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.
This paper provides a theoretical analysis of the efficiency of prepayment penalties in a dynamic competitive lending model with risky borrowers and costly default. When considering improvements in the borrower's creditworthiness as one of the reasons for refinancing mortgages, we show that refinancing penalties can be welfare improving, and that they can be particularly beneficial to riskier borrowers in the form of lower mortgage rates, reduced defaults, and increased availability of credit.
This paper provides a theoretical analysis of the efficiency of prepayment penalties in a dynamic competitive lending model with risky borrowers and costly default. When considering improvements in the borrower's creditworthiness as one of the reasons for refinancing mortgages, we show that refinancing penalties can be welfare improving, and that they can be particularly beneficial to riskier borrowers in the form of lower mortgage rates, reduced defaults, and increased availability of credit.
In this paper, we develop an account of the failure of private market-governance institutions to maintain market order by highlighting how control of their distributional function by powerful elites limits their regulatory capacity. We examine the New York Clearing House Association (NYCHA), a private market-governance institution among commercial banks in Manhattan that operated from 1853 to 1913.
A high quality customer database is a cornerstone of successful interactive marketing strategies and tactics. Based on the notion that customer data quality is not only a technical but also an organizational problem, this study develops and tests an organizational learning framework of the relationship between organizational processes, customer data quality and firm performance. The findings show that high quality customer data impact both customer and business performance and that the most important driver of customer data quality comes from the executive suite.
Negative social feedback is often a source of distress. However, self-verification theory provides the counterintuitive explanation that negative feedback leads to less distress when it is consistent with chronic self-views. Drawing from this work, the present study examined the impact of receiving self-verifying feedback on outcomes largely neglected in prior research: implicit responses (i.e., physiological reactivity, facial expressions) that are difficult to consciously regulate and downstream behavioral outcomes.
Motivated by recent empirical work, this paper formalizes a theory of competitive savings — an arms race in household savings for mating competition that is made more fierce by an increase in the male-to-female ratio in the pre-marital cohort. Relative to the empirical work, the theory can clarify a number of important questions: What determines the strength of the savings response by males (or households with a son)? Can women (or households with a daughter) dis-save? What are the conditions under which aggregate savings would go up in response to a higher sex ratio?
Social scientists have spent decades studying how individuals achieve status within organizational groups — that is, how they gain respect, prominence, and influence in the eyes of others. We know, for example, that demographics matter: People of the historically dominant race and gender and a respected age (white men over 40 in the western corporate world) are typically afforded higher status than everyone else.
Studies of social judgment found that the way bicultural individuals respond to cultural cues depends on their cultural identity structure. Biculturals differ in the degree to which they represent their two cultural identities as integrated (vs. nonintegrated), which is assessed as high (vs. low) bicultural identity integration (BII), respectively. High BII individuals assimilate to cultural cues, yet low BII individuals contrast to these cues. The current studies reveal that this dynamic extends to consumer behavior and elucidate the underlying psychological mechanism.
We propose and test a framework that describes the relationship between network structures and job performance. We provide an integration of the current conceptualizations of social capital as they pertain to job performance outcomes by taking a multi-dimensional view of job performance. We break down job performance into creativity, decision-making, task execution, and teamwork, and distinguish the effect of structural holes within and across the organizational boundary on these four job performance domains.
Traditional advertising, such as TV and print advertising, primarily builds awareness of a firm's product among consumers, whereas sponsored search advertising on a search engine can target consumers closer to making a purchase because they reveal their interest by searching for a relevant keyword.
This chapter provides a critical review of the emerging field of consumer experience and experiential marketing.
An interview with Gilles Fontaine, deputy chief executive officer (CEO) of IDATE, and economics professor Eli Noam of Columbia Business School is presented. When asked to define cord-cutting from a U.S. or European perspective, Noam says it refers to the dropping by consumers of expensive cable television (TV) subscriptions in exchange for online TV access. Fontaine explains why cord-cutting is not happening in Europe. Noam discusses his outlook for the triple-play model of cable firms.
We show that counting downward while performing a task shortens the perceived duration of the task compared to counting upward. People perceive that less time has elapsed when they were counting downward versus upward while using a product (Studies 1 and 3) or watching geometrical shapes (Study 2). The counting direction effect is obtained using both prospective and retrospective time judgments (Study 3), but only when the count range begins with the number “1” (Study 2).
Five studies explore observers' condemnation of passive victims. Studies 1 and 2 examine the role of observers' behavioral forecasts in condemning passive victims of sexual harassment. Observers generally predicted that they would engage in greater confrontation than victims typically do. More importantly, the more confrontation participants predicted they would engage in, the more they condemned the passive victim, and the less willing they were to recommend the victim for a job and to work with her.
We present a method that dynamically designs elicitation questions for estimating preferences, focusing on the parameters of cumulative prospect theory and time discounting models. Typically these parameters are elicited by presenting decision makers with a series of choices between alternatives, gambles or delayed payments. The method dynamically (i.e., adaptively) designs such choices to optimize the information provided by each choice, while leveraging the distribution of the parameters across decision makers (heterogeneity) and capturing response error.
We present a method that dynamically designs elicitation questions for estimating preferences, focusing on the parameters of cumulative prospect theory and time discounting models. Typically these parameters are elicited by presenting decision makers with a series of choices between alternatives, gambles or delayed payments. The method dynamically (i.e., adaptively) designs such choices to optimize the information provided by each choice, while leveraging the distribution of the parameters across decision makers (heterogeneity) and capturing response error.
We provide insights into earnings quality from a survey of 169 CFOs of public companies and in-depth interviews of 12 CFOs and two standard setters.
Previous research finds that consumers classify in-group (but not out-group) members as integral to their social-self. The present research is the first to propose and find that consumers also classify owned (but not unowned) objects as integral to their personal-self (Experiment 1).
For bicultural individuals, visual cues of a setting’s cultural expectations can activate associated representations, switching the frames that guide their judgments. Research suggests that cultural cues may affect judgments through automatic priming, but has yet to investigate consequences for linguistic performance. The present studies investigate the proposal that heritage-culture cues hinder immigrants’ second-language processing by priming first-language structures. For Chinese immigrants in the United States, speaking to a Chinese (vs.
For managers, intercultural effectiveness requires forging close working relationships with people from different cultural backgrounds (Black, Mendenhall, & Oddou, 1991). Recent research with executives has found that higher cultural metacognition is associated with affective closeness and creative collaboration in intercultural relationships (Chua, Morris, & Mor, & 2012). However, little is known about the social cognitive mechanisms that facilitate the performance of individuals who score high on cultural metacognition.
This article derives and evaluates estimates of the implied cost of equity capital of U.S. insurance companies. During most of the period December 1981 through January 2010, the monthly median implied equity risk premium ranged between 4% and 8%, with a time-series mean of 6.2%. However, during the financial crisis of 2008–2009, the equity premium reached unprecedented levels, exceeding 15% in November 2008.
It is standard in economics to assume that assets are normal goods and demand is downward sloping in price. This view has its theoretical foundation in the classic single period model of Arrow with one risky asset and one risk free asset, where both are assumed to be held long, and preferences exhibit decreasing absolute risk aversion and increasing relative risk aversion.
We empirically study the motivations of users to contribute content to social media in the context of the popular microblogging site Twitter. We focus on non-commercial users who do not benefit financially from their contributions. Previous literature suggests two main possible sources of motivation to post content for these users: intrinsic motivation and image-related motivation. We leverage the fact that these two types of motivation give rise to different predictions as to whether users should increase their contributions when their number of followers (audience size) increases.
This paper is devoted to the findings of a bibliometric analysis of 52 syllabi on economic sociology provided by the members of the American Sociological Association section "Economic Sociology" and scholars from the UK, France, Germany, and Russia. In addition, the initial collection was expanded to course syllabi submitted from outside of sociology, including management departments, policy programs and anthropology. The analysis aims at measuring to what extent economic sociologists are consensual and have an agreement upon a set of core texts.
We develop a liability driven investment framework that incorporates downside risk penalties for not meeting liabilities. The shortfall between the asset and liabilities can be valued as an option which swaps the value of the endogenously determined optimal portfolio for the value of the liabilities. The optimal portfolio selection exhibits endogenous risk aversion and as the funding ratio deviates from the fully funded case in both directions, effective risk aversion decreases.
In one laboratory study and one field study conducted with a large, representative sample of respondents, we show that seemingly innocuous questions that precede a conjoint task, such as demographic and usage-related screening questions can alter the price sensitivities recovered from the main conjoint task. The findings demonstrate that whether these prior questions use broad response categories (i.e., few scale points) or narrow response categories (i.e., many scale points) systematically influences consumers' price sensitivity in a CBC (Choice Based Conjoint) study.
While customer management has become a top priority for practitioners and academics, little is known about how managers actually make customer management decisions. Our study addresses this gap and uses the adaptive decision maker as well as the fast and frugal heuristics frameworks to gain a better understanding of managerial decision making. Using the process-tracing tool MouselabWEB, we presented sales managers in retail banking with three typical customer management prediction tasks.
Successful businesspeople are often attributed somewhat mystical talents, such as the ability to mesmerize an audience or envision the future. We suggest that this mystique — the way some managers are perceived by observers — arises from the intuitive logic that psychologists and anthropologists call magical thinking. Consistent with this account, Study 1 found that perceptions of a manager's mystique are associated with judgments of his/her charismatic vision and ability to forecast future business trends.
The 2008 financial crisis exemplifies significant uncertainties in corporate financing conditions. We develop a unified dynamic q- theoretic framework where firms have both a precautionary-savings motive and a market-timing motive for external financing and payout decisions, induced by stochastic financing conditions. The model predicts (1) cuts in investment and payouts in bad times and equity issues in good times even without immediate financing needs; (2) a positive correlation between equity issuance and stock repurchase waves.
How are the designs of corporate buildings used to create meaning and project a corporate image and personality" We distinguish functionalist architecture ("form follows function"), which focuses on the primary, utilitarian function of a building, from experiential architecture ("from function to form"), which uses the form of a building to communicate symbolically about the organization.
We provide evidence on the long-standing concern about the potential conflicts of interest of auditors that provide clients with non-audit services using rarely explored non-audit services fee data from 1978 to 1980. In this setting, we find evidence of improved earnings quality when auditors provide non-audit services, especially those related to information services. This is consistent with better audit quality resulting from knowledge spillovers in the joint offering of audit and consulting services.
Eurozone members are supposedly constrained by the fiscal caps of the Stability and Growth Pact. Yet ever since the birth of the euro, members have postponed painful adjustment. Wishful thinking has played an important role in this failure. We find that governments' forecasts are biased in the optimistic direction, especially during booms. Eurozone governments are especially over-optimistic when the budget deficit is over the 3 % of GDP ceiling at the time the forecasts are made. Those exceeding this cap systematically but falsely forecast a rapid future improvement.
An agent advises a principal on selecting one of multiple projects or an outside option. The agent is privately informed about the projects' benefits and shares the principal's preferences except for not internalizing her value from the outside option. We show that for moderate outside option values, strategic communication is characterized by pandering: the agent biases his recommendation toward "conditionally better-looking" projects, even when both parties would be better of with some other project. A project that has lower expected value can be conditionally better-looking.
The current research explores whether momentary changes in power can shift professional interview outcomes. Two experiments manipulated power by asking applicants to recall a time they had or lacked power prior to writing a job application letter (Experiment 1) or being interviewed for admission to business schools (Experiment 2).
People habitually use round prices as first offers in negotiations. We test whether the specificity with which a first offer is expressed has appreciable effects on first-offer recipients' perceptions and strategic choices. Studies 1a & b establish that first-offer recipients make greater counteroffer adjustments to round versus precise offers. Study 2 demonstrates this phenomenon in an interactive, strategic exchange.
People habitually use round prices as first offers in negotiations. We test whether the specificity with which a first offer is expressed has appreciable effects on first-offer recipients' perceptions and strategic choices. Studies 1a & b establish that first-offer recipients make greater counteroffer adjustments to round versus precise offers. Study 2 demonstrates this phenomenon in an interactive, strategic exchange.
The U.S. government has mandated that, in a catastrophic event, metropolitan areas need to be capable of caring for 50 burn-injured patients per million population. In New York City, this corresponds to 400 patients. There are currently 140 burn beds in the region, which can be surged up to 210. To care for additional patients, hospitals without burn centers will be used to stabilize patients until burn beds become available.
The U.S. government has mandated that, in a catastrophic event, metropolitan areas need to be capable of caring for 50 burn-injured patients per million population. In New York City, this corresponds to 400 patients. There are currently 140 burn beds in the region, which can be surged up to 210. To care for additional patients, hospitals without burn centers will be used to stabilize patients until burn beds become available.
We consider a multi-supplier, single-manufacturer supply chain where each supplier sells a different component at varying quality levels. The manufacturer has to decide on which quality level to choose for each component, trading-off the total cost and total quality. Each supplier decides on a price per unit quality level for its component. We characterize the strategic interaction among the suppliers and analyze the inefficiencies. We find that the inefficiencies due to such quality competition can be quite significant.
Proximity to plants makes it easier for headquarters to monitor and acquire information about plants. In this article, I estimate the effects of headquarters' proximity to plants on plant-level investment and productivity. Using the introduction of new airline routes as a source of exogenous variation in proximity, I find that new airline routes that reduce the travel time between headquarters and plants lead to an increase in plant-level investment of 8% to 9% and an increase in plants' total factor productivity of 1.3% to 1.4%.
There is a conventional wisdom in economics that public debt can serve as a substitute for private credit if private borrowing is limited. The purpose of this paper is to show that, while a government could in principle use such a policy to fully relax borrowing limits, this is not generally optimal. In our economy, agents invest in a short term asset, a long term asset, and government bonds. Agents are subject to idiosyncratic liquidity shocks prior to the maturity of the long term asset. We show that a high public debt policy fully relaxes private borrowing limits and is suboptimal.
This study examines the accuracy of relative valuation methods in the U.S. insurance industry, using price as a proxy for intrinsic value. The approaches differ in terms of the fundamentals used, the adjustments made to the fundamentals, the use of conditioning variables, and the selection of comparables. Selected findings include the following. First, over the last decade, book value multiples have performed significantly better than earnings multiples in valuing insurance companies.
In this article we argue that advances made in automation, communication, and manufacturing portend a dramatic reversal of the “bigger is better” approach to cost reductions prevalent in many basic infrastructure industries; for example, transportation, electric power generation, and raw material processing. We show that the traditional reductions in capital costs achieved by scaling up in size are generally matched by learning effects in the mass production process when scaling up in numbers instead. In addition, using the U.S.
Global economic transactions such as foreign direct investment (FDI) must extend over an institutional abyss between the jurisdiction, and therefore protection, of the states involved. Intergovernmental organizations (IGOs) represent an important attempt to span this abyss. The authors use a network approach to demonstrate that the connections between two countries, through joint membership in the same IGOs, are associated with a large positive influence on the FDI that flows between them.
This paper reviews recent research at the intersection of industrial organization and corporate finance on credit default swap (CDS) markets. These markets have been at the center of the financial crisis of 2007-2009 and many aspects of their operation are not well understood. The paper covers topics such as counterparty risk in CDS markets, the "empty creditor problem," "naked" CDS positions, the super-senior status of credit (and other) derivatives in Chapter 11 bankruptcy, and strategic behavior in CDS settlement auctions.
Large long-run differences in average house price appreciation across metropolitan areas over the past 50 years have led to wide spatial dispersion in house prices. We show this can be explained in large part by inelastic supply of land in some attractive locations combined with an increasing number of high-income households nationally. The resulting high house prices crowd out lower-income households from living in high price growth superstar housing markets, inducing a right-shift in the local area income distribution.