Business Analytics

An efficient empirical likelihood approach for estimating equations with missing data

Cheng Yong Tang and Yongsong Qin
Biometrika (2012), pp. 1–7

We explore the use of estimating equations for efficient statistical inference in case of missing data. We propose a semi-parametric efficient empirical likelihood approach, and show that the empirical likelihood ratio statistic and its profile counterpart asymptotically follow central chi-square distributions when evaluated at the true parameter. The theoretical properties and practical performance of our approach are demonstrated through numerical simulations and data analysis.

Finance

U.S. Monetary Policy Surprises and Mortgage Rates

Xu, Tracy, Han, Yufeng and Jiang, Yang
Real Estate Economics, Vol. 40 Issue 3, September 2012, pp.
461-507

This paper examines how the U.S. monetary policy surprises impact the mortgage rates in the nation and across five regions from 1990 to 2008. Regression analysis based on bootstrapping shows that surprises in the target federal funds rate (the target factor) have a significantly positive impact on the 1-year adjustable-rate mortgage (ARM) rate within the week of the FOMC announcements and the positive impact lasts up to one week after the announcements. Surprises in the future direction of the Federal Reserve monetary policy (the path factor) have significantly positive impacts on both the 1-year ARM rate and the 30-year fixed mortgage rates in the first week after the announcement. Furthermore, the responses of mortgage rates are asymmetric and affected by the size of monetary policy surprises, the stage of the business cycle and whether the monetary policy is tightening or loosening. There also exists heterogeneity in the mortgage rate pass-through process across regions and monetary policy surprises have differential impacts on the regional mortgage rates. The cross-region variations are mainly correlated with the regional housing market conditions, such as home vacancy and rental vacancy rates.

Finance

US Monetary policy surprises and mortgage rates

Pisun Xu, Yufeng Han, Jian Yang
Real Estate Economics,Vol. 40, Issue 3, Pages: 461-507.

This article examines how the US monetary policy surprises impact the mortgage rates in the nation and across five regions from 1990 to 2008. Regression analysis based on bootstrapping shows that surprises in the target federal funds rate (the target factor) have a significantly positive impact on the 1-year adjustable-rate mortgage (ARM) rate within the week of the Federal Open Market Committee announcements and the positive impact lasts up to 1 week after the announcements. Surprises in the future direction of the Federal …
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Finance

Asymmetric Correlation and Volatility Dynamics among Stock, Bond, and Securitized Real Estate Markets

Jian Yang, Yinggang Zhou and Wai Kin Leung
The Journal of Real Estate Finance and Economics, Vol. 45, Issue 2, pp 491–521
We apply a multivariate asymmetric generalized dynamic conditional correlation GARCH model to daily index returns of S&P500, US corporate bonds, and their real estate counterparts (REITs and CMBS) from 1999 to 2008. We document, for the first time, evidence for asymmetric volatilities and correlations in CMBS and REITs. Due to their high levels of leverage, REIT returns exhibit stronger asymmetric volatilities. Also, both REIT and stock returns show strong evidence of asymmetries in their conditional correlation, suggesting reduced hedging potential of REITs against the stock market downturn during the sample period. There is also evidence that corporate bonds and CMBS may provide diversification benefits for stocks and REITs. Furthermore, we demonstrate that default spread and stock market volatility play a significant role in driving dynamics of these conditional correlations and that there is a significant structural break in the correlations caused by the recent financial crisis.

Finance

Extreme correlation of stock and bond futures: International Evidence

Chin Man Chui and Jian Yang
The Financial Review, Vol. 47 Issue 3, August 2012, pp. 565-587

This study explores time-varying extreme correlation of stock-bond futures markets in three major developed countries. In the U.S. and the UK, there is evidence of positive extreme stock-bond correlation when both futures markets are extremely bullish or markets are extremely bearish. In German, stock-bond futures extreme correlation is negative, suggesting the most diversification potentials of bond futures when German stock when German stock index futures market plunges. Macroeconomic News,The Business cycle and the stock market uncertainty all significantly median stock bond futures correlation. However, only the stock market uncertainty still significantly affects the extreme stock-bond futures correlation when the stock market is extremely bearish.

Finance

Extreme correlation of stock and bond futures markets: international evidence

Chin Man Chui, Jian Yang
Financial Review,Vol. 47, Issue 3, Pages: 565-587.

This study explores time-varying extreme correlation of stock-bond futures markets in three major developed countries. In the United States and the United Kingdom, there is evidence of positive extreme stock-bond correlation when both futures markets are extremely bullish or bearish. In Germany, stock-bond futures extreme correlation is negative, suggesting the most diversification potentials of bond futures when German stock index futures market plunges. Macroeconomic news, the business cycle, and the stock …
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Management

“National” identity, perceived fairness, and organizational commitment in a Hong Kong context: A test of mediation effects

Kyle Ehrhardt , Margaret Shaffer , Warren C.K. Chiu and Dora M. Luk
International Journal of Human Resource Management,Vol. 23, Issue 19, Pages 4166-4191

This paper builds on research exploring antecedents of organizational commitment in non-Western contexts. Using identity theory as a foundation, we develop a model which posits that the relationship between the strength of one’s ‘national’ identity and affective and normative commitment is mediated by justice perceptions. Using a sample of indigenous Hong Kong employees, we found that perceptions of distributive, procedural and interactional justice mediated the relationship between the strength of one’s Hong Kong ‘national’ identity and normative commitment; while perceptions of distributive and interactional justice mediated the relationship between the strength of one’s Hong Kong ‘national’ identity and affective commitment.
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Accounting

Should pcaob disciplinary proceedings be made public? evidence from sanctions against a big 4 auditor

Carol Callaway Dee, Ayalew Lulseged, Tianming Zhang
Current Issues in Auditing,Vol. 6, Issue 2, Pages: P18-P24.

SUMMARY: In our paper “Client Stock Market Reaction to PCAOB Sanctions against a Big 4 Auditor”(Dee et al. 2011), we examine stock price effects for clients of a Big 4 audit firm when news of sanctions imposed by the PCAOB against the audit firm was made public. These PCAOB penalties were the first against a Big 4 auditor, and they revealed information about quality-control problems at the audit firm that were not publicly known until the sanctions were announced. Our analysis of stock prices suggests that investors in clients of the …
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Accounting

Negative Special Items and Future Earnings: Expense Transfer or Real Improvements?

William M. Cready, Thomas J. Lopez, and Craig A. Sisneros
The Accounting Review, Vol. 87, Issue 4, pp. 1165–1195

Burgstahler et al. (2002) investigate the implications of special items for future earnings and report that firms use negative special items to accelerate the recognition of future expenses into the current period. That is, negative special items serve as an ‘‘inter-period transfer’’ device. We extend their analysis and find that earnings increase in post-special item quarters beyond the four quarters considered in Burgstahler et al. (2002). In particular, we find that future earnings increase over the subsequent 16 quarters by more than 130 percent of the reported negative special item. The earnings increases are greater for restructuring charges than for asset write-downs or goodwill impairment charges. Such patterns suggest that negative special items also signal real future performance improvements (i.e., performance improvement hypothesis) in addition to inter-period expense transfer (i.e., inter-period transfer hypothesis). Moreover, the real improvement effect appears to be driven by restructuring charges, the most prevalent type of special item.

Finance, Sustainability

Do Shareholder Proposals Affect Corporate Climate Change Reporting and Policies?

Byrd, John and Cooperman, Elizabeth
International Review of Accounting, Banking & Finance, Volume 4 Issue 2, pp. 100-126

This study examines the effect of shareholder proxy proposals on climate change issues, using a sample of climate change resolutions submitted to U.S. corporations during 2007 to 2009. We test the hypothesis that shareholder climate-change proposals are effective in getting firms to engage in future actions. We examine differences in future actions based on company responses including: (1) SEC exclusion; (2) negotiation and withdrawal; and (3) proxy proposals voted on, and the percentage of vote received on proposal measures. We find evidence of future actions taken for climate change in response to resolutions, although actions can be relatively minor compared to proposal requests. Future actions occur more often for proposals with negotiated withdrawals. For proposals taken to vote, action occurs more often with a shareholder vote of 20 percent or higher. Extractive industry firms are also shown to be more reluctant to engage in climate change actions versus firms in non-extractive industries.

Management

Academic decathletes: Insights from the metaphor and an exemplar

Sarah Kovoor-Misra
Journal of Management Inquiry,Vol. 21 Issue 3, Pages: 279-286
Business school professors are facing increasing pressure to excel in diverse academic roles that require different knowledge and skills. The multiplicity and diversity of roles evoke the image of the professor as an academic decathlete. In this article, the author explores the metaphor of the academic decathlete through conversations with Professor Tom Lee who has been successful in multiple academic roles. The interview sheds light on the dimensions and capacities of an academic decathlete and various strategies that can be used as academics seek to perform at high levels of excellence in a range of roles.

Information Systems

An experimental comparison of real and artificial deception using a deception generation model

Yanjuan Yang and Michael V. Mannino
Decision Support Systems, Vol 53 Issue 3, June, 2012, Pages 543-553

To develop a data mining approach for a deception application, data collection costs can be prohibitive because both deceptive data and truthful data are necessary to be collected. To reduce data collection costs, artificially generated deception data can be used, but the impact of using artificially generated deception data is not well understood. To study the relationship between artificial and real deception, this paper presents an experimental comparison using a novel deception generation model. The deception and truth data were collected from financial aid applications, a document centric area with limited resources for verification. The data collection provided a unique data set containing truth, natural deception, and boosted deception. To simulate deception, the Application Deception Model was developed to generate artificial deception in different deception scenarios. To study differences between artificial and real deception, an experiment was performed using deception level and data generation method as factors and directed distance and outlier score as outcome variables. Our results provided evidence of a reasonable similarity between artificial and real deception, suggesting the possibility of using artificially generated deception to reduce the costs associated with obtaining training data.

Business Analytics

Tuning Parameter Selection in High‐Dimensional Penalized Likelihood

Yingying Fan and Cheng Yong Tang
Journal of the Royal Statistical Society, In Press

Determining how to appropriately select the tuning parameter is essential in penalized likelihood methods for high-dimensional data analysis. We examine this problem in the setting of penalized likelihood methods for generalized linear models, where the dimensionality of covariates p is allowed to increase exponentially with the sample size n. We propose to select the tuning parameter by optimizing the generalized information criterion (GIC) with an appropriate model complexity penalty. To ensure that we consistently identify the true model, a range for the model complexity penalty is identified in GIC. We find that this model complexity penalty should diverge at the rate of some power of log p depending on the tail probability behavior of the response variables. This reveals that using the AIC or BIC to select the tuning parameter may not be adequate for consistently identifying the true model. Based on our theoretical study, we propose a uniform choice of the model complexity penalty and show that the proposed approach consistently identifies the true model among candidate models with asymptotic probability one. We justify the performance of the proposed procedure by numerical simulations and a gene expression data analysis.

Accounting

Management control systems dilemma: Reconciling sustainability with information overload

Bruce R Neumann, Eric Cauvin, Michael L Roberts
Advances in Management Accounting, Volume 20, pp. 1-28.

In the growing debate about designing new management control systems (MCS) to include stakeholder values, there has been little discussion about information overload. Stakeholder advocates call for including more environmental and related social disclosures but do not consider how information overload might impair the use and interpretation of corporate performance measures. As we know, shareholders and boards of directors are most concerned with market data such as earnings per share, dividend rates and market value growth. In this chapter we assert that management control system designers must consider information overload before expanding MCS to include social and nonfinancial disclosures.

Management

Before Identity: The Emergence of New Organizational Forms

C. Marlene Fiol and Elaine Romanelli
Organization Science, May/June 2012 vol. 23 no. 3 597-611

The evolution of new organizational forms has attracted growing theoretical and empirical attention, but little research has considered the microsocial processes that promote the emergence of groups of quasi-similar organizations that sometimes evolve into new organizational forms. Drawing from social psychological and sociological theories of identity formation, we explain processes of individual identification and collective identity development that precede and promote the formation of similar clusters, which audiences can then recognize and distinguish from established organizational populations and other emerging similarity clusters.

Information Systems

Comparing Semi-Automated Clustering Methods for Persona Development

Brickey, J.; Walczak, S.; and Burgess, T.
IEEE Transactions on Software Engineering, Vol 38 , Issue: 3, Page(s): 537 – 546

Current and future information systems require a better understanding of the interactions between users and systems in order to improve system use, and ultimately, success. The use of personas as design tools is becoming more widespread as researchers and practitioners discover its benefits. This paper presents an empirical study comparing the performance of existing qualitative and quantitative clustering techniques for the task of identifying personas and grouping system users into those personas. A method based on Factor (Principal Components) Analysis performs better than two other methods which use Latent Semantic Analysis and Cluster Analysis as measured by similarity to expert manually defined clusters.

Finance

Are two heads better than one? Evidence from the thrift crisis

John Byrd, Donald R. Fraser, D. Scott Lee, and Semih Tartaroglu
Journal of Banking & Finance, Volume 36, Issue 4, pp. 957–967

We employ a natural experiment from the 1980s, predating the ubiquitous clamor for independence influenced corporate governance structures, to examine which governance mechanisms are associated with firm survival and failure. We find that thrifts were more likely to survive the thrift crisis when their CEO also chaired the firm’s board of directors. On average, chair-holding CEOs undertook less aggressive lending policies than their counterparts who did not chair their boards. Consequently, taxpayer interests were protected by thrifts that bestowed both leadership posts to one person. This is an important policy issue, because taxpayers become the residual claimants for depository institutions that fail as a result of managers adopting risky strategies to exploit underpriced deposit insurance. Our findings corroborate recent evidence that manager-dominated firms resist shareholder pressure to adopt riskier investment strategies to exploit underpriced deposit insurance.

Entrepreneurship, Information Systems

Information Technology and Intangible Output: The Impact of IT Investment on Innovation Productivity

Landon Kleis, Paul Chwelos, Ronald V. Ramirez, and Iain Cockburn
Information Systems Research, Vol. 23 Issue 1, March 2012, pp. 42–59

Prior research concerning IT business value has established a link between firm-level IT investment and tangible returns like output productivity. Research also suggests that IT is vital to intermediate processes like those that produce intangible output. Among these, IT’s use in innovation and knowledge creation processes are perhaps the most critical to a firm’s long-term success. However, little is known about the relationship between IT, knowledge creation, and innovation output. In this study, we contribute to the literature by comprehensively examining IT’s contribution to innovation production across multiple contexts, using a quality-based measure of innovation output. Analyzing a panel of large U.S. manufacturing firms between 1987 and 1997, we find a 10% increase in IT input is associated with a 1.7% increase in innovation output for a given level of innovation-related spending. This relationship
between IT, R&D and innovation production is robust across multiple econometric methodologies and found to be particularly strong in the mid to late 1990s, a period of rapid technological innovation. Our results also demonstrate the importance of IT in creating value at an intermediate stage of production, in this case, through improved innovation productivity. However, R&D and its related intangible factors (skill, knowledge, etc.) appear to play a more crucial role in the creation of breakthrough innovations.

Management

A theoretical model and analysis of the effect of self-regulation on attrition from voluntary online training

Traci Sitzmann
Learning and Individual Differences, Vol. 22, Issue 1, Pages 46–54

A theoretical model is presented that examines self-regulatory processes and trainee characteristics as predictors of attrition from voluntary online training in order to determine who is at risk of dropping out and the processes that occur during training that determine when they are at risk of dropping out. Attrition increased following declines in trainees’ commitment to training and self-efficacy. Trainees lower in conscientiousness were more vulnerable to dropping out than those higher in conscientiousness, and this effect was fully mediated by self-regulatory processes. Conscientiousness also moderated the effects of commitment and self-efficacy on attrition—a high level of conscientiousness provided a buffer against dropping out when trainees’ commitment and self-efficacy declined during training. The number of hours that trainees worked per week moderated the effort/attrition relationship; spending extra time reviewing increased attrition for trainees who worked longer hours and decreased attrition for trainees who worked shorter hours.

Finance

Intraday price discovery and volatility transmission in stock index and stock index futures markets: Evidence from China

Jian Yang, Zihui Yang, and Yinggang Zhou
Journal of Futures Markets, Vol. 32, Issue 2, pages 99–121
Using high-frequency data, this study investigates intraday price discovery and volatility transmission between the Chinese stock index and the newly established stock index futures markets in China. Although the Chinese stock index started a sharp decline immediately after the stock index futures were introduced, the cash market is found to play a more dominant role in the price discovery process. The new stock index futures market does not function well in its price discovery performance at its infancy stage, apparently due to high barriers to entry into this emerging futures market. Based on a newly proposed theoretically consistent asymmetric GARCH model, the results uncover strong bidirectional dependence in the intraday volatility of both markets.

University of Colorado Denver Business School