Breaking the Cycle: How the News and Markets Created a Negative Feedback Loop in COVID-19
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
Adapted from “Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments,” by Laura Boudreau of Columbia Business School, Julia Cajal Grossi of the Geneva Graduate Institute, and Rocco Macchiavello of the London School of Economics.
Adapted from “Online Advertising as Passive Search,” by Raluca M. Ursu of New York University Stern School of Business, Andrey Simonov of Columbia Business School, and Eunkyung An of New York University Stern School of Business.
This paper from Columbia Business School, “Meaning of Manual Labor Impedes Consumer Adoption of Autonomous Products,” explores marketing solutions to some consumers’ resistance towards autonomous products. The study was co-authored by Emanuel de Bellis of the University of St. Gallen, Gita Johar of Columbia Business School, and Nicola Poletti of Cada.
Co-authored by John B. Donaldson of Columbia Business School, “The Macroeconomics of Stakeholder Equilibria,” proposes a model for a purely private, mutually beneficial financial agreement between worker and firm that keeps decision-making in the hands of stockholders while improving the employment contract for employees.
At Columbia Business School, our faculty members are at the forefront of research in their respective fields, offering innovative ideas that directly impact the practice of business today. A quick glance at our publication on faculty research, CBS Insights, will give you a sense of the breadth and immediacy of the insight our professors provide.
As a student at the School, this will greatly enrich your education. In Columbia classrooms, you are at the cutting-edge of industry, studying the practices that others will later adopt and teach. As any business leader will tell you, in a competitive environment, being first puts you at a distinct advantage over your peers. Learn economic development from Ray Fisman, the Lambert Family Professor of Social Enterprise and a rising star in the field, or real estate from Chris Mayer, the Paul Milstein Professor of Real Estate, a renowned expert and frequent commentator on complex housing issues. This way, when you complete your degree, you'll be set up to succeed.
Columbia Business School in conjunction with the Office of the Dean provides its faculty, PhD students, and other research staff with resources and cutting edge tools and technology to help push the boundaries of business research.
Specifically, our goal is to seamlessly help faculty set up and execute their research programs. This includes, but is not limited to:
All these activities help to facilitate and streamline faculty research, and that of the doctoral students working with them.
We consider the optimal design of mortgage-backed securities (MBS) in a dynamic setting in which a mortgage underwriter with limited liability can engage in costly hidden effort to screen borrowers and can sell loans to investors. We show that (i) the timing of payments to the underwriter is the key incentive mechanism, (ii) the maturity of the optimal contract can be short, and that (iii) bundling mortgages is efficient as it allows investors to learn about underwriter effort more quickly, an information enhancement effect.
Some conflicts are experienced as depleting and exhausting whereas others are experienced as stimulating and invigorating. We explored the possibility that the focus of perceived threat in conflict determines whether it produces taxing stress or vitalizing arousal. Studies 1 and 2 established that attending to threats to interests, relationships, and identities during interpersonal conflict differentially relates to motivational goals, empathy and perspective-taking, femininity, and a collectivistic self-construal.
Two quantitative meta-analyses examined how the presence of visual channels, vocal channels, and synchronicity influences the quality of outcomes in negotiations and group decision making. A qualitative review of the literature found that the effects of communication channels vary widely and that existing theories do not sufficiently account for these contradictory findings.
Do situational cues to individuals' social identities shift the way they look at objects? Do such shifts hinge on the structure of individuals' self-concept? We hypothesized individuals with integrated identities would exhibit attentional biases congruent with identity cues (assimilative response), whereas those with nonintegrated identities would exhibit attentional biases incongruent with identity cues (contrastive response).
This paper argues that there is a Coasean Bargain available to banks, Long-term Investors, and Bank Regulators around a particular form of "Contingent Capital." By purchasing rights to issue equity in crisis events at a pre-specified price from Long-term Investors, banks can ensure that they will have sufficient regulatory capital available when they need it most: in a crisis. By selling these rights (effectively, a form of crisis insurance) long-term investors can monetize their counter-cyclical investments strategies in banks and, thus, obtain an adequate return as long-term investors.
We propose that managers adept at thinking about their cultural assumptions (cultural metacognition) are more likely than others to develop affect-based trust in their relationships with people from different cultures, enabling creative collaboration. Study 1, a multi-rater assessment of managerial performance, found that managers higher in metacognitive cultural intelligence (CQ) were rated as more effective in intercultural creative collaboration by managers from other cultures.
This monograph presents existing and new research on three approaches to multiagent incentives. The goal of all three approaches is to find theories that better explain observed institutions than the standard approach has.
Standard principal-agent models commonly invoked to explain executive pay practices do not account for the involvement of third-party intermediaries in the CEO labor market. This paper investigates the influence of one such intermediary — talent agents who seek out prospective employers and negotiate pay packages on behalf of CEOs. Jensen, Murphy and Wruck (2004) characterize the hiring of such agents as an obvious example of rent extraction by incoming CEOs.
The current research investigated how patterns of home and host cultural identification can explain which individuals who have lived abroad achieve the greatest creative and professional success. We hypothesized that individuals who identified with both their home and host cultures (i.e., biculturals) would show enhanced creativity and professional success compared with individuals who identified with only a single culture (i.e., assimilated and separated individuals).
Using informant reports on working professionals, we explored the role of listening in interpersonal influence and how listening may account for at least some of the relationship between personality and influence. The results extended prior work which has suggested that listening is positively related to influence for informational and relational reasons.
Using informant reports on working professionals, we explored the role of listening in interpersonal influence and how listening may account for at least some of the relationship between personality and influence. The results extended prior work which has suggested that listening is positively related to influence for informational and relational reasons.
Increasingly, individuals identify with two or more cultures. Prior research has found the degree to which individuals chronically integrate these identities (bicultural identity integration; BII) moderates responses to cultural cues: High BII individuals assimilate (adopting biases that are congruent with norms of the cued culture), whereas low BII individuals contrast (adopting biases that are incongruent with these norms). The authors propose BII can also be a psychological state and modulated by shifts in processing styles.
In social dilemmas, negotiations, and other forms of strategic interaction, mind-reading — intuiting another party's preferences and intentions — has an important impact on an actor's own behavior. In this paper, we present a model of how perceivers shift between social projection (using one's own mental states to intuit a counterpart's mental states) and stereotyping (using general assumptions about a group to intuit a counterpart's mental states).
Travis Proulx and Michael Inzlicht offer an intriguing and ambitious model that seeks to parsimoniously capture the full range of meaning threats and the many psychological mechanisms that people use to cope with those threats. In this commentary, we articulate both our agreements and our disagreements with their meaning maintenance model (MMM). In general, we find the model both compelling and intriguing, and we find promise in several of its core assertions. However, we believe the current model, like any incipient model, has yet to incorporate some critical core constructs.
Four experiments examined the effects of perspective taking on processes contributing to stereotype maintenance: biases in social memory, behavior explanations, and information seeking. The first two experiments explored whether perspective taking influences memory and spontaneous explanations for stereotype-relevant behaviors. Relative to participants in an objective-focus condition, perspective takers exhibited better recall of stereotype-inconsistent behaviors (Experiment 1) and spontaneously generated more dispositional explanations for them (Experiment 2).
The current paper reviews the concept of power and offers a new architecture for understanding how power guides and shapes consumer behavior. Specifically, we propose that having and lacking power respectively foster agentic and communal orientations that have a transformative impact on perception, cognition, and behavior. These orientations shape both who and what consumers value. New empirical evidence is presented that synthesizes these findings into a parsimonious account of how power alters consumer behavior as a function of both product attributes and recipients.
Five experiments demonstrate that experiencing power leads to overconfident decision-making. Using multiple instantiations of power, including an episodic recall task (Experiments 1–3), a measure of work-related power (Experiment 4), and assignment to high- and low-power roles (Experiment 5), power produced overconfident decisions that generated monetary losses for the powerful. The current findings, through both mediation and moderation, also highlight the central role that the sense of power plays in producing these decision-making tendencies.
Five experiments investigated the effect of power on social distance. Although increased social distance has been suggested to be an underlying mechanism for a number of the effects of power, there is little empirical evidence directly supporting this claim. Our first three experiments found that power increases social distance toward others. In addition, these studies demonstrated that this effect is (a) mediated by self-sufficiency and (b) moderated by the perceived legitimacy of power — only when power is seen as legitimate, does it increase social distance.
The current research explored the neural mechanisms linking social status to perceptions of the social world. Two fMRI studies provide converging evidence that individuals lower in social status are more likely to engage neural circuitry often involved in "mentalizing" or thinking about others' thoughts and feelings.
Previous research suggests that cortisol can affect cognitive functions such as memory, decision making and attentiveness to threat-related cues. Here, we examine whether increases in cortisol, brought on by an acute social stressor, influence threat-related decision making. Eighty-one police officers completed a standardized laboratory stressor and then immediately completed a computer simulated decision making task designed to examine decisions to accurately shoot or not shoot armed and unarmed Black and White targets.
The current research explores how roles that possess power but lack status influence behavior toward others. Past research has primarily examined the isolated effects of having either power or status, but we propose that power and status interact to affect interpersonal behavior. Based on the notions that a) low-status is threatening and aversive and b) power frees people to act on their internal states and feelings, we hypothesized that power without status fosters demeaning behaviors toward others.
Five experiments tested the hypothesis that there is a bi-directional link between ideological (multiculturalism and color-blindness) and self-regulatory (perspective-taking and stereotype-suppression) approaches to managing diversity. A first set of experiments found that exposure to multiculturalism facilitated perceptual and conceptual forms of perspective-taking.
Using informant reports on working professionals, we explored the role of listening in interpersonal influence and how listening may account for at least some of the relationship between personality and influence. The results extended prior work which has suggested that listening is positively related to influence for informational and relational reasons.
Using informant reports on working professionals, we explored the role of listening in interpersonal influence and how listening may account for at least some of the relationship between personality and influence. The results extended prior work which has suggested that listening is positively related to influence for informational and relational reasons.
This research examines how two dimensions of moral intensity involved in a corporation's external crisis response — magnitude of effectiveness and interpersonal proximity — influence observer perceptions of and behavioral intentions toward the corporation. Across three studies, effectiveness decreased negative perceptions and increased pro-organizational intentions via ethical judgment of the response. Moreover, the two dimensions interacted such that a response high in proximity but low in effectiveness led to more negative perceptions and to less pro-organizational intentions.
Past research on pay dispersion has found that hierarchy hurts commitment, cooperation, and performance. In contrast, functional theories of social hierarchy propose that hierarchy can facilitate coordination and performance. We investigated the effects of hierarchical differentiation using a sample of professional basketball teams from the National Basketball Association (NBA). Analyses of archival data revealed that hierarchical differentiation in pay and participation enhanced team performance by facilitating intragroup coordination and cooperation.
It is self-evident that performing poorly on a task makes people dissatisfied relative to performing well. How can this negative affect be overcome? We provide an adaptive strategy for dealing with poor performance. Experiment 1 shows that poor performers tend to recruit the highest potential performance as a comparison standard and hence are dissatisfied. However, if they are reminded that they set their own low goals, and that these goals were met, they are as satisfied as better performers.
A perennial question facing managers is how much decision latitude to give their employees at work. The current research investigates how decision latitude affects employees' perceptions of managers' personalities and, in turn, their leadership effectiveness. Results from three studies using different methods (two experiments and a survey) indicate an inverted-U shaped relationship between degree of decision latitude and leadership effectiveness perceptions.
A growing literature suggests that even in the absence of any ability to predict returns, holding options on the benchmarks or trading frequently can generate positive alpha. The ratio of alpha to its tracking error appraises a fund's performance. This paper derives the performance-maximizing strategy, which turns out to be a variant of a buy-write strategy, and the least upper bound on such performance enhancement. If common equity indices are used as benchmarks, the potential alpha generated from trading frequently can be substantial in magnitude, but it carries considerable risk.
Firms are increasingly seeking to harness the potential of social networks for marketing purposes. Therefore, marketers are interested in understanding the antecedents and consequences of relationship formation within networks and in predicting interactivity among users. The authors develop an integrated statistical framework for simultaneously modeling the connectivity structure of multiple relationships of different types on a common set of actors.
Power and choice represent two fundamental forces that govern human behavior. Scholars have largely treated power as an interpersonal construct involving control over other individuals, whereas choice has largely been treated as an intrapersonal construct that concerns the ability to select a preferred course of action. Although these constructs have historically been studied separately, we propose that they share a common foundation — that both are rooted in an individual's sense of personal control.
The ability of humans to display bodily expressions that contradict mental states is an important developmental adaptation. The authors propose that mind-body dissonance, which occurs when bodily displayed expressions contradict mentally experienced states, signals that the environment is unusual and that boundaries of cognitive categories should be expanded to embrace atypical exemplars. Four experiments found that mind-body dissonance increases a sense of incoherence and leads to category expansion.
Theories of visionary leadership propose that groups bestow leadership on exceptional group members. In contrast, social identity perspectives claim that leadership arises, in part, from a person's ability to be seen as representative of the group. Integrating these perspectives, the authors propose that effective leaders often share group members' perspectives concerning the present, yet offer a unique and compelling vision for the group's future.
Extant research recognizes that firms exploit regulatory variations to their advantage but depicts such regulatory arbitrage as a dyadic process between firms and regulators. We extend this account by including the political rivals of a firm and suggest that firms view regulatory differences as part of a corporate political opportunity structure, and exploit regulatory variations to disadvantage their rivals. Empirically, we focus on variations in right-to-work (RTW) laws which signal the pro-business climate in a state and exist in twenty-two of the 50 American states.
Scarcity has long been known to impact consumers' choices. Yet, the impact of shelf-based scarcity in retail environments, created by stocking level depletion, has received almost no attention in the literature. Indeed, little research to date has even examined if consumers will attend to shelf-based scarcity in retail environments, much less how this cue can impact choice. A priori, given the inherently noisy and cue-filled nature of retail environments, it is quite reasonable to expect that shelf-based scarcity would play little to no role in consumers' choices.
Research examining both the organizing and activating effects of testosterone in one-shot bargaining contexts has been vexed by inconsistencies. Some research finds that high-testosterone men are more likely to reject unfair offers in an ultimatum game and exogenous administration of testosterone to men leads to less generous offers. In contrast, other research finds that higher prenatal exposure to testosterone predicts more generous dictator game offers and administering testosterone to women leads to more generous ultimatum game offers.
We characterize the optimal mortgage contract in a continuous time setting with stochastic growth in house price and income, costly foreclosure, and a risky borrower who requires incentives to repay his debt. We show that many features of subprime loans can be consistent with properties of the optimal contract and that, when house prices decline, mortgage modification can create value for borrowers and lenders.
Historical studies reveal how organizational markets supplied artifacts that became fashionable because they met not only consumers' cultural tastes, but also their technological preferences. This article calls such artifacts cultural-technological fusions. The digital mode of production tends to generate more types of fashionable fusions, which replace each other at a growing rate, and travel increasingly swiftly across consumers globally.
We propose an origination-and-contingent-distribution model of banking, in which liquidity demand by short-term investors (banks) can be met with cash reserves (inside liquidity) or sales of assets (outside liquidity) to long-term investors (hedge funds and pension funds). Outside liquidity is a more efficient source, but asymmetric information about asset quality can introduce a friction in the form of excessively early asset trading in anticipation of a liquidity shock, excessively high cash reserves, and too little origination of assets by banks.
We propose an origination-and-contingent-distribution model of banking, in which liquidity demand by short-term investors (banks) can be met with cash reserves (inside liquidity) or sales of assets (outside liquidity) to long-term investors (hedge funds and pension funds). Outside liquidity is a more efficient source, but asymmetric information about asset quality can introduce a friction in the form of excessively early asset trading in anticipation of a liquidity shock, excessively high cash reserves, and too little origination of assets by banks.
We propose that hierarchy is such a prevalent form of social organization because it is functionally adaptive and enhances a group's chances of survival and success. We identify five ways in which hierarchy facilitates organizational success. Hierarchy (a) creates a psychologically rewarding environment; (b) motivates performance through hierarchy-related incentives; (c) capitalizes on the complementary psychological effects of having versus lacking power; (d) supports division of labor, and, as a result, coordination; and (e) reduces conflict and enhances voluntary cooperation.
Using the employee opinion survey responses from several thousand employees working in 193 branches of a major U.S. bank, we consider whether there is a distinctive workplace component to employee attitudes despite the common set of corporate human resource management practices that cover all the branches. Several different empirical tests consistently point to the existence of a systematic branch-specific component to employee attitudes.
Research on the relationship between teachers' characteristics and teacher effectiveness has been underway for over a century, yet little progress has been made in linking teacher quality with factors observable at the time of hire. However, most research has examined a relatively small set of characteristics that are collected by school administrators in order to satisfy legal requirements and set salaries.
The empty creditor problem arises when a debtholder has obtained insurance against default but otherwise retains control rights in and outside bankruptcy. We analyze this problem from an ex-ante and ex-post perspective in a formal model of debt with limited commitment, by comparing contracting outcomes with and without insurance through credit default swaps (CDS).
Social power, alcohol intoxication, and anonymity all have strong influences on human cognition and behavior. However, the social consequences of each of these conditions can be diverse, sometimes producing prosocial outcomes and other times enabling antisocial behavior. We present a general model of disinhibition to explain how these seemingly contradictory effects emerge from a single underlying mechanism: The decreased salience of competing response options prevents activation of the Behavioral Inhibition System (BIS).
Financial openness is often associated with higher rates of economic growth. We show that the impact of openness on factor productivity growth is more important than the effect on capital growth. This explains why the growth effects of liberalization appear to be largely permanent, not temporary. We attribute these permanent liberalization effects to the role financial openness plays in stock market and banking sector development, and to changes in the quality of institutions. We find some indirect evidence of higher investment efficiency post-liberalization.
This research examines how consumers' spending on themselves versus others can be affected by temporary shifts in their states of power. Five experiments found that individuals experiencing a state of power spent more money on themselves than on others, whereas those experiencing a state of powerlessness spent more money on others than on themselves. This effect was observed using a variety of power manipulations (hierarchical roles, print advertisements, episodic recall, and mental role-playing), across spending intentions and actual dollars spent, and among college and national samples.
A major governance problem in closely-held corporations arising from the illiquidity of shares is the majority shareholders' expropriation of minority shareholders. As a solution, legal and finance research recommends that the main shareholder surrender some control to minority shareholders via ownership rights. We test this proposition on a large dataset of closely-held corporations. We find that shared-ownership firms report substantially larger return on assets (up to 14 percentage points) and lower expense-to-sales ratios.