Originally published in听Carroll Capital, the print publication of the Carroll School of Management at 涩里番下载. .
A French anti-terrorism unit and an earthquake in China aren鈥檛 typical settings for uncovering new managerial insights. But both are backdrops against which Carroll School scholars have lately explored questions that may change how organizations operate. Another setting for several recent research papers鈥攖he stock market鈥攊s certainly more conventional. But the professors鈥� findings are just as significant, suggesting better ways of understanding how capital markets really work.
Professor of Management and Organization Michael Pratt
Repairing Trust
An elite French counter-terrorism unit might seem to have little in common with the typical employer, where no shots are fired nor hostages taken. But O鈥機onnor Family Professor of Management and Organization Michael Pratt and a colleague have found that the French commandos, the Groupe d鈥橧ntervention de la Gendarmerie Nationale (GIGN), have something to teach all employers about trust and how to repair it in the workplace. 鈥淥rganizations that use project teams to interdependently handle complex or innovative work, where improvisation may be critical and violations common, are among those contexts where trust is both essential and fragile,鈥� the researchers write in the . The GIGN, unlike many organizations, has formal processes for recognizing and repairing breaches of trust, often encountered in field operations. It also has an ethos that no breach is permanent if the violator is serious about repairing it: 鈥淲hen trust violators successfully went through the standardized process laid out by the organization, they were fully trusted again on subsequent missions.鈥�
More Faculty Research
See a sampling of faculty research, media highlights, and awards from the spring 2024 semester.
A Better Means of Triage听
In the aftermath of mass casualty incidents (MCIs) like earthquakes and tsunamis, field hospitals are erected. Traditionally these hospitals have followed the commonsense approach of treating the worst survivable injuries first. But William S. McKiernan 鈥�78 Family Faculty Fellow Nan Liu (Business Analytics) and colleagues have found that a better guideline considers what will happen as the conditions of other patients deteriorate. Using data from the 2008 Sichuan earthquake in China, which killed nearly 90,000 people and injured nearly 400,000, they concluded that prioritizing patients based on an initial assessment of whose conditions will deteriorate (and how they will deteriorate) can produce better overall outcomes. 鈥淎n MCI response policy to do the greatest good for the greatest number need not always prioritize treatment solely based on victim initial health conditions,鈥� Liu and his coauthors write in
Even Companies Have Feelings
We all prefer those who say nice things about us鈥攁nd according to research by Joseph F. Cotter Professor of Accounting Mark Bradshaw, Accounting Professor Lian Fen Lee, and a colleague, that鈥檚 as true of companies as it is of people. The authors, in examine the characteristics of the lists of financial analysts that companies post on their investor relations websites. Analysts, who often work for investment banks, help investors evaluate publicly traded companies. Some听companies post the names of analysts that track their performance; others don鈥檛. Such lists are more likely
to appear when, for example, companies are selling stock or receive less media coverage, the researchers say. 鈥淲e also find that firms are more likely to include prestigious analysts (i.e., All-Stars or employed at larger, more prestigious brokerages) but more likely to exclude analysts who are less favorable about the firm or do not issue consistently beatable [earnings]
forecasts,鈥� they write. 鈥淭he obvious interpretation is that firms prefer analysts who help portray the firm in a more positive light.鈥�
Finanace Professors Andrey and Nadya Malenko
Laid-back Funds Help Inform CEOs听
As index funds have surged, they鈥檝e become controversial. These funds passively own all the securities in a particular market index,听instead of buying and selling stocks or bonds as market conditions change. Critics say they undercut the monitoring of public companies: Since they hold stocks regardless of their performance, the funds have no reason to watch over corporate management. But Finance Professors Nadya Malenko (Wargo Family Faculty Fellow) and Andrey Malenko (Hillenbrand Family Faculty Fellow) say that鈥檚 wrong. In a paper published in the Malenkos and coauthors argue that index funds have an incentive to express their opinions to corporate management because they can鈥檛 exit. Actively managed investment funds that disagree with a company鈥檚 direction will sell the stock. Since index funds can鈥檛鈥攔emember, they must hold all the stocks in an index鈥攖hey do engage with management. 鈥淲e show that, as a result, the growth in passive funds can enhance managerial learning from shareholders, increase the informativeness of corporate decisions, and raise听the share price,鈥� the researchers write. The Malenkos鈥� paper examines not just index funds but the broader implications of differences in shareholder and management beliefs and what those can mean for a company鈥檚 ownership structure.
Finance Professor Milena Wittwer
Loyalty Benefits Hook Bond Investors
Bonds often trade in what are called over-the-counter markets. An investor who wants to buy a bond contacts a dealer, asks for a price, and, if the price is acceptable, buys. Finance Professor Milena Wittwer and a colleague wanted to know why investors often听prefer OTC markets and shy away from centralized exchanges, which, in theory, should be cheaper. 鈥淓ven though these types of platforms already exist in many OTC markets, investors are reluctant to use them,鈥� they write in the Using data from Canada鈥檚 government bond market, they find that investors receive 鈥渓oyalty benefits鈥� for transacting directly with dealers in Canada: The dealers provide ancillary services like investment advice 鈥渙nly to customers with whom the dealer has a close business relationship.鈥� Like the free drinks that bartenders bestow on their best customers, those extra services keep investors coming back, even though they鈥檇 likely find better prices if everyone used an exchange.
Can Diagrams Improve Decision-Making?
If a picture鈥檚 worth a thousand words, might a diagram be worth a thousand dollars鈥攐r more? Marketing Professor Min Zhao and colleagues set out to test how visual depictions of options can affect financial decision-making. For many decisions, consumers confront long lists of options鈥攆or example, the many policies on an insurer鈥檚 website or the many mutual funds offered by an investment company. But long lists can overwhelm. So Zhao and her coauthors, in an article in the , tested two alternatives: a converging graphic, where multiple options are accompanied by arrows that point to a particular decision, like retirement saving, and a diverging one, where the arrows flow outward from a financial goal, like charitable contributions, to the ways of achieving it. The researchers found that 鈥渁 financial goal involving inward (versus outward) monetary flow is evaluated more favorably when the goal and its subordinate options are depicted with a converging (versus diverging) diagram.鈥� In other words, converging diagrams can help savers, and diverging ones, givers.
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