Each year, faculty of the University of Washington Foster School of Business produce influential research—on a wide array of topics—that advances academic theory and advises management practice. Here are some highlights from the 2013-14 academic year.
The early bird gets the worm. And, it seems, the esteem of managers. Ryan Fehr and Chris Barnes document a distinct morning bias which may be undermining the benefit of flextime policies. Bosses implicitly regard employees who arrive bright and early as more conscientious and effective than their later-arriving colleagues.
Corporate resources flow toward managers with connections to the CEO, but that’s not always a bad thing. According to a Ran Duchin study, cronyism can speed the flow of information to the top and improve financial performance at firms that engage in a diverse range of industries.
Make, buy or ally?
Innovating is always a good thing… right? Not quite. Abhishek Borah finds that financial markets, on average, react negatively when firms innovate through the acquisition of another company. By comparison, innovations produced in-house or through alliances tend to be greeted positively by investors.
Profiles in courage
Terry Mitchell finds that courage is a response to a specific situation rather than a personal attribute. Incidences of workplace courage are driven by a compelling sense of responsibility, enabled by the ability and authority to act. And overcoming fear is not a major factor.
Short-sellers get a bad rap. But according to Asher Curtis, these audacious investors—who profit when stock prices fall—trade on comprehensive analysis of public accounting information rather than the trajectory of stock prices. In doing so, they introduce liquidity and bring overpriced stocks closer to their fundamental values.
Too tired to cheat?
Against the conventional wisdom, Xiao-Ping Chen and Scott Reynolds demonstrate that fatigue can actually render us less likely to act unethically in many circumstances—specifically when the act is complicated by a high degree of social consensus that it’s wrong.
Cost-plus-margin is the reigning model in B2B pricing. But a new model introduced by Jonathan Zhang demonstrates that switching to a dynamic pricing strategy—informed by data on customer behavior and adjusted over time—can both increase profitability and maintain customer relationships.
Lose weight. Drink less. Exercise more. Quit smoking. Get a flu shot. Don’t text and drive. Nidhi Agrawal finds that health appeals such as these create anxiety which can spark intentions to address the particular issue—but it can undermine efforts to deal with other important health concerns.
Tax or consequences?
Who cares? Big deal. So what? That’s the extent of public outrage upon learning that a business is avoiding taxation. Jake Thornock finds that the revelation of aggressive corporate tax sheltering results in no long-term reputational cost to a firm, its senior leadership or its auditor.
Look out, lovelorn men!
Romantic rejection can be costly. According to Shelly Jain and Mark Forehand, men tend to splurge on luxury items after being spurned. Women, on the other hand, tend to indulge in opulent treats when they’re in a romantic relationship, not when they are rejected.
A model of long-term fairness created by Thomas Gilbert and Christopher Hrdlicka demonstrates that managing shared assets—public pension plans, endowments, natural resources—equitably across generations requires a reduction in investment risk and benefit payouts. Such long-term fairness insures against future economic or environmental shocks.
Pursuit of happiness
In modern American market capitalism, the shareholder is king. But Thomas Jones argues for a new corporate objective to better suit the modern economy: shifting the focus from maximizing the wealth of shareholders to enhancing the happiness of stakeholders—shareholders, yes, but also employees, customers, suppliers and communities.
Jarrad Harford confirms that American corporations have doubled their cash holdings, as a percentage of assets, over the past 30 years. He also identifies a key cause: tightening credit markets and shortening debt maturity over the same period. To mitigate refinancing risk, firms keep more cash.
Chris Barnes is discovering surprisingly strong causal connections between even minor amounts of sleep deprivation and a litany of workplace ills—errors, accidents, procrastination, lack of creativity and ethical breeches, to name just a few.
The ABCs of HFTs
Jonathan Brogaard delivers a primer on high-frequency trading—algorithm-wielding intermediaries who use superior computing and connectivity to buy and sell securities in unprecedented volumes and at unprecedented speeds. The bottom line? Faster investing appears to benefit financial markets.