INSIDE THIS ISSUE
Unintended Consequences: How Broker Incentives Skew Results
Exposing the Dangers of Targeting Children as Consumers
Integrating Research Across Disciplines: How Connecting Studies on Reporting May Lead to Valuable Insights
Starting from Scratch: Dr. Tonya Williams Bradford’s Lessons from a Career in Research
It’s no secret that incentives shape individual behaviors, but the challenge is to accurately predict the specific behaviors that may arise from a particular incentive. Researchers at the UCI Paul Merage School of Business have been exploring how incentives influence financial analysts. What they found raises a few red flags both for investors and for the industry at large.
UCI professors Devin Shanthikumar and Ben Lourie, along with PhD alumna Tiana Lehmer, published their findings in the Review of Accounting Studies. Their article, “Brokerage Trading Volume and Analysts’ Earning Forecast: A Conflict of Interest?” explores the influence of incentives on the outcome of financial analysts’ research.
“The big picture is that incentives matter,” says Shanthikumar, “but it isn’t always obvious what effects incentives will have.”
For Shanthikumar, the goal of the research was to develop a better understanding of how incentives influence the brokerage industry. In the 2000s, she researched conflicts of interest in the investment banking industry during a time of intense regulatory interest in the topic.
The 2003 case of star analyst Henry Blodget was especially influential in bringing the issue of incentives to the forefront. Blodget, then working as a researcher for Merrill Lynch, was charged by the Securities and Exchange Commission with civil securities fraud after he was found to have publicly issue buy recommendations for certain tech stocks while expressing negative views of those same stocks in private emails. The lawsuit led to significant media attention and rule changes that broke the link between analyst research and investment banking.
each brokerage house and measured how much trading volume they executed in a particular stock. The team compared trade volumes at different brokerage houses while also looking at which analysts issued forecasts, and whether the forecasts were optimistic or not.
This new comparative approach was a huge first step, but the team still needed to work out whether the numbers firmly showed causation in the correlations between trading volumes and analyst reporting. To resolve the question of causation, they looked at how analysts changed over time, including when they moved from one firm to another. “Are analysts learning from what happened last year and updating their behaviors the next year? Using that data and using both correlations and exploiting data related to analyst changes we were able to better understand what was going on,” Shanthikumar says.
The resulting separation of research from brokering removed the incentive structure which tied analyst compensation with investment banking outcomes. However, Shanthikumar says, the new rules only addressed one incentive problem. “Now the brokerage trading incentive will be that much more important to study,” she says.
Shanthikumar has been interested in studying how brokerage trading and incentives influence analyst behaviors for many years. The challenge has always been accessing the right data. When new data became available, the team recognized they had an opportunity to gain new insights into the link between incentives and analyst behaviors.
“All of this activity is happening inside the brokerage houses, and they don’t want to share all of that information,” she says. “We were able to get data that allows us, with a little creative research design, to figure out how to answer this question.”
Shanthikumar and her colleagues looked at data for
Analysts working in-house at brokerages are paid to produce research and reports. While customers benefit from the insights reports provide, regardless of the analyst’s final recommendation, the concern is that the brokerage as a whole stands to benefit from recommendations that could drive trading volumes.
“It’s a little bit like being in customer service,” Shanthikumar says. “Analysts don’t directly bring in revenue to the company. They’re being paid to help the company by performing a service to investors. That’s one of the reasons why analysts’ incentives can be harder to understand.”
While the research shows that trading volume responds to analyst quality, volume also responds to optimism. “That is the thing we need to address,” she says. “It can drive the analysts to be too optimistic and it can lead us as investors to buy too much. This is a sign that the finance industry needs to reevaluate their incentives.
Europe has already started to change practices by requiring direct payment for analyst research. For us as investors, this means we need to take that very positive research with a little grain of salt.”
One surprising insight from the team’s research came from looking at what happened when an analyst moved from one brokerage house to another. “What we found was that the trading volume followed them,” Shanthikumar says. “If a brokerage house got a highvolume analyst from another firm, they could increase their volume on those stocks that the analyst covers by as much as twenty percent. That’s a huge effect.”
While they found strong evidence that analysts are strategically updating their behavior in response to these incentives and becoming overly optimistic, Shanthikumar wants to be careful not to paint with a broad brush. “I don’t want it to sound like we’re saying that analysts are just lying to us or that we can’t trust them,” she says. “Analysts are simply responding to the incentives they’re given. They’re also compensated for accuracy, so that can provide some balance to the equation as well.”
Shanthikumar has advice for current investors and for students who want to work in the finance industry. “For people who are going into wealth management or investment management, they need to understand how to use information in a sophisticated way,” she says. “Part of what that means is to adjust for the potential biases created by these types of incentives. We don’t want to ignore analysts. They have a lot of great insight and information that we can all learn from. But in light of our research, we need to make the appropriate adjustments.”
Shanthikumar feels that their report has implications for pretty much everyone. “I teach MBAs and undergraduates to really be careful about incentives,” she says. “The incentives they design for their employees, the incentives their customers have, that their suppliers have, they all impact our behaviors. As parents, we design incentives for our kids to try to drive their behavior. We know how our incentives at work drive our own behaviors. But we need to be thoughtful about the intended and the unintended effects.”
The bottom line is that the financial industry needs to think about the role they want analysts to play. “What’s happening right now is a lot of experimentation,” Shanthikumar says. “In Europe, these kinds of incentives are no longer allowed. In the US we’re seeing the rise of these independent research firms that aren’t brokerage houses. They’re just doing the research. But how do they sell that research? Some are funded by the people using the research, others are funded by the companies that want coverage. Each of these is going to come with their own set of incentives and problems.”
Shanthikumar is optimistic about the future. “I don’t think we’re going to see legislation to step in and stop this. I don’t think the problem is that bad at this point,” she says. “We just need to be more sophisticated about how we respond to the research. We need to be aware of these conflicts of interest. What I’m hoping is that people might start to be even more sophisticated about other conflicts of interest that we may not have the research on yet.”
Devin Shanthikumar is the Associate Dean for Undergraduate Programs at Merage and an Associate Professor in the Accounting group. She teaches undergraduate, MBA, executive-level and Ph.D. courses, covering topics such as Managerial Accounting, Driving Profitability, and Research Presentations. Prior to joining The Paul Merage School of Business, Shanthikumar served on the faculty at the Harvard Business School (HBS), where she taught both Financial Accounting and Managerial Accounting for MBAs, and wrote cases which are used in accounting courses across the country. She has won multiple awards, and was named to Poet and Quant’s “Best 40 Under 40 Business Professors” list in 2019.
Over 50 years ago, studies were done to determine how advertising to children affected their consumption of junk food, cigarettes and alcohol. The results underscored the need to focus more research on the well-being of underage consumers and the influence of marketing on their physical, emotional and mental health.
In the decades since those early studies, academics have continued to explore the interaction between kids and marketing. Professor Connie Pechmann of the UCI Paul Merage School of Business, together with several colleagues from distinguished business schools across the country, has been studying the topic’s history to gain insights that may be useful to policy makers and others.
Pechmann joined Deborah Roedder John, professor of marketing at Carlson School of Management at the University of Minnesota, and Lan Nguyen Chaplin, professor of marketing at the Department of Integrated Marketing Communications, Northwestern University, in coediting a series of papers that provide an overview of the last 50 years of research on the consumer behavior of children. Their lead article, “Understanding the Past and Preparing for Tomorrow: Children and Adolescent Consumer Behavior Insights from Research in Our Field,” was published in April 2024 in the Journal of the Association for Consumer Research, the world’s largest global consumer research organization.
“We’ve been studying children and adolescent consumer behavior for 50 years,” says Pechmann. “The focus has always been on risks to their health and mental wellbeing. However, the target has changed over time. We started out with television advertising being the greatest risk, but now it’s moved toward social media, cannabis, vape and poverty.”
As necessary as it is to understand how advertising negatively affects children, Pechmann says the research can be very difficult. “There isn’t a lot of research done on children because they’re such a protected group. You have to go through many more hurdles. Parents, of course, want to protect their children, and if the activities are illegal—like alcohol or cannabis—parents don’t want to reveal the information, so it makes it even harder.”
The necessity of anonymity further limits the potential scope of research, because it prevents researchers from monitoring a subject’s progress over time.
Parents can be a source of complication as well. During interviews, parents can interfere with the process, which can reduce the accuracy of a child’s answers.
Such barriers haven’t stopped Pechmann and her coauthors from studying the consequences of advertising on children and their behaviors. “Everyone is very passionate about children,” she says. “We all started out as children. Many of us have children, so everyone is interested in protecting children and adolescents.”
To overcome the challenges associated with researching children and their consumer behaviors, Pechmann and her coauthors had to be creative. “Several of us arranged to go into schools, and we offered the schools something in return: drug education, for example,” she says. “In exchange for an hour of class time to collect data, we provided an
additional class period of drug education to fill their state requirements. It’s not easy, but if you work hard, you can do it.”
Some user data on children were available through social media and government surveys. “In Canada, the government decided to do a very large survey of children and adolescents on smoking,” says Pechmann. “California also does a healthy kids survey. Of course it’s anonymous, but they also go through schools, and they provide the data for free. Every once in a while, if we’re trying to reach really young children or children and their parents, we will work through a preschool or a nonprofit group that helps with parenting and very young children.”
Pechmann is optimistic about the positive news coming from the research. “In 2004 the EU finally decided to ban advertising to children and adolescents,” she says. “That was something the United States tried to do in the ’70s and ’80s, but it didn’t succeed. There are some examples of successes, like when we see the smoking rate declined massively because there was so much attention on youth and smoking in the ’90s.”
Youth smoking was in decline until Juul came along with different flavors of vape. “Then it went back up again. Sometimes we close the door, and it opens back up, or it’s a slightly different door.”
The reason why this research is so important is that, up until age 18, young people are highly vulnerable to advertising. “There’s a lot of neuroscience that explains why adolescents and children are so vulnerable,” says Pechmann. “They’re much more attuned to rewards, much less attentive to consequences and risks, much more tolerant of ambiguity, much more sensitive to social cues and much more impulsive, so they don’t have a lot of cognitive control.” This is an advertiser’s dream, she says.
While the research sometimes seems like it contains an abundance of dismal news, Pechmann wants to emphasize the silver lining. “We’ve learned a lot about what makes a good parent,” she says. “I’m not sure how easy it is to train parents, but we have extensive research that says the best parenting style is authoritative—not authoritarian where you boss [your children] around.”
Parents definitely need to set rules and boundaries, establish consequences, and set expectations so their children don’t make too many troubling choices, she says. “You have to be flexible. If you establish a punishment, it should be a reasonable punishment.”
One positive takeaway from the research is the importance of media literacy. “We’ve made a lot of progress in this area because we now really understand how to teach that,” says Pechmann. “For example, California just passed a law that says they have to cover media literacy from elementary school through high school, and we know what to teach.”
Educational strategies must be adjusted for the student’s age, she says. “If someone is 7 or 8 years old, you can’t teach them the same thing as if they’re 17. When they’re 17, you can talk about tobacco companies targeting them. When they’re 7, you can teach them there’s such a thing as an ad that tries to persuade them to do something.” Yet, they have difficulty grasping that idea. “Let them know there’s an agenda behind the ad, and advertisers are likely to exaggerate the benefits. That’s where you start. There’s a lot of guidance here.”
One fascinating aspect of their research showed that
the most effective deterrent to smoking, for example, was not to focus on the negative health effects but on social acceptability. “The Truth campaign made big gains against tobacco by saying smoking was socially unacceptable,” says Pechmann.
“That seems to be the way to go because young people don’t expect to live to be 70 years old. They think middle age is 30 or 40, so it doesn’t work to talk about the long-term health effects of smoking. The old anti-smoking and anti-drug messages were very much health-based: ‘Here’s your lung after smoking for years,’ and ‘here’s your brain on drugs.’ That approach has hopefully disappeared because it doesn’t work. Young people want immediate rewards, but they do not want immediate rejection from their friends for being uncool.”
When it comes to advocating for children, Pechmann has learned persistence is key. “Today around 14 states have passed media literacy laws,” she says. “You have to be very persistent. If you just keep putting the articles out, and you keep sharing the data, it may take up to 50 years, but eventually we can start to legislate educational programs that benefit children and adolescents.”
The lesson here is to keep going, she says. “We can’t expect an immediate response. It’s taken 40 years, and we’re finally getting traction. The people who did the early research are about to retire, and it’s only now making a difference. That’s the lesson we have to learn as researchers. We are having an impact, but it might take a while.”
Cornelia (Connie) Pechmann (MS, MBA, PhD) is a Professor of Marketing at the UCI Paul Merage School of Business. She studies the effects of advertising, social media, product labeling, brand names and retail store locations on consumers and she has published over 100 articles, reports and papers.
When crimes, misconduct and other forms of problematic behavior occur, what makes people willing to report them to authorities? It’s an interesting question—one that’s generated a fair amount of research across decades. But Patrick Bergemann, assistant professor of organization and management at the UCI Paul Merage School of Business, has discovered most of this research is fragmented and disconnected. This means researchers studying reporting behaviors through one lens may not know about insights gleaned from studies performed through another lens.
“Organizational sociologists and psychologists tend to study whistleblowing in corporate and workplace settings, while criminologists typically study crime reporting. Historians and political scientists look at denunciations—reports of political or religious nonconformity—while other researchers investigate reports of specific types of wrongdoing, such as child abuse,” says Bergemann. “I wanted to collect all of that theory and research into a single framework, particularly as it relates to how social influence affects different kinds of reporting.”
Having this framework means future research can utilize a typology of the various ways in which social influence impacts reporting. By situating different reporting contexts within this framework, it becomes possible to develop a more general understanding of reporting and take a more comparative approach across different types of deviance and domains of reporting.
“The reporting of deviance is a universal human behavior. For example, tattling becomes prevalent by age 2, and by age 4, most of the communication children have with adults about peer behavior involves tattling on other kids,” says Bergemann. “It makes sense that this is a similar social issue across different settings, so I believe it’s important to share findings across domains as well.”
That’s not to say social influence’s impact on reporting plays the exact same role in every situation. Bergemann acknowledges social influences vary in relevance and strength depending on many situational factors, such as the ambiguity of the behavior, the victimization of those involved, the anonymity of the reporting process and others. However, in pulling together studies from a variety of fields, he noticed some patterns emerge, namely how the process of social influence in reporting unfolds.
The first stage of the reporting process is the observation and labeling of a problematic behavior. The
observer could be a direct victim of the behavior, someone who witnessed the behavior without being personally victimized or a person who heard about it secondhand. That observer has to then decide how to label the behavior. Is it harmful enough to be considered a wrongdoing or not? This decision is susceptible to social influence, especially if the scenario is ambiguous or uncertain.
For instance, the observer may ask other people about their perspectives, consider the behaviors of others in similar circumstances and factor in the identities of those involved before deciding whether the behavior was wrong.
If the observer does decide the behavior was wrong, they have to then choose whether to report it to authorities. Again, social influence plays a role here, both directly and indirectly. Other people may try to convince the observer to report or not, but the anticipation of reactions by others may also influence the observer.
“The relationship between the wrongdoer and the observer is a very powerful influence, as is the sociocultural identity of each person,” Bergemann says. “For example, sexual assault victims are more likely to report their attackers if they are of a different ethnicity than the victims themselves. This can lead to a misrepresentation of what kind of person is frequently the wrongdoer and potentially create inequalities in the justice system.”
Bergemann’s review also reveals gaps in the literature, thereby highlighting areas where more research is needed. For one, he discovered that most research examines only a single type of social influence. This approach is likely to miss the ways in which different sources of social influence interact with one another. Studies that mix different levels of seriousness of wrongdoing with different social factors may reveal how
they collectively inform the reporting decision.
Another gap is a lack of work done on false reporting. In the scant research that has been done, false reports generally have been found to be very rare, but wrongdoers frequently claim reports against them are inaccurate or even completely fabricated.
“We often hear the term ‘false report’ in the midst of the media storms that surround accusations against celebrities. Discrediting the validity of the report is typically the go-to reaction of the PR firms representing these celebrities,” Bergemann explains. “What’s interesting to me as a researcher is how often false reporting is discussed in the media but how little we actually know about it from a research perspective.”
For now, Bergemann realizes that, in compiling the disconnected literature on social influence and reporting, some researchers may push back, saying these studies
across various disciplines are not comparable. While he recognizes the differences, he believes they can be accounted for while still benefiting from the understanding of what applies across multiple contexts.
“There’s nothing wrong with researchers studying social behaviors primarily through the lens of their own field. In fact, that’s logical,” says Bergemann. “But I do think if we get too siloed, we can miss the aspects of the research that are applicable to other settings. I hope this review opens up a wider conversation about why it’s helpful to look at what other researchers are doing.”
Patrick Bergemann is an assistant professor of organization and management at the Paul Merage School of Business at the University of California, Irvine. His research has been published in the American Journal of Sociology, American Sociological Review and Organization Science, among others. He earned his bachelor’s degree in economics from the University of Chicago and his doctorate in sociology from Stanford University.
Patrick Bergemann is an Associate Professor of Organization and Management at the Paul Merage School of Business at the University of California, Irvine. He studies the ways in which individuals, organizations, and states respond to wrongdoing, as they seek to stop its occurrence and hold those responsible accountable. One of his primary interests is whistleblowing, where he seeks to understand how social relations influence the willingness to report others, and what prevents some people from coming forward.
Dr. Tonya Williams Bradford is an associate professor of marketing at the UCI Paul Merage School of Business. She’s cowritten dozens of research papers over the years and recently was asked to contribute a new chapter in the second edition of Qualitative Methods and Marketing. Her chapter, cowritten with Mary C. Gilly, Merage emerita faculty, is titled “From a Blank Piece of Paper: Starting a Research Project,” offers actionable advice for academics getting started with the research process.
Bradford says that pinpointing the focal area is one of the first parts of research. “The topic likely has many different parts,” she says. “You have to narrow it down into something that is discreet enough to study in a meaningful way.” She believes most people struggle to arrive at a specific topic, at times casting too broad or narrow of a scope as they craft their research inquiries.
Bradford says many researchers have an initial idea about what they want to study, but once they go to the literature, they realize there are countless papers that have already been published on the same topic. But that does not mean all is lost.
“Finding the best way to approach the subject from an angle that no one has looked into in quite the same way is crucial,” she says. “People mistake the phenomena for the contribution. You have to ask yourself, ‘What’s the contribution I’m trying to make?’”
Another challenge researchers often face is the question of whether to collaborate or work on the project alone. Bradford says that question is a very personal one.
“So much of our research now is really hard to do alone because the problems are so complex,” she says. “Sometimes the research methods or approaches you need to take are more expansive than what might be in one’s tool kit.”
Bradford says many academics start by exploring what types of research will be necessary to arrive at a meaningful result. The pragmatic approach of understanding what needs to be done helps to identify the skills that will be necessary. In turn, the researcher can evaluate whether they can handle it all, or if they need a collaborator.
In her own work, Bradford tends to take a different approach. When she enjoys working with another person, she’ll start by exploring the topics that they might tackle together.
Ultimately, Bradford explains, the decision to go solo or work with others must take stock of how the project will unfold over time. “These projects can take six to ten
years,” she says. If she plans to spend that much time with someone, she wants to make certain she enjoys their company. Bradford says it’s not enough to have complementary skills. The relationship is paramount.
Choosing a research partner has its share of challenges, Bradford says. “People underestimate how much effort is involved in developing a research relationship. You have to understand what each individual’s skill sets are, what they’re good at, and how you complement each other. Once you’ve made that initial investment, it’s a sunk cost,” she says. “How can you leverage that investment? I’m all about finding people with whom I actually want to work because it’s a long haul.”
This tension between context and phenomena is an important factor in crafting a strong research paper. “So often we see a phenomenon that’s happening in a lot of places, but what’s the specific context and the specific locale where that’s happening?” she asks.
“Every country has different laws that govern organ donation, but are donors around the world the same? People opt to offer their organs, but that doesn’t mean the experience of doing so is the same for everyone.”
Local laws, the hospital or insurance system, and legal systems shape part of that experience, Bradford says. “I could pick a specific hospital system, but the reality is there are not that many transplants that happen in a particular year, and they’re spread over dozens of facilities.” Therefore, a researcher may need to focus on one country to gather their data, which becomes the context, despite the global nature of the phenomenon, she says.
The most important question to ask in research is: why does something happen? The second is, “What impact does the relationship have on other factors?” For Bradford, the first thing to do is take time to map the process. “It’s easy to fall into the trap of thinking that the process is the answer, but the process is not the theory,”
she says. “It’s not an explanation of ‘if-this-then-that.’ We need to ask why those things are in relationship with each other.”
Bradford says it’s extremely important for people to deeply understand their phenomena. “Then they can go to the literature and figure out what parts of this process we already understand in terms of the relationship between the different things we see and what parts still require some explanation.”
She believes that’s where the research becomes fun and interesting. “Research is one big puzzle. You’re trying to figure out what puzzle pieces you have and which puzzle pieces you need.” Then the question becomes this: “Which puzzle pieces are missing that you can fill in with your research?”
Once the researcher maps the process, the researcher moves on to explore why the process is happening. Figuring out how to answer that question is one of the core challenges of research. It may require the researcher to gather more data from a new source or find people who might have the answers to tough questions.
One of the biggest pitfalls researchers face is matching their data with the research question. “It’s easy to talk to whoever’s nearby,” Bradford says. “A lot of folks get criticized about their data because their research is based on student samples, so we need to ask how similar our college students are to the general population involved in this phenomena.”
For academic researchers, one of the first steps is
obtaining Institutional Review Board approval to conduct the research project. “It’s really important when we conduct research that the people who participate are fully aware of the benefits and concerns of doing so.”
She cites the Tuskegee Experiment as an example of how far things can go wrong. In that infamous study, which started in 1932, African American men were infected with syphilis without being consulted. The researchers wanted to see how the disease progressed without treatment. As a consequence, many subjects suffered severe health consequences, including death.
The Tuskegee Experiment and other shocking examples of unethical research led to the development of the rigorous protocols followed by the Institutional Review Board. All research protocols are required to be approved prior to initiating the research, she says.
Another common pitfall for researchers is the classic case of analysis paralysis. “There are thousands and thousands—even tens of thousands—of articles written about all kinds of things,” Bradford says. “You could get so deep in the weeds about what’s already been written that you forget that your study explains something different.” Perhaps the situation or environment has changed, and circumstances theorized in a former way are not as relevant now.
“That’s an opportunity to create something novel, so go do it. Don’t just sit and wait because the world needs our brain power.”
Tonya Williams Bradford is an associate professor of marketing and the inclusive excellence term chair professor at the UCI Paul Merage School of Business. Her research focuses on rituals and identity across phenomena, including gifting, relationships with money, communities, acculturation and consumer-brand relationships. She also serves as associate editor for the Journal of the Academy of Marketing Science, Journal of Public Policy & Marketing and the Journal of Retailing and as a member of the editorial review board for the Journal of Marketing, the Journal of Consumer Research and the Journal of Consumer Psychology
Professors Ben Lourie and Chenqi Zhu
Title: “Consensus Credit Ratings: A View from Banks”
Co-authors: Alex Nekrasov and N. Bugra Ozel
Accepted at: Review of Accounting Studies (Journal on Financial Times Top 50 list)
Abstract: While the production of credit ratings has long been limited mainly to rating agencies (CRAs), recent years have seen the growing popularity of consensus credit ratings crowdsourced from banks (i.e., bank ratings). We provide the first comprehensive examination of the properties and informativeness of bank ratings relative to CRA ratings. We find that bank ratings often deviate from CRA ratings, with over 60% of firm-months having different bank and CRA ratings. These deviations contain useful information. Bank ratings improve out-of-sample prediction of future defaults and CRA rating revisions and explain the cross-section of credit spreads. However, bank ratings do not improve out-of-sample prediction of credit excess returns, indicating that current prices incorporate bank rating information. Overall, our findings suggest that bank ratings are a useful supplement to traditional credit ratings.
Professor Emeritus Terry Shevlin
Title: “The deterrence effects of tax whistleblower laws: Evidence from New York’s FCA”
Co-authors: Yoojin Lee (PhD alumna), Shaphan Ng (PhD alumnus), and Aruhn Venkat (PhD alumnus)
Accepted at: Management Science (Journal on Financial Times Top 50 list)
Abstract: In this study, we provide evidence on the effects of state tax whistleblower laws. We exploit a novel 2010 amendment to New York’s False Claims Acts that explicitly extended whistleblower incentives to corporate income tax whistleblowers. We identify treated firms (firms exposed to New York’s FCA) using establishmentlevel data and descriptive analyses. Using a sample of firms exposed to New York and neighboring states, we find evidence that New York’s FCA reduced state tax avoidance. In cross-sectional tests, we find that effects are increasing in firms that grant fewer employee stock options and industry regulation, consistent with deterrence increasing in employee and regulator monitoring. We also find evidence that New York’s FCA deterred federal tax avoidance, consistent with positive vertical tax externalities. Next, we focus on particular tax strategies and find evidence of reduced probability of Double Irish tax structures, reduced relationships to tax planning banks, reduced use of special purpose vehicles, and reduced outbound tax-
motivated income shifting. We also find evidence that firms with the lowest (highest) cost of relocation 1) reduced (did not change) establishment counts in New York but 2) did not change (reduced) state tax avoidance. Finally, we disentangle general ex ante deterrence from ex ante peer deterrence using hand-collected New York tax whistleblower press releases from the Attorney General. We find evidence of both types of deterrence. Overall, this study provides policy-relevant evidence on the deterrence effects of tax whistleblower laws.
Professor Vidyanand Choudhary
Title: “Product Recommendation and Consumer Search”
Co-author: Zhe (James) Zhang
Accepted at: Journal of Management Information Systems (Journal on Financial Times Top 50 list)
Abstract: We study an online environment where a firm provides strategic product recommendations to consumers. We develop an analytical framework to integrate recommendations into the consumer search process. The firm sells two imperfectly substitutable products with different profit margins and makes a personalized product recommendation to each consumer based on its uncertainty (lack of knowledge) of his preferences. We define recommendation bias as the firm’s deliberate decision to recommend a product to a consumer that does not minimize expected misfit cost of the consumer. Consumers can accept the product recommendation, search for the nonrecommended product, or leave the website. We identify five consumer segments based on consumers’ responses to the firm’s recommendations. We show that the recommendation bias, profit, and consumer surplus depend on the interaction between the firm’s uncertainty regarding consumer preferences and consumer search costs. A reduction in its uncertainty about consumers leads to a corresponding increase in the firm’s profit but does not necessarily result in a reduction in consumer surplus. An increase in search costs can lead to nonmonotonic changes in the firm’s recommendation strategy, causing an increase or decrease in recommendation bias when the firm’s uncertainty about consumers is low. Furthermore, the firm’s profit can behave non-monotonically with respect to search costs: the firm benefits from an increase in search costs when these costs are small and uncertainty about consumers is low, but it can be adversely affected when search costs are moderate. Interestingly, consumer surplus may increase when search costs increase.
Professors Tingting Nian and Sanjeev Dewan
Title: “Gender Bias in Open Source Software Communities: Evidence From Stack Overflow”
Co-author: Lei Xu
Accepted at: Information Systems Research (Journal on Financial Times Top 50 list)
Abstract: In this research we examine whether, and to what extent, there exists a gender bias in the programming question-and-answer site, Stack Overflow, as reflected in asymmetries in peer evaluations of contributions by male versus female contributors. If gender bias is shown to exist in this relatively benign anonymous online community where offline programmers participate online, then this would be suggestive evidence for the existence of similar bias in other settings where peer evaluation of knowledge work is important, i.e., much of the IT industry. We use a novel identification strategy for gender bias, which exploits actions taken by users to newly reveal their gender: by changing their username from a neutral one to an overtly female one, or by uploading a female-looking picture of themselves. We employ a difference-in-differences approach to estimate the effects of gender bias by comparing the average monthly votes before and after users revealed their gender. Our results indicate a 1.2%-2.1% reduction in monthly votes after a female user reveals her gender, statistically significant at a one percent level. We also find evidence suggestive of statistical discrimination at work. In contrast, male users receive an increase in votes following a gender-revealing change. Put together, our results document a robust empirical regularity of a systematic gender bias in this Open Source Software (OSS) community, adding to prior evidence on gender-based barriers in computing in general.
Professor Connie Pechmann
Title: “Understanding the Past and Preparing for Tomorrow: Children and Adolescent Consumer Behavior Insights from Research in Our Field”
Co-authors: Deborah Roedder John and Lan Nguyen Chaplin
Accepted at: Journal of the Association for Consumer Research
Abstract: Our special issue on young consumers introduces readers to a research area that has been part of the consumer behavior field for over 50 years. We provide an overview of topics and findings from past to present that have appeared in marketing
and consumer journals. We also identify current research issues and gaps and invite readers to contribute to the field. Throughout our discussion, we introduce the 10 articles in this special issue, whose topics include neuroscience insights into youth risk behaviors, the effects of social media on youth, social activism among young people, strategies for encouraging them to eat healthier food, parenting strategies and youth smoking, how gambling advertising affects youth, their need for marketplace literacy, and the importance of studying the lived experiences of youth in poverty. These articles include empirical findings and identify opportunities for future research that can positively impact the lives of children and adolescents.
Professor Tonya Williams Bradford
Title: “Consumer Vulnerability Dynamics and Marketing: Conceptual Foundations and Future Research Opportunities”
Co-authors: Martin Mende, Anne L. Roggeveen, Maura L. Scott, and Mariella Zavala (PhD alumna)
Accepted at: Journal of the Academy of Marketing Science (Journal on Financial Times Top 50 list)
Abstract: Inspired by the goal of making marketplaces more inclusive, this research provides a deeper understanding of consumer vulnerability dynamics to develop strategies that help reduce these vulnerabilities. The proposed framework, first, conceptualizes vulnerability states as a function of the breadth and depth of consumers’ vulnerability; then, it sketches a set of vulnerability indicators that illustrate vulnerability breadth and depth. Second, because the breadth and depth of vulnerability vary over time, the framework goes beyond vulnerability states to identify distinct vulnerability-increasing and vulnerability-decreasing pathways, which describe how consumers move between vulnerability states. In a final step, the framework proposes that organizations can (and should) support consumers to mitigate vulnerability by helping consumers build resilience (e.g., via distinct types of resiliencefueling consumer agency). This framework offers novel conceptual insights into consumer vulnerability dynamics as well as resilience and provides avenues for future research on how organizations can better partner with consumers who experience vulnerabilities.
PhD Student Xiajing Zhu and Professor Connie Pechmann
Title: “Political Polarization Triggers Conservatives’ Misinformation Spread To Attain Ingroup Dominance”
Accepted at: Journal of Marketing (Journal on Financial Times Top 50 list)
Abstract: Conservatives are often blamed for spreading misinformation, but it is unclear whether certain situations trigger them and, if so, why. The authors examine situations that are politically polarized, meaning the topic and/or its framing conveys conflict, discord, or disagreement between the two main political parties: conservatives and liberals. The authors study whether conservatives react to polarized situations by spreading ingroup-skewed political misinformation that is objectively inaccurate but not necessarily understood to be false; and whether liberals are less reactive. Using a multi-method approach, six studies are conducted, including analyses of statements by public figures and speeches by U.S. presidents, and also controlled experiments. The results indicate that in polarized situations, conservatives’ need for ingroup dominance is elevated, so they convey more misinformation than liberals. In less polarized situations, conservatives’ need for ingroup dominance is tempered, reducing their misinformation conveyance. These findings suggest misinformation should not be blamed solely on the individual trait of conservativism, as polarized situations exaggerate conservative motives and behaviors. While news media, social media, political figures, and others may be incentivized to emphasize political polarization to bolster audiences and engagement, the resulting misinformation harms truth, trust, and democracy. Possible remedies include improved fact-checking and media literacy education.
Professor John Turner
Title: “How to Conclude a Suspended Sports League?”
Co-authors: Ali Hassanzadeh (PhD alumnus) and Mojtaba Hosseini (PhD alumnus)
Accepted at: Manufacturing & Services Operations Management (Journal on Financial Times Top 50 list)
Abstract: Problem definition: Professional sports leagues may be suspended due to various reasons such as the recent COVID-19 pandemic. A critical question the league must address when re-opening is how to appropriately select a subset of the remaining games to conclude the season in a shortened time frame. Academic/ practical relevance: Despite the rich literature on scheduling an entire season starting from a blank slate, concluding an existing season is quite different. Our approach attempts to achieve team rankings similar to that which would have resulted had the season been played out in full. Methodology: We propose a data-driven model which exploits predictive and prescriptive analytics to produce a schedule for the remainder of the season comprised of a subset of originally-scheduled games. Our model introduces novel rankings-based objectives within a stochastic optimization model, whose parameters are first estimated using a predictive model. We introduce a deterministic equivalent reformulation along with a tailored Frank-Wolfe algorithm to efficiently solve our problem, as well as a robust counterpart based on min-max regret. Results: We present simulation-based numerical experiments from previous National Basketball Association (NBA) seasons 2004-2019, and show that our models are computationally efficient, outperform a greedy benchmark that approximates a non-rankings-based scheduling policy, and produce interpretable results. Managerial implications: Our data-driven decision-making framework may be used to produce a shortened season with 25-50% fewer games while still producing an end-of-season ranking similar to that of the full season, had it been played.
Professor Tonya Williams Bradford 2024 Outstanding Reviewer Award for the Journal of Marketing
Description: This award is a special recognition of outstanding work as a Reviewer for the Journal of Marketing (JM). Winners were selected from the over 180-member JM Editorial Review Board on the basis of review workload and constructiveness, thoroughness, and timeliness of reviews. Awardees were presented with a plaque to honor and celebrate their contributions.
Professor Vidyanand Choudhary 2024 Best Senior Editor Award for the Production and Operations Management (POM) Journal
Description: This award is a special recognition of outstanding work as a Senior Editor for the POM Journal. Only 7 Senior Editors for this award (out of 326 Senior Editors) were selected to receive this award for 2024. Awardees were presented with a plaque at the Production and Operations Management Society (POMS) Conference in April 2024.
Professor Lu Zheng 2024 Swiss Finance Institute Outstanding Paper Award
Description: The Swiss Finance Institute (SFI) is a private foundation created by Switzerland’s banking and finance community in cooperation with leading Swiss universities. It supports and advances research, training, and knowledge exchange in banking and finance. SFI annually awards a prize for an unpublished research paper that makes an outstanding contribution to the field of finance. Awardees are invited to receive their award and present their paper in June of the following year in Switzerland.
Paper Title: “Passive Investing and the Rise of MegaFirms”
Co-authors: Hao Jiang and Dimitri Vayanos
Abstract: We study how passive investing affects asset prices. Flows into passive funds raise disproportionately the stock prices of the economy’s largest firms, and especially those large firms that the market overvalues. These effects are sufficiently strong to cause the aggregate market to rise even when flows are entirely due to investors switching from active to passive. Our results arise because flows create idiosyncratic volatility for large firms, which discourages investors from correcting the flows’ effects on prices. Consistent with our theory, the largest firms in the S&P500 experience the highest returns and increases in volatility following flows into that index.
Retired Faculty
Professor Emerita New Faculty
Wong Professor of Accounting
Assistant Professor of Marketing
