assistant Professor of Accounting
Buyer-Supplier Relationships: A Case Investigation in the Rug and Textile Industry
Obie Paul Byrum (Ph.D. Graduate) Raj Veliyath (Dissertation Chair) Yoon Hee Kim (Committee Member) Sina Golara (Committee Member)
OVERVIEW
Dr. Paul Byrum graduated from the PhD program in Business Administration in Fall 2023. His dissertation examined the influence of supply chain structural components and the role of nexus suppliers in the rug and textile industries, focusing particularly on their role in buyer-supplier relationships within a specific retail supply chain in the United States. Nexus suppliers are distinguished from strategic suppliers by their inter-organizational relations and supply network positions. This study utilizes a qualitative case study approach to assess the sources of value offered by Nexus suppliers in the rug and textile industries. The findings indicate that the level of formalization, centralization, and complexity in a supply chain have an influence on the visibility of nexus suppliers. This research can aid in the development of successful strategies for identifying, selecting, and utilizing Nexus suppliers.
28 | PhD Summaries
EXECUTIVE TAKEAWAYS Executive Takeaways
■ Supply network characteristics may alter a buying firm's nexus supplier visibility. ■ Nexus supplier roles vary depending on the various elements of the supply chain. ■ Nexus suppliers become visible to buying teams by formalizing supply networks.
Obie Paul Byrum, Ph.D. Graduate Raj Veliyath, Professor of Management Yoon Hee Kim, Associate Professor of Operations Management
A Model of Fortification Using Bayesian Persuasion Abhra Roy and Jomon Paul Coles Research Symposium on Homeland Security, Special Issue, SIFALL23-01, October 2023
OVERVIEW
In this paper, we analyze a communication game between a Sender and multiple Receivers using Bayesian Persuasion in the context of fortification. The government acts as a Sender and wants firms (the Receivers) with critical infrastructure to bolster their defenses. The firms may benefit from bolstering only if an attack is imminent. Bolstering does not offer any benefits, otherwise. Each firm is also assumed to have different expected returns and/or costs of fortification. We compare optimal persuasion mechanisms when the government is perfectly able to observe the actual state of nature as opposed to the scenario where it receives noisy signals about the actual state of nature. We show that, in most cases, such a persuasion mechanism exists but involves limiting information. We show that overall welfare increases when the government persuades firms to fortify. Further, we find that the persuasion mechanism that maximizes welfare and the one that maximizes the government’s payoff coincide. Finally, we Pareto-rank welfare under different scenarios.
30 | Coles Research Symposium
EXECUTIVE TAKEAWAYS Executive Takeaways
■ The government can improve welfare by persuasion. ■ More firms may bolster their defenses when the intelligence apparatus is imperfect. ■ The government signal is more informative when information is imperfect.
Jomon A. Paul, Professor of Quantitative Analysis Abhra Roy, Associate Professor of Economics
The Effect of Media Bias on Conflict and the Provision Of a Public Good in a Model of Location Choice Abhra Roy Coles Research Symposium on Homeland Security, Special Issue, SIFALL23-07, October 2023
OVERVIEW
We analyze a model of conflict between an insurgency and a government. The median voter chooses an equilibrium tax rate and the government chooses how much tax revenue to allocate to defense. The rest of the tax revenue is used to provide a public good that benefits the minority who may join the insurgency. There is a single media outlet that is assumed to report on the value of the public good. In this context, we determine how the location of the attack and its probability changes when the media outlet is captured by the elites vis-a-vis when it is independent. Further, we analyze the likelihood of capture when inequality changes and investigate how that affects both the location of attack and its probability. Finally, we show whether or not the governments concern for providing more security has any bearing on the likelihood of capture and its impact on both the location and probability of an attack.
32 | Coles Research Symposium
EXECUTIVE TAKEAWAYS Executive Takeaways
■ Security concerns of the government can backfire. ■ Elites have a propensity to advertise more when public goods are more valuable. ■ Inequality may lead to more frequent attacks. ■ Providing more public goods increases welfare. ■ Redistribution may be lower when security concerns are higher.
Abhra Roy, Associate Professor of Economics
When Does a Country Attack an Adversary? The Joint Role of Cost of Attack on Quality of
Information Aniruddha Bagchi
Coles Research Symposium on Homeland Security, Special Issue, SIFALL23-02, October 2023
OVERVIEW
I examine a game between two countries (Home and Foreign) to determine how the quality of intelligence affects the choice between offense and defense. The foreign country is interested in attacking the home country and expends effort in developing a viable plan of attack. The outcome of this effort is uncertain, and the home country spends resources to find out if the foreign country succeeds in developing the plan. I allow for two kinds of intelligence errors- missed alarm and false alarm. Based on the intelligence input, the home country first decides whether to undertake a pre-emptive strike. If it decides not to strike, then in the next period, the home country can choose to fortify itself, while the foreign country decides whether to attack. I examine how the cost of attack and quality of information jointly help the Home country choose between offense and defense.
34 | Coles Research Symposium
EXECUTIVE TAKEAWAYS Executive Takeaways
■ How does intelligence quality about an adversary affect the choice between preemption vs. fortification? ■ If the cost of preemption is higher than the cost of fortification, a country avoids preemption. ■ In such a case, it does not automatically fortify. ■ We identify conditions under which intelligence adds value. ■ We also identify conditions under which ability to preempt adds value.
Aniruddha Bagchi, Professor of Economics
Using Honeypot Data to Detect Adversarial Tactic, Technique, and Procedure Changes based on Victim Geolocation Andy Green Coles Research Symposium on Homeland Security, Special Issue, SIFALL23-04, October 2023
OVERVIEW
The financial and national security impacts of cybercrime globally are well documented. According to the 2021 FBI Internet Crime Report, financially motivated threat actors committed 86% of reported breaches, resulting in a total loss of approximately $4.1 billion in the United States alone. Firms can use cyber threat intelligence to help lessen the impact of threat actor activity. Our study seeks to determine if threat actors change their tactics, techniques, and procedures (TTPs) based on the geolocation of their target’s IP address. To answer this research question, we deployed identically configured honeypots on multiple continents to collect attack data from geographically separate locations concurrently. This approach allowed us to aggregate log data about attacks against specific services commonly targeted by threat actors.
36 | Coles Research Symposium
EXECUTIVE TAKEAWAYS Executive Takeaways
■ Victim geolocation may matter to cybercriminals. ■ Cybercriminals may attack victims differently based on their geolocation. ■ Countermeasures from researchers can help victims improve their security posture.
Andy Green, Assistant Professor of Information Security
To Report or Not to Report? Exploring Protection Motivation Theory to Understand Decision-Making of Cybersecurity Researchers Who Discover Vulnerabilities Andy Green, Dejarvis Oliver, and Amy Woszczynski Coles Research Symposium on Homeland Security, Special Issue, SIFALL23-06, October 2023
OVERVIEW
Protection Motivation Theory (PMT) has been applied to the information security context to understand why and how people make decisions when faced with a risky situation. While PMT has been studied in the personal and work contexts, using fear appeals and positive rewards to encourage employees to adopt pro-security behaviors, no studies to date have reviewed the decision-making process for the cybersecurity researcher who discovers a vulnerability and is faced with the choice to report to the organization or not. Using Qualtrics, we surveyed 196 US- based respondents who reported at least one vulnerability in the last 24 months. We found that beliefs related to response- and self-efficacy had significant influence on protection motivation intentions, while response costs, threat appraisals, threat severity, and fear did not. We recommend forming clear, well-publicized vulnerability disclosure policies to encourage robust reporting processes and support growing relationships between cybersecurity researchers and organizations.
38 | Coles Research Symposium
EXECUTIVE TAKEAWAYS
■ Firms should use a cooperative approach, rather than an antagonistic one, with vulnerability researchers when they report their findings. ■ Firms should develop clearly written vulnerability disclosure policies that encourage vulnerability researchers to report their findings. ■ Firms should include safe harbor language in their vulnerability disclosure policies to encourage vulnerability researchers to report their findings. ■ Firms should consider implementing a bug bounty program to supplement their vulnerability disclosure policies.
Andy Green, Assistant Professor of Information Security Dejarvis Oliver, Ph.D. Graduate Amy Woszczynski, Professor of Information Systems
Fortifying Healthcare: An Action Research Approach to Developing an Effective SETA Program Jason Williams, Humayun Zafar, and Saurabh Gupta Coles Research Symposium on Homeland Security, Special Issue, SIFALL23-05, October 2023
OVERVIEW
Organizations continue to use security education training and awareness (SETA) programs to reduce the number of cybersecurity incidents related to phishing. A large healthcare organization contacted the authors to share that they continued to struggle with the efficacy of their traditional training program and to ask whether we could design a better program. Using an action research methodology, the researchers designed a new training program using self-regulation theory. The comparison of the results of the phishing tests before and after the training showed that the new SETA program was more effective than the existing SETA program. The results also showed differences between medical and office staff regarding the effectiveness of training. The research shows the effectiveness of self-regulatory theory in SETA training and how this approach leads to significant improvement vs traditional methods of training. The research also points to new emerging issues in security training research.
40 | Coles Research Symposium
EXECUTIVE TAKEAWAYS
■ Trainees need to develop robust mental models about phishing to spot malicious emails. ■ There is a difference between groups when it comes to phishing and SETA training. ■ Users do not need to be informed about cyber trends and should be trained differently.
Jason Williams, Ph.D. Graduate Humayun Zafar, Professor of Information Security and Assurance Saurabh Gupta, Professor of Information Systems
A Differential Game Analysis of Attack-Defense Strategies Involving Cybersecurity Leo MacDonand and Jomon Paul Coles Research Symposium on Homeland Security, Special Issue, SIFALL23-03, October 2023
OVERVIEW
Organizations’ ever increasing technology reach has led to a surge in cybersecurity risks. The constant and ongoing threats of a cyber-attack require companies to continuously update defenses to prevent attacks as well as limit damages form a successful attack. We develop a dynamic differential cybersecurity game model between an attacker and defender (firm). The attacker can have multiple methods of attack each with separate probabilities of success and resultant payoffs. The firm meanwhile impacts the probability of successful attack by allocating resources to both prevention and containment strategies that reduce the probability of a successful attack or the resultant losses (attacker payoffs) respectively. We further consider the role of a third player, for example government agencies, that can use its resources to detect threats and provide information to a firm to increase the successful defense/ containment strategies. We then solve for the equilibrium strategies, offering insights into effective cybersecurity approaches.
42 | Coles Research Symposium
EXECUTIVE TAKEAWAYS
■ Developed realistic non-zero-sum dynamic game model to evaluate cybersecurity strategies. ■ Firm actions include prevention and containment strategies against multiple cyber-attacks. ■ Incorporates third party strategy/objectives such as government intervention/intelligence.
Leo MacDonald, Professor of Quantitative Analysis Jomon A. Paul, Professor of Quantitative Analysis
Invest or Not to Invest: Accounting for Cloud Computing for Utility Companies Kelly Ha
OVERVIEW
This study delves into the relation between accounting practices and the investment decisions of utility companies concerning cloud computing technologies. In today's dynamic business environment characterized by rapid technological advancements and evolving regulatory frameworks, utility firms face a myriad of challenges when formulating investment strategies. One crucial aspect of these decisions is the treatment of cloud computing expenses – whether to capitalize them or expense them. The choice between capitalization and expensing holds significant implications for utility companies, affecting their financial reporting, profitability metrics, and regulatory compliance. Through a comprehensive analysis of financial data and rate case information spanning several years, our research aims to elucidate the impact of accounting treatment on investment behaviors within the utility sector. Understanding this relationship is imperative for both accounting professionals and utility decision-makers, as it underscores the critical importance of accounting standards in shaping strategic investment decisions. By shedding light on these intricate dynamics, our study seeks to highlight the crucial role of accounting in informing investment strategies and facilitating informed decision- making in regulated industries. Ultimately, this research contributes to a deeper understanding of how accounting practices influence strategic decision-making, emphasizing the vital importance of accounting considerations in utility companies' investment decisions.
44 | Summer Research Fellowship
EXECUTIVE TAKEAWAYS
■ Accounting rules shape utility firms' investments in cloud computing. ■ Expensing versus capitalizing affects utility forms' financial metrics and reporting. ■ Sound accounting principles foster utility firms' operational efficiency and risk management.
Kelly Ha, Assistant Professor of Accounting
Performance Aspiration and Rent-Seeking Sergey Lebedev
OVERVIEW
What triggers rent-seeking by firms? Rent-seeking involves unproductive uses of resources to capture and redistribute value without creating new value, thus resulting in a significant net loss for society. Given the social costs of rent-seeking, it is crucial to look at factors that prompt firms to engage in such actions. We suggest that rent- seeking may be a response to firms exceeding or, conversely, falling short of their performance benchmarks. Applying behavioral theory of the firm and utilizing a novel measure of rent-seeking as patent “evergreening” in the pharmaceutical industry, we hypothesize and find that both performance relative to a firm’s own prior performance level and performance relative to a firm’s peers have a significant effect on rent-seeking.
46 | Summer Research Fellowship
EXECUTIVE TAKEAWAYS
■ Rent-seeking is an important, but often overlooked nonmarket strategy. ■ Firms performing better than their peers may engage in more rent- seeking. ■ Firms falling short of their past performance may increase rent-seeking.
Sergey Lebedev, Assistant Professor of Strategic Management
CEO Outside Board Directorships and CEO Turnover Sunay Mutlu
OVERVIEW
Abstract: We explore outside board directorships of CEOs and investigate whether they affect certain types of CEO turnover. We argue that CEO outside board directorships reduce the likelihood of forced turnover (i.e., dismissal) as they signal that the CEO is a powerful member of the corporate elite, which provides access to network resources that increase her abilities. Similarly, we argue that CEO participation in external board service increases the probability of voluntary turnover, as it enhances the CEO's appeal within the executive labor market. Our analyses using archival US data in the 2000 – 2015 sample period provide supporting results.
48 | Summer Research Fellowship
EXECUTIVE TAKEAWAYS
■ We explore the impact of elite social networks on CEO behavior. ■ We uncover the association between CEO turnover and their status in corporate elite. ■ We highlight the positive effect of outside directorships on CEOs' career decisions.
Sunay Mutlu, Associate Professor of Accounting
Gender in IS Research: Who's on top? Aaron French, Amy Woszczynski, Carole Hollingsworth, and David Rusk
Coles Working Paper Series, FALL23-04, November 2023
OVERVIEW
This research evaluates Information Systems (IS) research publications based on gender using the Senior Scholars’ Basket of Eight (B8) journals through the lens of social roles theory. Despite notable efforts for gender inclusion and equity, a disparity between research output in premier IS journals persists. We used an archival research method to evaluate gender differences of academic researchers based on scholarly publications in the 21st century. We gathered all non-editorial and non-book-review articles published in the B8 over two decades (2001-2020) and coded each author as male, female, or other based on self-identified criteria. The data includes over 5,000 articles with almost 14,000 authors, of which almost 6,000 were unique. Then we evaluated publication statistics and differences for gender in IS research. In total, just under 27% of all authors were women, with women appearing in about 23% of publications. These percentages are lower than expected based on the representation of women in IS academia. While both men and women are increasing their output in these premier journals, the output of men is increasing at a faster rate than that of their women colleagues, further widening the publication gap and projecting even greater disparities in the future. The paper concludes with a discussion of findings, implications, and recommendations for the field of IS.
50 | Working Papers
EXECUTIVE TAKEAWAYS
■ Women are highly unrepresented in the field of IS. ■ The makeup of female Ph.D.s in IS has averaged 30 percent over the past two decades. ■ The gender gap in research is bigger resulting in a lack of representativeness. ■ Only 23% of research publications in the 21st century for the IS Senior Basket of 8 are by women. ■ This research makes recommendations to increase the representativeness of women and provides a research agenda.
Aaron French, Assistant Professor of Information Systems Amy Woszczynski, Professor of Information Systems Carole Hollingsworth, Assistant Professor of Information Systems David Rusk, Ph.D. Graduate
Making the Grade: An Analysis of Sustainability Reporting Standards and GRI Adherence Ratings Atanas Nik Nikolov, Wesley Friske, and Todd Morgan
Coles Working Paper Series, FALL23-03, November 2023
OVERVIEW
The purpose of this study is to determine how institutional factors affect the implementation of sustainability standards established by the Global Reporting Initiative (GRI). The sample for the study consists of 4,380 organizations that adopted GRI’s sustainability standards and sustainability reporting framework in the period between 2005 to 2015. The results of this initial investigation suggest that institutional norms and the pressure to achieve organizational legitimacy result in relatively high adherence ratings for: (1) state-owned enterprises (2)Asian organizations, (3) European organizations, (4) large organizations, (5) organizations that provide external assurance of their ratings, and (6) publicly traded companies vs. privately owned ones. Further, the length of experience with sustainability reporting is positively related to adherence ratings, which is suggestive of organizational learning.
52 | Working Papers
EXECUTIVE TAKEAWAYS
■ Firms are increasingly following GRI reporting standards globally. ■ Size, public status, past experience, and headquarters location increase adherence. ■ External assurance certification of reporting further improves ratings.
Atanas Nik Nikolov, Assistant Professor of Marketing
Characteristics of a Rubber Stamp Board: The Curious Case of Enron Lucy F. Ackert, Amine Khayati, and James G. Tompkins
Coles Working Paper Series, SPRING24-02, March 2024
OVERVIEW
To empirically identify a board as a rubber stamp board, we reason that two conditions must exist. First, the board must have a very high percentage approval voting record, and second, board votes must include one or more proposals that can reasonably be judged as poor decisions on an ex-ante basis. Through an in-depth examination of the Enron corporate records between 1997 and 2001, evidence provided by public reports, and a behavioral study we conduct with 94 graduate students, we conclude that Enron operated with a rubber stamp board. We examine characteristics of the Enron Board and its processes and find that Enron had a rubber stamp board despite having directors who were highly qualified and leaders in their field, routinely questioned management, and were financially incentivized to engage in diligent monitoring. We find that the combination of accomplished directors driven to finish crowded meeting agendas and directors’ lack of healthy skepticism of management provided a perfect storm for rubber stamping. Rubber stamping by the Board was prevalent during times of rising and/or high stock prices, and less so as Enron was collapsing. This highlights the importance of director vigilance during both good and bad times. We offer implications for corporate governance and avenues for future research.
54 | Working Papers
EXECUTIVE TAKEAWAYS
■ Rubber stamp boards have a high approval record and poor decisions on an ex-ante basis. ■ Evidence indicates that Enron operated with a rubber stamp board. ■ Enron directors questioned management and were qualified and financially incentivized. ■ Crowded agendas and lack of skepticism provide a perfect storm for rubber stamping. ■ We encourage director vigilance during both good and bad times.
Lucy F. Ackert, Professor of Finance Amine Khayati, Clinical Assistant Professor of Finance James G. Tompkins, Professor of Finance
Supplier Financing Agreements and Cash Flows Bryan Brockbank, Mary S. Hill, and Sunay Mutlu
Coles Working Paper Series, SPRING24-03, March 2024
OVERVIEW
Abstract: Supplier financing is a potential win-win scenario for a firm and its suppliers, providing the option to the supplier of receiving early or on-time payment while also allowing the buyer to potentially extend payment terms and manage working capital. ASU 2022-04 requires that firms disclose details about their supplier financing arrangements, including the amount of payables that have been financed and whether payment terms have been extended. Using 10-Qs from the first nine months following this new disclosure requirement, we identify firms with supplier financing arrangements and examine the impact of those arrangements on cash holdings and analysts’ cash flow forecasts. We find that firms with supplier financing have lower abnormal cash flows, lower excess cash holdings, and a higher likelihood of analysts forecasting their cash flows. Additionally, we find that cash flow forecasts are revised downwards and have greater forecast dispersion following disclosure of supplier financing arrangements.
56 | Working Papers
EXECUTIVE TAKEAWAYS
■ Firms are now required to disclose details about their supplier financing arrangements. ■ Initial evidence suggests firms using supplier financing have cash constraints. ■ New disclosures do not help financial analysts with their cash flow forecasts.
Mary S. Hill, Associate Professor of Accounting Sunay Mutlu, Associate Professor of Accounting
Media Attention Given to Six CEO News Types and Its Influence on
Consumer Evaluations Prachi Gala and Samuel Staebler
Coles Working Paper Series, SPRING24-01, March 2024
OVERVIEW
This study investigates how CEO-related events covered in news media affect consumer evaluations. The conceptual model proposes six CEO-related news categories and details their impact on consumer evaluations. In addition, this study also investigates to what degree these consumer responses determine stock prices of firms. The authors analyze a rich sample of 725 CEO-related events of 125 firms covered in leading U.S. news outlets from 2009 to 2019. Through a quasi-experiment and an event study, this study finds that stories about CEO scandals detrimentally affect consumers which can be translated to an immediate loss of more than US$500 million on stock markets. In addition, this study also shows that news stories about CEO altruism or CEO political ideologies have a positive impact on consumer evaluations. Overall, the authors explain the variation of effects investigating important moderators based on signaling and screening theory.
58 | Working Papers
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