Yearly Archives: 2011

Business Analytics

Polynomial unconstrained binary optimisation ? Part 2

Fred Glover, Jin-Kao Hao, and Gary Kochenberger
International Journal of Metaheuristics Vol. 1, Num. 4, Pages: 317-354

The class of problems known as quadratic zero-one (binary) unconstrained optimisation has provided access to a vast array of combinatorial optimisation problems, allowing them to be expressed within the setting of a single unifying model. A gap exists, however, in addressing polynomial problems of degree greater than 2. To bridge this gap, we provide methods for efficiently executing core search processes for the general polynomial unconstrained binary (PUB) optimisation problem. A variety of search algorithms for quadratic optimisation can take advantage of our methods to be transformed directly into algorithms for problems where the objective functions involve arbitrary polynomials. Part 1 of this paper (Glover et al., 2011) provided fundamental results for carrying out the transformations and described coding and decoding procedures relevant for efficiently handling sparse problems, where many coefficients are 0, as typically arise in practical applications. In the present part 2 paper, we provide special algorithms and data structures for taking advantage of the basic results of part 1. We also disclose how our designs can be used to enhance existing quadratic optimisation algorithms.

Finance

Reaching for the stars: the appointment of celebrities to corporate boards

Stephen P. Ferris, Kenneth A. Kim, Takeshi Nishikawa and Emre Unlu
International Review of Economics Vol. 58, Issue 4, Pages: 337-358

For a sample of over 700 celebrity appointments to corporate boards of directors over the period 1985–2006, we find positive excess market returns at the time of their announcement. The 1-, 2-, and 3-year long-run performance of the appointing firms provide corroborating evidence of the value of these appointments. We conclude that the appointment of celebrities as directors increase a firm’s visibility in a fashion consistent with Merton’s (J Finance 42:483–510, 1987) investor recognition hypothesis.

Management

An examination of the relationship between training comprehensiveness and organizational commitment: Further exploration of training perceptions and employee attitudes

Kyle Ehrhardt, Janice S. Miller, Sarah J. Freeman, and Peter W. Hom
Human Resource Development Quarterly,Vol. 22, Issue 4, Pages 459-489

For organizations, the value of employing highly committed individuals is well documented. Accordingly, scholars have endeavored to identify factors that may influence employees’ organizational commitment. One factor that has received growing attention in this regard is individuals’ perceptions of training offered by an organization. However, despite increased scrutiny over the past decade, the precise nature of the relationship between employee training perceptions and organizational commitment remains unclear. Consequently, in this study we use social exchange theory as a foundation to examine the relationship between perceptions of training comprehensiveness and organizational commitment among individuals serving on cross-functional product development teams within numerous large manufacturing firms. Results of a multilevel regression analysis support a direct relationship between perceived training comprehensiveness and organizational commitment. Additionally, whether individuals specifically chose to participate on a product development team moderated this relationship, but not in the expected direction. We discuss implications of study findings for both research and practice.
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Finance

U.S. Monetary Policy Surprises and International Securitized Real Estate Markets

Pisun Xu and Jian Yang
The Journal of Real Estate Finance and Economics, Vol. 43, Issue 4
This paper examines the impact of U.S. monetary policy surprises on securitized real estate markets in 18 countries. The policy surprises are measured by both the surprise changes to the target federal funds rate (the target factor) and surprises in the future direction of the Federal Reserve monetary policy (the path factor). The results show that most international securitized real estate markets have significantly positive responses to surprise decrease in current or future expected federal funds rates, though such responses vary greatly across countries. Also, while the U.S. securitized real estate market reacts mainly to the target factor, foreign securitized real estate markets react to the path factor. Furthermore, we find that the cross-country variation in the response to the target factor is correlated with the country’s exchange rate regime and its degree of real economic and particularly financial integration, while the cross-country variation in the response to the path factor is mainly related to the country’s degree of financial integration.

Sustainability

A Simple Path to Sustainability: Green Business Strategies for Small and Medium-sized Businesses

Andreas, Frederick, Elizabeth S. Cooperman, Blair Gifford, and Graham Russell, eds.
ABC-CLIO, 2011.

Simple Path to Sustainability: Green Business Strategies for Small and Medium-Sized Businesses is designed specifically to help smaller enterprises share in the benefits that flow from sustainability. Built around case histories showcasing 12 small to medium-size enterprises (SMEs) that have outstanding records of sustainability, this unique, hands-on guide will help readers choose and develop sustainability strategies and undertake the marketing and management initiatives necessary for success.

The studies collected here detail each company’s journey from initial idea through building a new culture, engaging stakeholders, gaining competitive advantage, and planning for the future. Each study also covers the challenges encountered, successes and failures, and lessons learned. Cases are centered around distinct themes, including a marketing/public relations perspective, a risk management perspective, an organizational culture perspective, and a new product development perspective. Taken as a whole, these stories do more than inform. They will inspire managers to become green entrepreneurs, undertaking sustainable strategies that can reap surprising benefits.

Management

The Detrimental Effects of Power on Confidence, Advice Taking, and Accuracy

Kelly E. See, Elizabeth W. Morrison, Naomi B. Rothman, and Jack B. Soll
Organizational Behavior and Human Decision Processes,  November 2011

Incorporating input from others can enhance decision quality, yet often people do not effectively utilize advice. We propose that greater power increases the propensity to discount advice, and that a key mechanism explaining this effect is elevated confidence in one’s judgment. We investigate the relationships across four studies: a field survey where working professionals rated their own power and confidence and were rated by coworkers on their level of advice taking; an advice taking task where power and confidence were self-reported; and two advice taking experiments where power was manipulated. Results consistently showed a negative relationship between power and advice taking, and evidence of mediation through confidence. The fourth study also revealed that higher power participants were less accurate in their final judgments. Power can thus exacerbate the tendency for people to overweight their own initial judgment, such that the most powerful decision makers can also be the least accurate.

Finance

Household Search Choice: Theory and Evidence

Yosef Bonaparte and Frank J. Fabozzi
Applied Economics Volume 43, Issue 26, pp. 3835-3847

Since the work by Stigler (1961) on the economics of information in the early 1960s, economists have paid closer attention to the role of search for information. However, search methods are not considered in the theory of portfolio choice. We present a model of investor search behaviour in order to provide a framework by which to evaluate our empirical evidence on the role of search in portfolio selection and performance. We study two types of search methods: informal and professional. We show that the income, wealth and risk preference of households influence their search choice.

Finance

Linear and Nonlinear Predictablity of International Securitized Real Estate Returns: A Reality Check

Juan Cabrera, Tao Wang, and Jian Yang
Journal of Real Estate, Vol. 33, Num., Pages: 565-594
This paper examines the short-horizon return predictability of the ten largest international securitized real estate markets, paying special attention to possible nonlinearity-in-mean as well as nonlinearity-in-variance predictability. Although international securitized real estate returns are generally not predictable based on commonly-used statistical criteria, there is much evidence for the predictability based on economic criteria (i.e., direction of price changes and trading rule profitability), which is more often due to nonlinearity-in-mean. The forecast combinations for various models appear to improve the forecasting performance, while the allowance of data-snooping bias using White’s reality check substantially mitigates spurious out-of-sample forecasting performance and weakens otherwise overwhelmingly strong predictability. Overall, there is robust evidence for the predictability in many international securitized real estate markets.

Risk Management

Efficiency changes around mergers in the US property-liability insurance industry: a data envelopment analysis

Jeungbo Shim
The Journal of Business and Economic Studies,Vol. 17, Issue 2, Pages: 77.

This paper investigated the relationship between mergers & acquisitions (M & A) and efficiency change in the US property-liability insurance industry for the years 1990-2004. The cost, revenue, pure technical, scale, and allocative efficiency were estimated using data envelopment analysis (DEA). The empirical results revealed that acquirers’ overall cost and revenue efficiency declined following M & As. This finding implied that M & A has the potential to create inefficiencies, perhaps due to scale diseconomies and post- …
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Finance

A reassessment of the excess return phenomenon for initial public offerings of common stock

Glenn A Wolfe, Elizabeth S Cooperman
Journal of Applied Business Research (JABR),Vol. 6, Issue 1, Pages: 40-50.

This study examines the relationship between underpricing for new issues of common stock and issue size (offer price and number of shares) after controlling for an issues risk. Both risk and offer price are found to be significant factors in explaining underpricing. Offer price dominates as an explanatory variable in cold issue markets, while risk dominates in hot issue markets.
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Finance

BOND MARKET REACTION TO STOCK REPURCHASES: IS THERE A WEALTH TRANSFER EFFECT?

Takeshi Nishikawa, Andrew K. Prevost, and Ramesh P. Rao
Journal of Financial Research Vol. 34, Issue 3, pages 503–522

We reexamine the bondholder wealth impact of stock repurchases with a focus on the wealth transfer effect. We do not detect any transfer of wealth from bondholders to shareholders surrounding open market stock repurchases. For the overall sample (1994–2002), using daily data we document a significant decrease in bond yields surrounding repurchase announcements. Subsamples classified by attributes that capture wealth transfer propensity also do not reveal evidence consistent with a wealth transfer effect. Correlation analysis between bond and stockholder wealth effects similarly is not supportive of a wealth transfer effect. Contrary to the wealth transfer hypothesis, we document a greater proportion of bond rating upgrades than downgrades in the three months following a repurchase announcement. Our results are robust to alternate bond price data and event return methodology.

Management

Exploring entrepreneurial fulfillment for women in India: An empirical study

V. Kanti Prasad , G. M. Naidu , Kyle Ehrhardt , Doan E. Winkel and B. Kinnera Murthy
Journal of Enterprising Culture,Vol. 19, Issue 03, pp. 287-314

Drawing on social feminist theory, Indian cultural precepts, and previous research, we explore factors which may influence entrepreneurial fulfillment for women entrepreneurs in India. Results of a hierarchical regression analysis suggest that numerous network characteristics, as well as perceptions of family support, each contribute to a sense of entrepreneurial fulfillment for Indian women entrepreneurs. These factors furthermore each contributed to entrepreneurial fulfillment beyond the influence of the financial performance of the venture. Implications for understanding women entrepreneurs in emerging economies are discussed, as are practical implications for both women entrepreneurs and policy makers. We additionally present directions for future research.
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Business Analytics

Missteps in Multiple Regression Student Projects: Beyond Association-Not-Causation

Marlene A Smith
The American Statistician,Vol. 65, Issue 3, Pages: 190-197.

This article describes common yet subtle errors that students make in self-designed multiple regression projects, based on experiences in a graduate business statistics course. Examples of common errors include estimating algebraic identities, overlooking suppression, and misinterpreting regression coefficients. Advice is given to instructors about helping students anticipate and avoid these common errors; recommended tactics include extensive written guidelines supplemented with in-class active-learning exercises. …
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Business Analytics

Polynomial unconstrained binary optimisation – Part 1

Fred Glover, Jin-Kao Hao, and Gary Kochenberger
International Journal of Metaheuristics, Vol. 1, Num. 3, Pages: 232-256

The class of problems known as quadratic zero-one (binary) unconstrained optimisation has provided access to a vast array of combinatorial optimisation problems, allowing them to be expressed within the setting of a single unifying model. A gap exists, however, in addressing polynomial problems of degree greater than 2. To bridge this gap, we provide methods for efficiently executing core search processes for optimisation problems in the general polynomial unconstrained binary (PUB) domain. A variety of search algorithms for quadratic optimisation can take advantage of our methods to be transformed directly into algorithms for problems where the objective functions involve arbitrary polynomials. In this Part 1 paper, we give fundamental results for carrying out the transformations. We also describe coding and decoding procedures that are relevant for efficiently handling sparse problems, where many coefficients are 0, as typically arise in practical applications. In a sequel to this paper, Part 2, we provide special algorithms and data structures for taking advantage of the basic results of Part 1. We also disclose how our designs can be used to enhance existing quadratic optimisation algorithms.

Accounting

Stakeholder value disclosures: anchoring on primacy and importance of financial and nonfinancial performance measures

Bruce R. Neumann, Michael L. Roberts and Eric Cauvin
Review of Managerial Science Vol. 5, Issue 2-3, Pages: 195-212

In the growing debate about stakeholder values, there has been little discussion about information overload or whether the requested disclosures can be effectively used. Stakeholder advocates call for complicated and massive environmental and related social disclosures while not considering how information overload might affect the discourse about corporate performance. Stakeholders, including shareholders, plead for more transparency in financial statements, management discussion and analysis (MDA), and other corporate disclosures. As we know, shareholders and boards of directors are most concerned with the ‘Holy Trinity’ of earnings per share, dividends and market value changes. We believe that managers and stakeholders involved in performance evaluations have multiple interests that extend beyond traditional shareholder value measures. We note that the Balanced Scorecard (BSC) was developed as one tool to reflect and communicate these multiple measures. We test how managers use (or ignore) multiple performance measures and we posit that stakeholders will face many of the same constraints when using and processing multiple disclosures including Corporate Social Reports (CSR), environmental, or similar disclosures. While we do not directly test a wide variety of stakeholder disclosures, we examine eight (four for a single subject) shareholder values (financial measures) and four stakeholder values (nonfinancial measures). The eight measures included in our research instruments serve as proxies for the multiple concerns that might be of interest to many stakeholders. Note that stakeholders are likely to be extremely interested in nonfinancial performance measures, while many shareholders will likely concentrate on financial performance measures. Field research has reported managers tend to favor financial measures while discounting or ignoring nonfinancial measures when evaluating subordinates, making it difficult to align performance evaluations and incentives with corporate strategies (Ittner et al. Account Rev 78:725–758, 2003). In this study, we find the relative weights managers place on financial and nonfinancial performance measures are influenced by both (1) presentation order and (2) the relative importance of specific measures. When financial measures are presented first, the manager who performs better on financial measures is rated higher than the manager who performs better on nonfinancial measures. However, when nonfinancial measures are presented first, managers who excel on nonfinancial measures are rated higher. Reports that include financial measures that are relatively more (less) important also produce higher (lower) ratings for the manager who excels on financial measures. Thus, the relative weights that superiors place on financial and nonfinancial measures in evaluating corporate managers’ performance are substantially anchored both by the order in which measures are presented as well as by the importance of the specific performance measures employed. Other stakeholder disclosures are likely to be similarly anchored, perhaps biased, by primacy and a priori importance rankings.

Accounting

A Social Network Analysis of the Literature on Management Control

K. J. Euske, James W. Hesford, and Mary A. Malina
Journal of Management Accounting Research, Vol. 23, No. 1, pp. 259-283.

This paper investigates the literature on management control published in accounting and management journals. Social network analysis of citation data from the 25-year period 1981-2005 enables us to examine topics and ties among researchers. Social ties have important consequences for the development of the literature, shaping topics, research methods and the diffusion of knowledge. We observe minimal communication between the two disciplines, appearing as two distinct communities despite similar interests. This lack of communication includes citations and authoring across the two disciplines. When citations across disciplines occur, it is almost exclusively accounting authors citing management authors, not vice versa. There is virtually no joining of accounting and management scholars within social networks. Within the two broader communities there also exist smaller research clusters. While we cannot determine the impact this has on our understanding of management control, we discuss possible reasons for this phenomenon and its potential implications for management control research.

Management

A META-ANALYTIC EXAMINATION OF THE INSTRUCTIONAL EFFECTIVENESS OF COMPUTER-BASED SIMULATION GAMES

Traci Sitzmann
Personnel Psychology, Vol. 64, Issue 2, Pages 489–528

Interactive cognitive complexity theory suggests that simulation games are more effective than other instructional methods because they simultaneously engage trainees’ affective and cognitive processes (Tennyson & Jorczak, 2008). Meta-analytic techniques were used to examine the instructional effectiveness of computer-based simulation games relative to a comparison group (k= 65, N= 6,476). Consistent with theory, posttraining self-efficacy was 20% higher, declarative knowledge was 11% higher, procedural knowledge was 14% higher, and retention was 9% higher for trainees taught with simulation games, relative to a comparison group. However, the results provide strong evidence of publication bias in simulation games research. Characteristics of simulation games and the instructional context also moderated the effectiveness of simulation games. Trainees learned more, relative to a comparison group, when simulation games conveyed course material actively rather than passively, trainees could access the simulation game as many times as desired, and the simulation game was a supplement to other instructional methods rather than stand-alone instruction. However, trainees learned less from simulation games than comparison instructional methods when the instruction the comparison group received as a substitute for the simulation game actively engaged them in the learning experience.

Management

The paradox of stretch goals: Organizations in pursuit of the seemingly impossible

Sim B Sitkin, Kelly E See, C Chet Miller, Michael W Lawless, Andrew M Carton
Academy of Management Review,Vol. 36, Issue 3, Pages: 544-566.

We investigate the organizational pursuit of seemingly impossible goalscommonly known as stretch goals. Building from our analysis of the mechanisms through which stretch goals could influence organizational learning and performance, we offer a contingency framework evaluating which organizations are positioned to benefit from such extreme goals and which are most likely to pursue them. We conclude that stretch goals are, paradoxically, most seductive for organizations that can least afford the risks associated …
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Finance, Information Systems

Surplus deferred pension compensation for long-term K-12 employees: an empirical analysis for the Denver Public School Retirement System and four state plans

Michael V Mannino, Elizabeth S Cooperman
Journal of Pension Economics & Finance,Vol. 10, Issue 3, Pages: 457-483.

This study uses a unique data set of retiree characteristics and salary histories for administrators, teachers, and non-professional employees of the Denver Public School Retirement System (DPSRS) to analyze surplus deferred compensation for DPSRS and four state K-12 defined benefit pension plans. We find sizable levels of surplus deferred compensation for each plan, with significant differences across plans, job classes, and age groups. Across plans, differences in cost of living allowances impact the expected present …
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Entrepreneurship, Management

The benefits of a long-lens approach to leader development: Understanding the seeds of leadership

Susan Elaine Murphy and Stefanie K. Johnson
The Leadership Quarterly Vol. 22, Issue 3, Pages 459–470

Although research has identified techniques for leader development, most of the extant research has focused on development in adulthood, ignoring development at an early age. A recent resurgence in interest in the genetic or other early development factors, such as attachment, points to the benefits of understanding the developmental trajectories (Day,
Harrison, & Halpin, 2009) of individuals throughout adulthood. This paper argues for an examination of the earliest “seeds” of leader development. In this paper we present a framework that explores the tasks of leadership at various ages before adulthood, the skills
required to accomplish these tasks, and the mechanism by which younger leaders develop these skills. In understanding what skills and what features of leadership identity have long roots, we can begin to understand more fully the developmental needs of adults. Without a more comprehensive look at leadership over the lifespan, leader development practices will not meet their full potential.