Coles Research Magazine Seventh Issue | 2021
While the challenges of the last year have turned the academic world upside down, they have not stopped the faculty of the Michael J. Coles College of Business from conducting relevant, dynamic research that expands our understanding of the theories and practices surrounding modern business. The 7 th edition of The Coles Research Magazine is a testament to our faculty’s dedication to pursuing knowledge. Readers will find two executive summaries from Coles College PhD candidates; four papers published in Financial Times Top 50 journals; research that earned the Coles College Outstanding Publication and Competitive Grant awards; and the winners of the College’s Working Paper Series. Realizing that to be actionable, research must be relatable, the magazine’s editors have taken great care to ensure that the content presented here is accessible to fellow academics and business partners alike. Executive summaries of each paper and a concise listing of key takeaways ensure that the value of each publication is clear. The Michael J. Coles College of Business is home to some of the most distinguished and frequently cited researchers in the world. Their findings have changed how organizations do business and how educators teach it. In this latest edition of The Coles Research Magazine , I invite you to discover for yourself the power of Coles College research.
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 4 RIMS: A New Approach to Measuring Firm Internationalization By Victor B. Marshall, Lance E. Brouthers , and Dawn L. Keig 6 State Contract Law and the Use of Accounting Information in Debt Contracts By Colleen Honigsberg, Sharon P. Katz, Sunay Mutlu , and Gil Sadka 8 Corporate Cash Shortfalls and Financing Decisions By Rongbing Huang and Jay R. Ritter 10 The Puzzle of Frequent and Large Issues of Debt and Equity By Rongbing Huang and Jay R. Ritter Journal Publication - Distinguished Journal 12 Supply Location and Transportation Planning for Hurricanes: A Two-Stage Stochastic Programming Framework By Jomon A. Paul and Minjiao Zhang
PhD Summaries 14 Efficient vs. Effective Technology Use
By Jason Williams , Saurabh Gupta , Adriane B. Randolph , and Stacie Petter 16 Shedding Light on Sales Relationships: What Effect Does the Sunshine Act Have on Salesperson Ethical Behavior and Customer Response? By Rebecca Burcham , Brian N. Rutherford , Joseph F. Hair, Jr., O.C. Ferrell, and Greg Marshall.
Table of Contents
Research Grant 18 ImPACT IT: Increasing the Participation and
AdvanCemenT of Women in Information Technology By Adriane B. Randolph
Working Papers 20 Market Microstructure and Informational Efficiency By Rafael R. Guthmann and Brian C. Albrecht 22 “Think Leader—Think Male”?: Challenging the Centrality of Masculinity within the Ideal Leader Concept By Graham Lowman , Mark Hiatt , Lee Macenczak, Ji Qi, and Peter D. Harms 24 Assessment of US Healthcare Informatics Education: The Current State and Comparisons across Program Types By Oluwagbenga Ogungbemi , Saurabh Gupta , and Sweta Sneha 26 Seasoned Equity Issuers’ Prospectus Filings: How Informative is their Tones? By Rongbing Huang , Hong Qian, and Santhosh Ramalingegowda 28 Effects of Gender Disparity and Social Costs of Failure on Entrepreneurship Across Countries By Sharon A. Simmons, Chong Kyoon Lee, Susan L. Young , and MaQueba Massey
* Coles College of Business faculty highlighted in bold.
RIMS: A New Approach to Measuring Firm Internationalization Victor B. Marshall, Lance E. Brouthers, and Dawn L. Keig
Journal of International Business Studies Vol. 51, Issue 5 (March) 2020, pp. 1133–1141
Overview
Empirical research that tests hypotheses regarding the drivers and/or consequences of firm internationalization needs a valid measure. This paper develops a new measure: the ratio of international market shares (RIMS). It measures to what degree a firm conforms to the theoretically grounded characteristics of a maximally global firm. We compare RIMS theoretically and empirically to three widely used measures of firm internationalization: foreign sales to total sales (FSTS), international diversification, and international scope. RIMS is clearly demonstrated superior in capturing both the breadth and depth of a firm’s internationalization and in the ease with which it can be calculated and interpreted.
4 | Journal Publications - Financial Times Top 50 Journals
■ RIMS compares a firm’s penetration of its primary target market in terms of market share to the rest of the world’s markets. ■ RIMS captures both the breadth and depth of a firm’s internationalization. ■ RIMS is easy to calculate and interpret. ■ RIMS can be calculated for more firms than diversification or foreign sales to total sales (FSTS). Executive Takeaways
Lance E. Brouthers, Professor of Management
State Contract Law and the Use of Accounting Information in Debt Contracts Colleen Honigsberg, Sharon P. Katz, Sunay Mutlu, and Gil Sadka
Review of Accounting Studies Vol. 26, 2021, pp. 124-171
Overview This paper examines the relationship between state contract law and the use of accounting information in debt contracts. Contract theory suggests that balance sheet-based covenants resolve debtholder-shareholder conflicts ex ante, while income statement-based covenants trigger the switch of control rights ex post. Lenders find it more difficult to exert their control rights ex post if the contract law is more favorable to debtors, suggesting that balance sheet-based covenants are more efficient in these jurisdictions. We test and find evidence that lenders using pro-debtor law are more likely to rely on balance sheet-based covenants than those using pro-lender law. We measure reliance using both the weight of balance-sheet covenants relative to income-statement covenants and covenant strictness. Our analysis also shows that contracts with performance-pricing grids are less likely to include interest-increasing grids when the law is more favorable to debtors. Results provide initial evidence that contract law is an important determinant in the design of debt contracts.
6 | Journal Publications - Financial Times Top 50 Journals
Executive Takeaways
■ State contract laws affect the nature of accounting information in debt contracts. ■ Balance-sheet numbers are more desirable in contracts governed by pro-debtor state laws. ■ Interest-increasing performance clauses are more common under pro-lender state laws.
Sunay Mutlu, Assistant Professor of Accounting
Corporate Cash Shortfalls and Financing Decisions Rongbing Huang and Jay R. Ritter
The Review of Financial Studies Vol. 34, Issue 4 (April) 2021, pp. 1789-1833
Overview Firms may raise external capital to fund investment and operations, rebalance capital structures, or increase cash balances. In this paper, we find that US firms’ external financing decisions from 1972 to 2013 were primarily motivated by near- term cash shortfalls, and the choice of financing instrument was determined by how persistent the cash shortfalls were and what the issuance proceeds would be used for. Given their actual revenue and spending, most net equity issuers and an overwhelming majority of net debt issuers would have faced immediate cash depletion without external financing. In contrast, moving towards a stationary target capital structure and pure cash stockpiling appeared to be second-order considerations for most companies. We also examine the proportion of issuance proceeds retained as cash. On average, debt issuers immediately spent almost all of the proceeds, while equity issuers retained a good deal in cash. Anticipated near-future cash needs and the fixed costs of financing help to explain the fraction of proceeds retained. Our findings suggest that, when making financing decisions, most firms are primarily concerned about the opportunity costs of failing to meet cash needs. A funding-horizon theory that optimizes both security issuance and capital structure to meet immediate and future funding needs best describes observed capital structures.
8 | Journal Publications - Financial Times Top 50 Journals
Executive Takeaways
■ Firms generally seek external financing when they would otherwise run out of cash. ■ The specific cash need determines the choice between debt and equity financing. ■ The fixed costs of financing help to explain the fraction of the proceeds to keep as cash. ■ More research on the opportunity costs of cash shortfalls is needed.
Rongbing Huang, Professor of Finance
The Puzzle of Frequent and Large Issues of Debt and Equity Rongbing Huang and Jay R. Ritter
Journal of Financial and Quantitative Analysis (forthcoming)
Overview Larger, more frequent, and more recent debt and equity issues in three consecutive fiscal years are followed by lower stock returns in the subsequent year. The value-weighted (VW) averages of raw returns during the next year are 12.2% for firms with no significant external financing in the prior three fiscal years; 10.8% for firms that issued debt or equity only once; 3.9% for firms that issued debt or equity at least three times; and -1.2% for firms with at least three large issues. The q-factor model time-series regression intercept from 1975 to 2018 decreases in the subsequent year from 0.12% per month (t-statistic=2.88) for the VW portfolio of firms with no external financing in the prior three years to -0.00%, -0.32%, and -0.63% per month (t-statistics= -0.08, -2.54, and -4.31), for the VW portfolios of firms with one debt or equity issue, three or more equity or debt issues, and at least three large issues, respectively. Purging the factor returns of recent issuers increases the magnitude of the estimated underperformance following frequent equity issues. A value-weighted Fama-MacBeth regression shows that firms with three equity issues underperform non-issuers by 0.65% per month (t-statistic =-2.65). Earnings announcement returns are low following frequent issues, especially equity issues.
10 | Journal Publications - Financial Times Top 50 Journals
Executive Takeaways
■ Many firms engage in substantial external financing activity. ■ Firms with substantial external financing activity have low subsequent stock returns. ■ Abnormal post-issuance stock returns decay over time. ■ Purging the factors of recent issuers helps to detect abnormal post-issuance returns.
Rongbing Huang, Professor of Finance
Supply Location and Transportation Planning for Hurricanes:A Two-Stage Stochastic Programming Framework Jomon A. Paul andMinjiao Zhang
European Journal of Operational Research Vol. 274, Issue 1 (April) 2019, pp. 108-125
Overview We develop a two-stage stochastic programming model with recourse actions for hurricane preparedness. In the first stage, it works to optimize the locations of Points of Distribution (PODs), medical supply levels, and transportation capacity; in the second, transportation decisions and flow. Our model minimizes the total social cost, comprised of deprivation and commercial logistics costs, and facilitates determination of the optimal deployment time. We demonstrate the benefits of our approach in a case study. As risk attitude goes from optimistic to pessimistic, the optimal number of PODs increases exponentially to distribute the risk. A similar trend holds for total costs as a function of hurricane category and its interplay with risk: for weaker hurricanes, regardless of risk attitude, the optimal decision is to deploy closer to landfall at 12 hours; for stronger, resources are best deployed earlier, at 36 hours. Since deployment cost also increases exponentially as landfall approaches, when budget is limited, risk attitude influences deployment decisions and a preference for lower severity-level supplies. Our model addresses hurricanes but can be adapted to other disasters with forewarnings, such as winter storms, floods, or disease outbreaks.
12 | Journal Publications - Distinguished Journal
■ The two-stage stochastic programming model optimizes social cost effectively. ■ Total cost is a function of hurricane category and its interplay with risk. ■ Early deployment is preferable for strong hurricanes due to increased demand. ■ The number of dispensing sites increases exponentially with aversion to risk. ■ Funding lower severity-level supplies is preferred when the budget is limited. Executive Takeaways
Jomon A. Paul, Professor of Quantitative Analysis Minjiao Zhang, Associate Professor of Quantitative Analysis
Efficient vs. Effective Technology Use JasonWilliams (PhDGraduate) Saurabh Gupta (Dissertation Chair) Adrianne Randolph (Second Supervisor) Stacie Petter (Reader)
Overview Information technology (IT) is foundational to modern work systems, but its nuances like how to best use technology for a given situationare not fully understood. This study develops a theory of workplace IT use combining individual, organizational, and technical influences. The first, continued use , describes employment of a technology to complete a job task efficiently; such as checking email. The second, novel use , describes recruitment of previously unused features of a technology to perform novel job tasks. Managers can help workers use a technology efficiently or innovatively as the needs of the organization change.
14 | PhD Summaries
Executive Takeaways
■ To ensure efficient technology use, maintain stable work conditions and organizational structure. ■ Workers tend to move toward more efficient technology use. ■ Additional input is often required to prompt and support innovative use. ■ To allow innovation, managers should give employees the freedom to explore how the technology can best support job tasks.
JasonWilliams, PhD Graduate Saurabh Gupta, Professor of Information Systems Adriane B. Randolph, Professor of Information Systems
Shedding Light on Sales Relationships: What Effect Does the Sunshine Act Have on Salesperson Ethical Behavior and Customer Response? Rebecca Burcham (PhDGraduate) Brian N. Rutherford (Dissertation Chair) Joseph F. Hair, Jr. (Committee Co-Second) O.C. Ferrell (Committee Co-Second) Greg Marshall (Reader) Overview The financial relationship between physicians and pharmaceutical salespeople has long been scrutinized for the potential ethical issues that may arise from the influence that financial incentives have on physician prescribing behavior. Until recently, details of these financial incentives were only available to physicians and salespeople. In order to shed light on this relationship, Congress passed legislation, known as the Sunshine Act, with the intent to make transparent financial information. By shedding light on this information, the legislation’s intent is to mitigate the potential ethical issues that such a financial relationship poses. While previous studies examined the impact that the Sunshine Act has on physician ethical behavior, this study introduces the potential effect of information transparency on pharmaceutical salesperson ethical behavior. Additionally, the study looks to address how the change in salesperson ethical behavior brought about by information transparency mediates the effect on salesperson outcome and behavioral performance. Finally, the study seeks to understand how the change in salesperson ethical behavior mediates the relationship with physicians by measuring their loyalty to and trust in the salesperson and in the pharmaceutical manufacturer.
16 | PhD Summaries
Executive Takeaways
■ Salesperson ethical behavior results in higher customer loyalty and trust in the firm. ■ Salesperson ethical behavior results in higher customer loyalty and salesperson trust. ■ Information transparency may not result in positive behavior responses.
Rebecca Burcham, PhD Graduate Brian N. Rutherford, Professor of Marketing & Professional Sales
National Science Foundation Grant:
ImPACT IT: Increasing the Participation and AdvanCemenT of Women in Information Technology
Adriane B. Randolph
Overview Currently, only 20 percent of US Information Systems faculty at the rank of full professor are women. Moreover, the data are insufficiently granular to determine howmany of these women belong to groups traditionally underrepresented in science, technology, engineering, and mathematics (STEM), such as African-Americans, Native Americans, and Latinx. In conjunction with the Association for Information Systems (AIS), Dr. Adriane Randolph and a team of investigators across five institutions are working to promote the advancement of women in the field; specifically, to increase the number promoted to “full”. The National Science Foundation’s Organizational Change for Gender Equity in STEM Academic Professions (ADVANCE) program has awarded a three-year, million-dollar grant in support of ImPACT: Increasing the Participation and AdvanCement of Women in Information Technology (Award # 2017130). It is designed to catalyze action and foster accountability in the Information Systems academic field by supporting women’s efforts to advance and increasing the number of women who achieve the rank of full professor. Activities such as forming working groups to review existing data mechanisms and AIS processes, identifying best practices, and conducting anti-implicit bias awareness and intervention training for AIS, represent a major strategic opportunity for the AIS as a professional society to drive positive change through increased diversity and inclusion.
18 | Research Grant
■ The Information Systems field is not immune to gender inequity. ■ Women are not monolithic. ■ Data collected should allow a clear understanding of intersecting identities. ■ Professional associations offer opportunities to prompt systemic changes in STEM fields. Executive Takeaways
Adriane B. Randolph, Professor of Information Systems
Market Microstructure and Informational Efficiency Rafael R. Guthmann and Brian C. Albrecht
Coles Working Paper Series, FALL20-03, November 2020
Overview Building on the ideas of Nobel laureate F. A. Hayek, many economists, such as Nobel laureate Leo Hurwicz, have formally shown that competitive markets require little information to allocate goods efficiently. If people know only the prices of goods that they want to buy and sell, they can achieve an efficient outcome. However, the standard formulation of competitive markets neglects their underlying microstructure; nobody actually sets the prices, which provide all necessary information. Our paper reconsiders the informational efficiency of markets by modeling two with different microstructures. In the first and most commonly studied, people must search for their trading partners. In the second, market-makers connect buyers and sellers. We prove that while a search market can allocate goods as efficiently as a competitive market, it requires much more information to do so. Search is informationally inefficient; every buyer must know every seller’s expected price. In an economy with market-makers, buyers and sellers only need to need to know the price of a few market-makers. Less abstractly, buyers require less information if they can go on Amazon and find the going rate for a product than if they must search myriad online shops.
20 | Working Papers
■ Any form of trade requires information. ■ Platforms, such as Amazon or Uber, help users by acquiring information for the users. ■ With globalization, platforms that can gather, organize, and present people information have an advantage. ■ We predict an increase in the use of these platforms with economic integration. Executive Takeaways
Brian C. Albrecht, Assistant Professor of Economics
“Think Leader—Think Male”?: Challenging the Centrality of Masculinity within the Ideal Leader Concept Graham Lowman, Mark Hiatt, Lee Macenczak, Ji Qi, and Peter D. Harms
Coles Working Paper Series, FALL20-08, November 2020
Overview Prior research has found that individuals generally view leadership as a male role. This bias is entrenched in society and many organizations, leading to the reflexive association: “think leader—think male”. Here, we use the novel psychological network analysis methodology to challenge this paradigm, proposing that gender occupies a decentralized position within the ideal leader concept. Replicated across three samples—undergraduate and graduate students (n=517) and working adults from online panel and crowdsource platforms (n=1,120; n=321)—results indicate that the “think leader—think male” paradigm fails to capture how individuals conceptualize their ideal leader. In fact, they place considerably less importance on leaders being male or masculine than previously thought. While some differences exist across samples, the overall results indicate that a more accurate paradigm would be “think leader—think intelligent”. However, we encourage future research to explore why discrepancies exist between individuals’ ideal leader concept and actual workplace behavior based on sex-role expectations.
22 | Working Papers
Executive Takeaways
■ Prior studies have found that people “think leader—think male”. ■ Psychological network analysis (PNA) is a novel method for analyzing leader concepts. ■ PNA suggests “think leader—think intelligent” is a more accurate description of the typical ideal-leader concept.
GrahamH. Lowman, Assistant Professor of Organizational Behavior and Human Resource Management Mark Hiatt, Assistant Professor of Management and Entrepreneurship Lee Macenczak, Clinical Assistant Professor of Management
Assessment of US Healthcare Informatics Education: The Current State and Comparisons across Program Types Oluwagbenga Ogungbemi, Saurabh Gupta, and Sweta Sneha
Coles Working Paper Series, SPRING21-05, March 2021
Overview Information technology plays an increasingly significant role in healthcare. Although little is known about the content and consistency of university degree courses in this area, by and large, their geographic expansion reflects the growth in interest online. This paper presents a qualitative assessment of the curricula at 30 US graduate healthcare informatics programs spanning 30 universities and four types of schools: Business, Information Systems, Public Health, and Medicine. The analysis finds seven types of degree programs focused on healthcare informatics. Schools of management focus on healthcare management; information systems programs focus on data and informatics; and schools of medicine focus on both informatics and management. While schools of public health offer the smallest set of programs, they take the broadest view of the subject, accommodating technical and management approaches. Study results clarify the similarities and differences among the programs to benefit both students and curriculum designers.
24 | Working Papers
Executive Takeaways
■ The number of graduate programs in Healthcare Management Informatics has increased with public interest. ■ Four kinds of health informatics courses are offered by different academic programs. ■ Degree names do not necessarily reflect program content; Type of school offering them is a better indicator.
Oluwagbenga Ogungbemi, MSHMI Student Saurabh Gupta, Professor of Information Systems Sweta Sneha, Professor of Information Systems
Seasoned Equity Issuers’ Prospectus Filings: How Informative is their Tone? Rongbing Huang, Hong Qian, and Santhosh Ramalingegowda
Coles Working Paper Series, FALL20-05, November 2020
Overview In the United States, a public company may follow its initial public offering (IPO) with what is termed a seasoned equity offering (SEO) of shares to raise more money. First, it must file Form S, the preliminary prospectus, and Form 424B, the final prospectus, with the Securities and Exchange Commission. In this paper, we use textual analysis to identify uncertainty words (e.g., may, approximately, believe, risk), weak modal words (a subset of the uncertainty words, e.g., may, might, could), and negative words (e.g., loss, adverse) in the prospectus filings of a sample of SEOs from 1998 to 2016. We find that a weak modal tone in the final prospectus filing is positively related to the discounting of the offer price relative to the stock price on the day before the offer and negatively related to the offer-day stock return. For example, a one- standard-deviation increase in our measure of weak modal tone in is associated with a 0.50-percent increase (e.g., from 3.67% to 4.17%) in the offer-price discount. An increase in cautionary tone from the S filing to the 424B filing is associated with abnormally lower stock returns for several days after the offer. Overall, our findings suggest that using a cautionary tone in a firm’s SEO prospectus filing casts a significant negative light on the firm and is followed by a lower stock return.
26 | Working Papers
Executive Takeaways
■ Textual analysis can quantify soft information conveyed in prospectus filings. ■ Uncertain and weak modal tones in a firm’s filing cast a negative light on the firm. ■ SEO firms at higher risk for litigation use more cautionary tones. ■ SEO firms use more cautionary language since the passage of the Sarbanes-Oxley Act. ■ Risk disclosures using cautionary words provide useful information to investors.
Rongbing Huang, Professor of Finance
Effects of Gender Disparity and Social Costs of Failure on Entre- preneurship Across Countries
Sharon A. Simmons, Chong Kyoon Lee, Susan L. Young, andMaQuebaMassey
Coles Working Paper Series, SPRING21-03, March 2021
Overview Many studies have examined the effect of institutional environments on women’s entrepreneurial activity. However, none captures the effect of such nuanced institutional arrangements as the social costs of failure , defined as the formal and informal representations of expected conduct with anticipated negative consequences for nonconformity when a business effort falls through. The impact of this multi- dimensional concept may contribute to the gaps between men and women’s economic participation and opportunity, educational attainment, health, and political empowerment across countries. Meanwhile, gender disparities are considered barriers to economic development and high-growth entrepreneurship, while fear of being subjected to the social costs of failure is argued to motivate high-growth aspirations. Therefore, we ask, how do gender disparities and the social costs of failure, independently and in concert, affect women’s entrepreneurship, especially high-growth entrepreneurship, across countries? Using an institutional legitimacy framework to study 262,000 individuals across 35 countries, we find that societies with smaller gender disparities have higher total levels of entrepreneurial activity and aspirations for growth, but higher social costs of failure weaken these gains. Our study contributes to scholarly conversations on institutional legitimacy, cultural institutions, women entrepreneurs, and high-growth entrepreneurship. It informs the quality vs. quantity debate, supporting the strong need for national policies to address the institutional drivers of women’s engagement in entrepreneurial projects with high-growth potential.
28 | Working Papers
Executive Takeaways
■ Entrepreneurship is a gendered phenomenon. ■ Women entrepreneurs suffer from institutional gender disparities more than men entrepreneurs do. ■ The social costs of failure have a greater delegitimizing effect on women-led than men-led entrepreneurial firms. ■ Societies with smaller gender disparities have greater total and high-growth entrepreneurship activity. ■ Policies encouraging women entrepreneurs to lead high-growth projects are urgently needed.
Susan L. Young, Associate Professor of Management
Special thanks to the following faculty and committees for their significant contributions to the Coles Research Magazine.
Coles Working Paper Series
Editor: Jomon Paul
Editorial Board: Abhra Roy Aniruddha Bagchi ■ Ann Gillette ■ Brian Albrecht Canan Mutlu ■ Gabriel Ramirez ■ Gohar Sedrakyan ■ Graham Lowman Humayun Zafar ■ James Boudreau ■ Jennifer Hutchins ■ Jesse Schwartz Justin Cochran ■ Lance Brouthers ■ Leo MacDonald ■ Marcus Caylor Maria Kalamas ■ Mark Hiatt ■ Rajaram Veliyath ■ Rongbing Huang Samia Siha ■ Saurabh Gupta ■ Stacey Kessler ■ Stacy Campbell Sweta Sneha ■ Sunay Mutlu ■ Susan Young ■ Vineeta Sharma Research and Development Committee Abhra Roy ■ Andy Green Armen Taschien ■ Hong Qu ■ Jennifer Hutchins Max North ■ Minjiao Zhang ■ Samia Siha Vineeta Sharma ■ Yoon Hee Kim
PhD Program Executive Director: Brian Rutherford
ColesCollege.com
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