Columbia Business School Research

In this paper we study the determinants of business groups’ ownership structure using unique panel data on Korean chaebols. In particular, we attempt to understand how groups form over time. We find that chaebols grow vertically (that is, pyramidally) as the family uses well-established group firms (“central firms”) to set up and acquire firms that have low pledgeable income (e.g., low profitability) and high acquisition premia.

Blight findings have functioned as a cornerstone for condemnation since the great urban decline of the mid-twentieth century prompted governments at all levels throughout the country to intervene in the real estate market. Elements of blight, and then the term itself, became a basis for this intervention. But the use of blight as a basis for takings has become increasingly controversial as its application has migrated from slum clearance to urban renewal, then to economic development projects, and on to revenue-enhancing projects.

This paper exploits India's rapid, comprehensive and externally imposed trade reform to establish a causal link between changes in tariffs and firm productivity. Pro-competitive forces, resulting from lower tariffs on final goods, as well as access to better inputs, due to lower input tariffs, both appear to have increased firm-level productivity, with input tariffs having a larger impact. The effect was strongest in import-competing industries and industries not subject to excessive domestic regulation.

We propose a new, valuation-based measure of world equity market segmentation. While we observe decreased levels of segmentation in many developing countries, the level of segmentation is still significant. In contrast to previous research, we characterize the factors that account for variation in market segmentation both through time as well as across countries.

First we discuss how extrinsic incentives may come into conflict with other motivations. For example, monetary incentives from principals may change how tasks are perceived by agents, with negative effects on behavior. In other cases, incentives might have the desired effects in the short term, but they still weaken intrinsic motivations. To put it in concrete terms, an incentive for a child to learn to read might achieve that goal in the short term, but then be counterproductive as an incentive for students to enjoy reading and seek it out over their lifetimes.

The current research investigated whether mind-sets and contexts that afford a focus on self-other differences can facilitate perceptual and conceptual forms of perspective taking. Supporting this hypothesis, results showed that directly priming a difference mind-set made perceivers more likely to spontaneously adopt other people's visual perspectives (Experiment 1) and less likely to overimpute their own privileged knowledge to others (Experiments 2 and 3).

Dominant theories of trade tend to ignore the role of finance as a source of comparative advantage. On the other hand, the finance literature places financial institutions as a driver of economic growth. This paper unites these two competing schools of thought in a general equilibrium framework. For economies with high-quality institutions (defined by the competitiveness of the financial sector, the quality of corporate governance, and the level of property rights protection), finance is passive.

This paper reviews the pattern of bank failures during the financial crisis and asks whether there was a link with corporate governance. It revisits the theory of bank governance and suggests a multiconstituency approach that emphasizes the role of weak creditors. The empirical evidence suggests that, on average, banks with stronger risk officers, less independent boards, and executives with less variable remuneration incurred fewer losses. There is no evidence that institutional shareholders opposed aggressive risk-taking.

The article discusses research that shows managers who are perceived as being tough and wielding power are more likely to be promoted than others. The author cites the example of drug maker Pfizer, where in 2001 the no-nonsense Hank McKinnell was hired as chief executive instead of the more collegial Karen Katen. In 2006 Pfizer got rid of McKinnel for poor performance.

This experimental study investigates how behavior changes after receiving punishment. The focus is on how proposers in a power-to-take game adjust their behavior depending on their fairness perceptions, their experienced emotions, and their interaction with responders. We find that fairness plays an important role: proposers who take what they consider to be an unfair amount experience higher intensities of prosocial emotions (shame and guilt), particularly if they are punished. This emotional experience induces proposers to lower their claims.

Many companies do not know their marketing ROI because their organizations are not set up to evaluate marketing ROI.

This article examines the population dynamics and viability of network weavers, which are organizations that provide network relations for others. An analysis of the population dynamics of the intergovernmental organizations (IGOs) that are the basis of the interstate networks that influenced global economic relations, peace, and democracy in the 1815–2000 period show that IGO founding and failure depends on the ease and value of specific interstate relations.

This research investigates the effects of regulatory focus on alternative search and consideration set formation in consumer decision making. Results from three experiments yield two primary findings. First, promotion‐focused consumers tend to search for alternatives at a more global level, whereas prevention‐focused consumers tend to search for alternatives at a more local level. Second, promotion‐focused consumers tend to have larger consideration sets than do prevention‐focused consumers.

<p>We present a tractable, linear model for the simultaneous pricing of stock and bond returns that incorporates stochastic risk aversion. In this model, analytic solutions for endogenous stock and bond prices and returns are readily calculated. After estimating the parameters of the model by the general method of moments, we investigate a series of classic puzzles of the empirical asset pricing literature.

We examine the implications of separating students of different grade levels across schools for the purposes of educational production. Specifically, we find that moving students from elementary to middle school in 6th or 7th grade causes significant drops in academic achievement. These effects are large (about 0.15 standard deviations), present for both math and English, and persist through grade 8, the last year for which we have achievement data. The effects are similar for boys and girls, but stronger for students with low levels of initial achievement.

Bicultural individuals differ in the degree to which their cultural identities are integrated versus conflicting—Bicultural Identity Integration (BII). Studies of judgment find that biculturals with less integrated identities (low BIIs) tend to defy salient cultural norms, whereas those with highly integrated identities (high BIIs) conform. This study examined biculturals' judgment in a group decision-making context, focusing on individuals' reactions to consensus in cultural ingroups. Results showed that low (vs.

Bicultural individuals vary in the degree to which their two cultural identities are integrated. Among Asian-Americans, for instance, some experience their Asian and American sides as compatible whereas others experience them as conflicting. Past research on judgments finds this individual difference affects the way bicultural individuals respond to situations that cue their cultures.

This Editors' Forum –‘Creativity East and West’– presents five papers on the question of cultural differences in creativity from the perspective of different research literatures, followed by two integrative commentaries. The literatures represented include historiometric, laboratory, and organizational studies. Investigation of cultural influences through country comparisons and priming manipulations, focusing on how people perform creatively and how they assess creativity.

This paper proposes a simple model to study how domestic institutions affect patterns of international capital flows. Inefficient financial system, and poor corporate governance, may be bypassed by two-way capital flows in which domestic savings leave the country in the form of financial capital outflows but domestic investment takes place via inward FDI. While financial globalization always improves the welfare of a developed country with a good financial system, its effect is ambiguous for a developing country with an inefficient financial sector or poor corporate governance.

Non-linear external habit persistence models, which feature prominently in the recent "equity premium" asset pricing and macroeconomics literature, generate counterfactual predictions in the cross section of stock returns. In particular, we show that in the absence of cross sectional heterogeneity in firms' cash flow risk these models produce a "growth premium," that is, stocks with high price-to-fundamental ratios command a higher premium than stocks with low price-to-fundamental ratios.

As Cassius said to Brutus (in Julius Caesar) Men at some time are masters of their fates: The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings. Might you become master of your fate through choice—no matter what the stars say?

Negotiators may use vigilant, loss-minimizing strategies or eager, gain-maximizing strategies. The present study provides evidence that preferences for these different strategies depend on negotiator role and personal orientation. In a price negotiation, buyers and prevention-focused individuals prefer vigilant strategies, whereas sellers and promotion-focused individuals prefer eager strategies.

Whether one is in one’s native culture or abroad, one’s personality can differ markedly from the personalities of the majority, thus failing to match the “cultural norm.” Our studies examined how the interaction of individual- and cultural-level personality affects people’s self-esteem and well-being.We propose a person-culture match hypothesis that predicts that when a person’s personality matches the prevalent personalities of other people in a culture, culture functions as an important amplifier of the positive effect of personality on self-esteem and subjective well-being at the individ

Large companies are usually organized into business units, yet some activities are almost always centralized in a company-wide functional unit. We first show that organizations endogenously create an incentive conflict between functional managers (who desire excessive standardization) and business-unit managers (who desire excessive local adaptation). We then study how the allocation of authority and tasks to functional and business-unit managers interacts with this endogenous incentive conflict.

This special issue features articles from the 9th Annual INFORMS Revenue Management and Pricing Section Conference at the Kellogg School of Management, Northwestern University during 22–23 June 2009. The conference featured 42 half hour talks by practitioners and researchers, as well as keynote addresses by Professor Anton Kleywegt of Georgia Tech and by Dr Matthew Schrag, the Director of Operations Research and Industrial Engineering at Delta Airlines. The conference was organized by Martin Lariviere and Baris Ata.

This goal of this chapter is to build a bridge between psychophysiology and organizational behavior in an effort to extend organizational theories and enhance the precision of organizational research. The first section describes psychophysiological systems and theories that can inform organizational scholars' understanding of the biological bases of behavior in organizations. The second section discusses the advantages and challenges associated with incorporating psychophysiological measures into organizational research.

Belief in one's ability to exert control over the environment and to produce desired results is essential for an individual's well being. It has been repeatedly argued that the perception of control is not only desirable, but it is likely a psychological and biological necessity. In this article, we review the literature supporting this claim and present evidence for a biological basis for the need for control and for choice—that is, the means by which we exercise control over the environment.

Applies economic, marketing, and finance concepts to develop a metric, Customer Value Added, that explains how marketing activities drive the financial performance of an organization.  Includes empirical results for a consumer packaged goods company where Customer Value Added predicted revenue and contribution with R-squared values greater than 0.90.

This article starts by discussing the concept of "inflation hedging" and provides estimates of "inflation betas" for standard bond and well-diversified equity indices for over 45 countries. We show that such standard securities are poor inflation hedges. Expanding the menu of assets to Treasury bills, foreign bonds, real estate and gold improves matters but inflation risk remains difficult to hedge. We then describe how state-of-the-art term structure research has tried to uncover estimates of the inflation risk premium, the compensation for bearing inflation risk.

The notion of accessibility of mental representations has been invaluable in explaining and predicting human thought and action. Focusing on social cognition, we review the large corpus of data that has accumulated since the first models of mental activation dynamics were outlined. We then outline a framework that we call Relevance of a Representation (or ROAR for short), the main tenant of which is that not all stimulated representations are in fact activated (i.e., influence thought and action processes).

Six studies show that subtle contextual cues that increase customers' self-awareness can be used to influence their satisfaction with service providers holding the objective service delivery constant. Self-awareness cues tend to increase customers' satisfaction when the outcome of a service interaction is unfavorable, but tend to decrease customers' satisfaction when the outcome of the interaction is favorable. This is because higher self-awareness increases customers' tendency to attribute outcomes to themselves as opposed to the provider.

How to view pricing, cross-selling, and customer loyalty during difficult economic times.  (Reprinted from "Marketing in Difficult Times," Effective Executive, July, 2009, pp. 11-18.)

This paper addresses the issues that confront the FASB and IASB in developing a new conceptual framework document. First, we suggest characteristics that a conceptual framework ought to exhibit. Most of these suggestions are based on our critique of the existing framework and the FASB-IASB work in progress. Second, we present a model framework that exhibits these characteristics. We emphasize up front that this framework is quite explicit. It goes to the heart of what a framework document should do: it places specific restrictions on what constitutes admissible accounting standards.

Bilateral investment treaties (BITs) are agreements between two countries for the reciprocal encouragement, promotion and protection of investments in each other's territories by companies based in either country. Germany and Pakistan signed the first BIT in 1959 and since then, BITs are one of the most popular and widespread form of international agreement. In this work we study the proliferation of BITs using a social networks approach. We propose a network growth model that dynamically replicates the empirical topological characteristics of the BIT network.

I use uniquely comprehensive data on financial news events to test four predictions from an asymmetric information model of a firm's stock price. Certain investors trade on information before it becomes public; then, public news levels the playing field for other investors, increasing their willingness to accommodate a persistent liquidity shock. Empirically, I measure public information using firms' stock returns on news days in the Dow Jones archive. I find four patterns in postnews returns and trading volume that are consistent with the asymmetric information model's predictions.

We examine whether securitization impacts renegotiation decisions of loan servicers, focusing on their decision to foreclose a delinquent loan. Conditional on a loan becoming seriously delinquent, we find a significantly lower foreclosure rate associated with bank-held loans when compared to similar securitized loans: across various specifications and origination vintages, the foreclosure rate of delinquent bankheld loans is 3% to 7% lower in absolute terms (13% to 32% in relative terms).

Cultural influences on individual judgment and decision making are increasingly understood in terms of dynamic constructive processing and the structures in social environments that shape distinct processing styles, directing initial attentional foci, activating particular judgment schemas and decision strategies, and ultimately reinforcing some judgment and decision making (JDM) patterns over others.