Columbia Business School Research

How do firms repair their reputations after a serious accounting restatement? To answer this question, we review firms' press releases and identify 1,765 reputation-building actions taken by: (1) 94 restating firms in the periods before and after their restatement; and (2) a set of matched control firms during contemporaneous periods.

This research examines how consumers choose retailers when they are uncertain about store prices prior to shopping. Simulating everyday choice, participants made successive retailer choices where on each occasion they chose a retailer and only then learned product prices. The results of a series of studies demonstrated that participants were more likely to choose a retailer that offered an everyday low pricing strategy (EDLP) or that offered frequent small discounts over a retailer that offered infrequent large discounts.

This study examines the relation between securitization and loan performance using a comprehensive dataset from a major national mortgage lender. Loans remaining on the bank's balance sheet ex post incurred higher delinquency rates than sold loans, contrasting the negative relation between screening efforts and ex ante probability of loan sale explored by prior studies. Moreover, the performance gap between sold and retained loans was wider among the subsample of loans that were perceived as easier to resell.

Despite a 20-year trend toward integrated marketing communications, advertisers seldom coordinate television and search advertising campaigns. We find that television advertising for financial services brands increases both the number of related Google searches and searchers' tendency to use branded keywords in place of generic keywords. The elasticity of a brand's total searches with respect to its TV advertising is 0.17, an effect that peaks in the morning.

The current research establishes a first-mover disadvantage in negotiation. We propose that making the first offer in a negotiation will backfire when the sender reveals private information that an astute recipient can leverage to his or her advantage. In two experiments, we manipulated whether the first offer was purely distributive or revealed that the sender's preferences were compatible with the recipient's preferences (i.e., the negotiators wanted the same outcome on an issue).

We propose a framework for the joint study of the consumer's decision of where to buy and what to buy. The framework is rooted in utility theory where the utility is for a particular channel/brand combination. The framework contains firm actions, the consumer search process, the choice process, and consumer learning. We develop research questions within each of these areas. We then discuss methodological issues pertaining to the use of experimentation and econometrics.

This paper proposes an accounting framework that breaks up a country's gross exports into various value-added components by source and additional double-counted terms. Our parsimonious framework bridges a gap between official trade statistics (in gross value terms) and national accounts (in value-added terms), and integrates all previous measures of vertical specialization and value-added trade in the literature into a unified framework.

Purpose — The purpose of this paper is to measure the cumulative, holistic impact of discrete information and communication technologies. It also provides a glimpse of applications and service adoption, which complements more traditional perspectives such as technology penetration. This approach is utilized to measure achievements in implementing a policy such as Europe's Digital Agenda.

Recent findings of low societal consensus in cultural values suggest that our field’s dominant paradigm — culture as shared values — is a fallacy. The perennial persistence of this illusion may come from the fact that it appeals to the human brain’s hardwired capacity for essentialism. Evidence against value consensus, however, does not doom all shared-meaning models of culture (pace Schwartz, 2013).

Following the classic work of Mitjuschin, Polterovich and Milleron, necessary and sufficient as well as sufficient conditions have been developed for when the multicommodity Law of Demand holds. However, far less attention has been focused on the nature and properties of violations. To address these questions, the existing sufficient conditions although simpler in form are of little value unless they are also necessary. We show when the widely cited Mitjuschin and Poterovich sufficient condition also becomes necessary.

Learning requires acquiring and using knowledge. How do individuals acquire knowledge of another culture? How do they use this knowledge in order to operate proficiently in a new cultural setting? What kinds of training would foster intercultural learning? These questions have been addressed in many literatures of applied and basic research, featuring disparate concepts, methods and measures. In this paper, we review the insights from these different literatures. We note parallels among findings of survey research on immigrants, expatriate managers, and exchange students.

Risk free asset demand in the classic portfolio problem is shown to decrease with income if and only if the consumer's uncertainty preferences over assets satisfy the preference condition that the risk free asset is more readily substituted for the risky asset as the quantity of the latter increases. In this case, the risky asset is said to be "urgently needed" following the terminology of the classic certainty analysis of Johnson (1913). The urgently needed property tends to be more readily satisfied in uncertainty versus certainty settings.

Understanding country differences in temporal discounting is critical for extending incentive-based environmental policies successfully from developed countries to developing countries. We examined differences between Chinese and Americans in discounting of future financial and environmental gains and losses. In general, environmental use value was discounted significantly more than the monetary values, but environmental existence value was discounted similarly to the monetary values. Confirming previous research, we found that participants discounted gains significantly more than losses.

The article describes the potential negative consequences of the courses about academia, and especially the danger of weakening research and the innovation system of research universities. The MOOC courses may disrupt the structure of higher education because their business model is effective in de-linking the three components of an active University: teaching, research, and approval of credit for degree-granting courses. In the end, the article offers universities several ways to deal with the negative consequences of these MOOC courses.

Tens of millions of people are currently choosing health coverage on a state or federal health insurance exchange as part of the Patient Protection and Affordable Care Act. We examine how well people make these choices, how well they think they do, and what can be done to improve these choices. We conducted 6 experiments asking people to choose the most costeffective policy using websites modeled on current exchanges. Our results suggest there is significant room for improvement.

We study a scenario in which a firm designs the compensation contract for a salesperson who exerts unobservable effort to increase the level of uncertain demand and, jointly, the firm also decides the inventory level to be stocked. We use a newsvendor-type model in which actual sales depend on the realized demand but are limited by the inventory available, and unfulfilled demand cannot be observed. In this setup, under the optimal contract, the agent is paid a bonus for meeting a sales quota.

This paper presents a framework for addressing normative accounting issues for reporting to shareholders. The framework is an alternative to the emerging Conceptual Framework of the International Accounting Standards Board and the Financial Accounting Standards Board. The framework can be broadly characterized as a utilitarian approach to accounting standard setting. It has two main features. First, accounting is linked to valuation models under which shareholders use accounting information to values their stakes.

Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared to premiums in listed markets, the OTC illiquidity premium is several times higher, the size, value, and volatility premiums are similar, and the momentum premium is three times lower.

Historical cost accounting deals with uncertainty by deferring the recognition of earnings until the uncertainty has largely been resolved. Such accounting affects both earnings and book value and produces expected earnings growth deemed to be at risk. This paper shows that the earnings-to-price and book-to-price ratios that are the product of this accounting forecast both earnings growth and the risk to that growth.

It has been observed that ad-evoked feelings exert a positive influence on brand attitudes. To investigate the empirical generalizability of this phenomenon, we analyzed the responses of 1,576 consumers to 1,070 TV commercials from more than 150 different product categories. The findings suggest five empirical generalizations. First, ad-evoked feelings indeed have a substantial impact on brand evaluations, even under conditions that better approximate real marketplace settings than past studies did.

We propose that the psychological states individuals bring into newly formed groups can produce meaningful differences in status attainment. Three experiments explored whether experimentally created approach-oriented mindsets affected status attainment in groups, both immediately and over time. We predicted that approach-oriented states would lead to greater status attainment by increasing proactive behavior.

In transitions from state socialism, property rights are re-allocated to organizations and groups, creating new markets and new forms of economic enterprise that reshape the stratification order. A generation of research has estimated individual-level outcomes with income equations and mobility models, relying on broad assumptions about economic change. We redirect attention to the process of economic change that structures emerging markets.

Previous research suggests that there is a fundamental link between expansive body postures and feelings of power. The current research demonstrates that this link is not universal, but depends on people's cultural background (Western versus East Asian) and on the particular type of expansive posture enacted. Three types of expansive postures were examined in the present studies: the expansive-hands-spread-on-desk pose (Carney et al., 2010), the expansive-upright-sitting pose, and the expansive-feet-on-desk pose (Carney et al., 2010).

How likely is a catastrophic event that would substantially reduce the capital stock, GDP, and wealth? How much should society be willing to pay to reduce the probability or impact of a catastrophe? We answer these questions and provide a framework for policy analysis using a general equilibrium model of production, capital accumulation, and household preferences.

Hedge fund managers trade o the benefits of leveraging on the alpha-generating strategy against the costs of inefficient fund liquidation. In contrast to the standard risk-seeking intuition, even with a constant-return-to-scale alpha-generating strategy, a risk-neutral manager becomes endogenously risk-averse and decreases leverage following poor performance to increase the fund's survival likelihood. Our calibration suggests that management fees are the majority of the total compensation.

In this study of the impact of protests against Walmart (a first entrant) on Target (a second entrant) from 1998 to 2008 in U.S. geographic markets, we develop and test a theory of information spillovers from protests against corporations proposing to enter a new market. We argue that the number of protests directed against a first entrant is a noisy signal for the second entrant because such protests are likely to be dominated by protest-prone activists and so do not reflect the sentiments of the community.

If individuals buy a Snickers bar and subsequently see their favorite basketball team begin to play better, they might attribute this improved performance to their purchase decision. Even as consumers acknowledge that this type of control is irrational, we demonstrate that they are willing to superstitiously alter their purchase behavior (by choosing a less-preferred option) in hopes of helping their favorite team.

Perspective taking is often the glue that binds people together. However, we propose that in competitive contexts, perspective taking is akin to adding gasoline to a fire: It inflames already-aroused competitive impulses and leads people to protect themselves from the potentially insidious actions of their competitors. Overall, we suggest that perspective taking functions as a relational amplifier.

The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility (“uncertainty”), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being stronger.

We present a theoretical model of reappropriation — taking possession of a slur previously used exclusively by dominant groups to reinforce another group's lesser status. Ten experiments tested this model and established a reciprocal relationship between power and self-labeling with a derogatory group term. We first investigated precursors to self-labeling: Group, but not individual, power increased participants' willingness to label themselves with a derogatory term for their group. We then examined the consequences of such self-labeling for both the self and observers.

Consumer psychology faces serious issues of internal and external relevance. Most of these issues originate in seven fundamental problems with the way consumer psychologists plan and conduct their research that could be called the seven sins of consumer psychology.

We use longitudinal, disease-level data to analyze the impact of pharmaceutical innovation on longevity and medical expenditure in Sweden, where mean age at death increased by 1.88 years during the period 1997-2010. Pharmaceutical innovation is estimated to have increased mean age at death by 0.60 years during the period. The estimates indicate that longevity depends on the number of drugs to treat a disease, not the number of drug classes.

Markets for information products exhibit varying degrees of competition on both the supply and the demand side. This paper studies the potential complementarity of information products, equilibrium information buying behaviors and information price setting in such markets. Our game-theoretic model consists of two information providers selling imperfect information to two competing clients and allows for different information quality levels as well as varying degrees of client competition.

Defaults have such powerful and pervasive effects on consumer behavior that they could be considered “hidden persuaders” in some settings. Ignoring defaults is not a sound option for marketers or consumer policy makers. The authors identify three theoretical causes of default effects—implied endorsement, cognitive biases, and effort—to guide thought on the appropriate marketer and policy maker responses to the issues posed for consumer welfare and consumer autonomy, including proposals for benign “nudges” of behavior.

Accusations of wrongdoing, baseless or justified, can severely tarnish a company's reputation. Once disseminated, even baseless accusations can persist and cause considerable damage for a company. This study examines the proactive crisis communication strategy of inoculating individuals against invalid accusations before they go viral. An experiment was conducted in a real world consumer context among members of an online consumer panel using an electronics discounter as the research stimulus.

We investigate the intrinsic motivation of individuals to report, and thereby sanction, fellow group members who lie for personal gain. We further explore the changes in lying and reporting behavior that result from giving individuals a say in who joins their group. We find that enough individuals are willing to report lies such that in fixed groups lying is unprofitable. However, we also find that when groups can select their members, individuals who report lies are generally shunned, even by groups where lying is absent.