How a CEO comes across at key touchpoints such as earnings calls can significantly shape investors’ perceptions of his or her abilities. We know from research that even subtle things like tone of voice can increase—or diminish—shareholder confidence. So, too, can subliminal emotional or behavioral cues in speech.

But what about something arguably more obvious and easier to quantify? What about accent?

Until now, remarkably little attention has been given to how much sway a CEO’s accent has on investors’ impressions or attitudes. We simply don’t know whether chief executives with “foreign” accents fare better or worse with shareholders than native US-English speaking counterparts.

And this subject matters. It’s estimated that as many as 9 percent of all companies in the U.S. and more than 11 percent of Fortune 500 firms are run today by foreign-born chief executives. How investors perceive these CEOs relative to native speakers could have major implications for hundreds of thousands of organizations.

Shedding compelling new light on this is new research by Goizueta PhD candidate Leonardo Barcellos, and Schaefer Chaired Professor of Accounting Kathryn Kadous. Together they have produced a study that suggests that accent does matter–though perhaps not in the way that many of us might think.

CEO Accent Research Results May Surprise You

Barcellos’ and Kadous’ findings show that having a foreign accent not only positively enhances the way a CEO is perceived by potential investors, but that non-native English speakers are an astounding 30 times more likely to be seen as “exceptional,” “determined,” and more “hard working” than counterparts with native accents.

“There’s a lot of interest in how CEOs and managers are perceived, and research has looked at the interplay between attributes such as personality or speech with stereotyped thinking around high status and ability,” says Barcellos. “But accent is a new variable. And accents—foreign accents in particular—are also implicitly connected to biases and stereotypes. So, intuitively, you might expect that CEOs with non-native accents would be seen as somehow lower in status, less educated, or less able.”

Barcellos and Kadous created a novel hypothesis, however.

They reasoned that the stereotype-reconciliation process—the way biased or stereotyped thinking can be changed, attenuated, or even completely abandoned when new information or data comes to light—might in fact yield more interesting, counter-intuitive results.

“Specifically, we hypothesized that stereotypes attached to nonnative speakers—that they’re less educated or advantaged—would in some way compete with the way we (stereotypically) see the figure of the CEO as someone powerful, successful, and of high-status,” explains Kadous. “We suspected those CEOs with foreign accents might somehow be construed as overcoming greater odds or more adversity to make it to the top; and that this might actually make potential investors think all the more highly of them and their abilities.”

To put this to the test, she and Barcellos ran a series of randomized experiments.

First, they recruited participants with real-world investing experience to review data from a fictitious firm. Participants were then invited to listen to various recordings of earnings conference calls, in which managers report firm earnings to investors. The calls were performed by actors, some of which were led by “CEOs” with native U.S.-English accents, some by non-native, Hispanic chief executives. The results were compelling.

“In the first experiment, we asked participants about their willingness to invest in the firm after they listened to the chief executive’s earnings call,” says Barcellos. And to test our theories around stereotype reconciliation further, we used both good and bad earnings reports. We wanted to see how they would respond to the CEO in question, particularly when the news was bad and needed to be processed more assiduously by the investors.”

Three further experiments explored their initial findings in more detail. In one of these, Barcellos and Kadous had participants listen to a passage read aloud by individuals with different accents, some described as CEOs, others not. Participants were asked to record open-ended descriptions of the individuals in each recording.

The results were stunning, says Barcellos.

“Across the board, we found that investors were more positively disposed to the CEOs with foreign accents. When we asked them to describe a CEO based on hearing the individual speak, investors used 2.5 times as many positive adjectives and qualifiers to describe nonnative-accented individuals versus native speakers.”

Looking at the findings together, he and Kadous were able to establish that investors are 36 times as likely to describe the CEO as having “exceptional traits” when the CEO spoke with a non-native versus native accent.

“The positive traits attributed to non-native-accented CEOs largely reflect investors’ attempts to reconcile the conflicting stereotypes arising from the CEO position and non-native accents. Investors reconcile the stereotypes by inferring that the non-native-accented CEO must have truly exceptional characteristics that can explain how a member of a disadvantaged group rose to the top management position,” says Kadous. “They are inclined to see the non-native group as having ‘worked their way up the ladder.’ The qualifiers they use include ‘hardworking’ and ‘integrity’ and having respect for workers because ‘they’ve been there too.’”

Perhaps most significantly, she and Barcellos found that investors were a stunning 33% more likely to invest in firms with poor earnings when the CEO delivering the “bad news” had a non-native accent. They put this down to the extra cognitive effort that we make to process and digest negative information or outcomes than positive – cerebral legwork that CEOs and the organizations they lead should be cognizant of these findings, says Barcellos. “Our research shows that managers should not be reluctant to speak up or step forward in key meetings, for fear of being judged poorly on their accent.”

The findings add weight, too, to the imperative for boards of directors and other senior decision-makers to guard against discrimination in appointing and retaining their top executives—especially when times are tough and performance suffers, says Kadous.

“When things are going well, the path ahead for organizations is usually pretty straightforward. It’s when the chips are down that it becomes all the more critical to have the backing of your shareholders and investors. Our research shows that when it comes to receiving bad news or poor results, investors are 33 percent more likely to still want to stake money on a firm or organization whose CEO speaks with a non-native accent than those run by native U.S.-English-speaking executives.”

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Managing style and product design

Mobile phones look very different now than they did ten years ago. With access to all of the design patents available from the US Patent & Trademark Office (including ones from products in the telecommunications industry), Tian Heong Chan, assistant professor of information systems & operations management, and coauthors Jürgen Mihm (INSEAD) and Manuel E. Sosa (INSEAD) show how one can cluster them according to their visual similarities. The process results in an evolutionary timeline charting the successive styles of mobile phones from “clamshell” to “touchscreen slate” and everything in between. This approach creates a novel data platform from which researchers can start testing hypotheses about how product forms evolve. With the data, the authors show that there is increasing turbulence (or unpredictability in the change in product forms) across all product categories. In other words, it is much harder now than in the past to predict what the next hot style will be based on current trends. This is especially salient in non-tech categories, such as furniture and fashion. The authors conclude that companies with the capability to manage this increasing uncertainty will have a significant competitive advantage in the future. Management Science (2017)

Relational signaling and gift giving

Prior research indicates that gift givers are motivated by competing goals. Often, they will simply select an item of the recipient’s choosing. However, gift givers are also likely to select an item on their own to help show knowledge of the recipient and further define and maintain a personal connection. Morgan Ward, assistant professor of marketing, and coauthor Susan Broniarczyk (U Texas) take the research a step further by analyzing how the closeness of a relationship further impacts the gift-giving decision when a gift registry is readily available. The duo employed five separate studies with human subjects presented with various gift-giving scenarios. The paper notes, “We find that despite their stated primary intention to please recipients, close (vs. distant) givers ultimately are more likely to ignore recipients’ explicit registry preferences in favor of freely chosen gifts.” Ward and Broniarczyk conclude that divergence from the registry was not necessarily about finding a better gift. Instead, it occurred only when givers specifically received attribution for their selection. The closeness of the personal connection resulted in a “perceptual distortion of the gift options in favor of relational-signaling gifts.” Distant givers were much more likely to pick an item from the registry, selecting gifts closely aligned with recipients’ preferences. Journal of Marketing Research (2016)

The link between corporate alliances and returns

Strategic alliances are agreements between two or more firms to pursue a set of agreed upon objectives while remaining independent organizations. Alliances are formed for a number of reasons, including licensing, marketing or distribution, development or research, technology transfer or systems integration, or some combination of the above. Tarun Chordia, R. Howard Dobbs professor of finance, and coauthors Jie Cao (Chinese U of Hong Kong) and Chen Lin (U Hong Kong) find evidence of return predictability across alliance partners. If the alliance partner or partners have high (or low) returns this month, then the firm has high (or low) returns over the next two months. Using a sample of alliances over the period 1985 to 2012, the authors find that a long-short portfolio sorted on lagged one-month returns of strategic alliance partners provides a return of over 85 basis points per month. This long-short portfolio return is robust to a number of specifications, including different adjustments for risk, controlling for different proxies for cross-autocorrelations, and excluding partnerships with customer-supplier relationships, as well as controls for industry returns. They theorize, “If investors are fully aware of the impact of strategic alliances on returns and pay attention to the firm-partner links, then the stock price of a firm should quickly adjust to price changes of its partners’ stocks.” The evidence suggests that investor inattention may be the source of a firm’s underreaction to its partners’ returns. Journal of Financial and Quantitative Analysis (2016)

Understanding the influence of mobile promotions

Michelle Andrews, assistant professor of marketing, and coauthors Jody Goehring (RetailMeNot), Sam Hui (U Houston), Joseph Pancras (U Conn), and Lance Thornswood (JCPenney) cull together divergent streams of research to provide a framework to better understand how mobile promotions influence the in-store shopping behavior of consumers. Online promotions allow merchants to reach shoppers easier and faster, enabling traditional stores to text out online discounts or highlight specific products. Merchants can also use geolocation on mobile phones to text and target shoppers once inside of their store to feature merchandise or advertise a special offer. The authors identify a number of key areas for additional research to “enable long-term, value enhancing relationships between consumers and marketers.” For instance, they note the need for a better understanding of the role of privacy concerns on personal data collection via mobile devices. Andrews and coauthors also find that a deeper investigation of such things as return on investment, loyalty programs, upselling, proximity to purchase, and global promotions are required to get a true sense of the effectiveness of mobile promotions. Journal of Interactive Marketing (2016)

Significance of pricing and product-line strategies

In new research, Ramnath Chellappa, associate professor of information systems & operations management, and coauthor Amit Mehra (U Texas) investigate the business practice of IT “versioning,” whereby a company creates different models of a product in order to charge varying prices for each one. Much research takes into account economies of scale and a company’s marginal costs—the price of making an additional unit of a product. However, Chellappa and Mehra note that companies also need to consider consumer usage costs when they decide to create various versions of the same IT product. But for IT products and services, the “costs” are not monetary. The pair note the “time commitment and physical effort” to use IT products or services. They use the example of mobile devices: “One cannot enjoy these information goods without them consuming resources such as memory and processing power.” They determine that “this consumption-related disutility” is critical to feature bundling and consumer segmentation. The researchers create a model to test the consumer cost impact, using a “digital goods firm with a unique production cost structure and agents—consumers who face resource constraints in consuming these goods.” Given the usage costs, they determine that individuals may not necessarily prefer products with more features to lower-quality items. The pair concludes “marginal cost and consumers’ usage costs have the same impact on versioning strategy.” Management Science (2017)

The impact of behavioral bias on decision-making

For business leaders, the ability to make critical decisions in a dynamic work and industry environment is essential to the success of an organization. However, Diwas KC, associate professor of information systems & operations management, and coauthors Francesca Gino (Harvard U) and Bradley R. Staats (UNC) note that behavioral traits can sometimes impact the ability to weigh new information and make a logical decision, even in the face of negative news. KC, Gino, and Staats analyze 147,000 choices made by cardiologists during a six-year period when they were presented with negative news from the FDA about drug-eluting stents used in angioplasty. The experienced cardiologists were more likely to continue using the questionable stents than their less-experienced peers, even after being informed of the problem. The role of influence also played a factor in the decision-making. They add, “Given that those who feel they are expert are less likely to react to negative news, those around them show the same tendency, thus making worse decisions than those in groups with less perceived expertise.” The seasoned cardiologists were better able to “generate counterexamples to the negative news and thus be susceptible to confirmation bias.” The authors note managers should be aware that more experience and the perception of expertise may bias decision-making. Management Science (2017)

The process behind auditor judgement

Auditors are required to use considerable judgment in their job, assessing information from a number of sources to create financial reports, critique accounting estimates, and assess a company’s internal controls over financial reporting. But an auditor’s decision-making process is not well understood. In their paper, Kathryn Kadous, professor of accounting, and coauthors Emily E. Griffith (U Wisconsin) and Donald Young 13PhD (Goizueta, Indiana U) provide a framework for researchers to better evaluate the judgment of auditors and, in turn, improve audit quality. Prior research in this area presumes that “decision makers typically engage deliberate, analytical processes to solve problems (i.e., pursue goals) that they have specifically chosen, that they limit their decision inputs to items they view as relevant, and that they have access to the details of their own cognitive processing.” The trio notes that “nonconscious goals” and “intuitive processes” are also influential in the decision-making process and in the factors driving these processes. Kadous, Griffith, and Young conclude that their framework indicates researchers approach their investigation by taking into account “conscious and nonconscious goals” and “decision makers with conflicting incentives, as well as differing capabilities.” Auditing: A Journal of Practice & Theory (2016)

The role of the economy on individualism

Past work has shown that as countries become wealthier, people often become more individualistic. In new research, Emily Bianchi, assistant professor of organization & management, takes the investigation a step further and finds that even subtle fluctuations in the economy are associated with changes in individualism. She finds that during good economic times, Americans are more likely to seek out ways to signal their uniqueness and individuality. For instance, during boom times, Americans tend to give their children more uncommon names and are more likely to prize autonomy and independence in child-rearing. They are also more likely to favor music featuring self-oriented lyrics. Conversely, during recessions, Americans tend to focus more on fitting in and tend to give their children more common names, listen to more relationally oriented music, and encourage their children to get along with others. Additionally, Bianchi discovered that recessions engender uncertainty, which, in turn, decreases individualism and encourages interdependence. The study results indicated that the “link between wealth and individualism is driven not only by differences in how people live, work, and learn but also by their sense of the predictability, orderliness, and certainty of the surrounding environment.” Journal of Personality and Social Psychology (2016)

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She succeeds Anand Swaminathan. The associate dean position carries a three-year term, and faculty can serve up to two terms.

Kadous, Schaefer Chaired Professor of Accounting, has been a part of the Goizueta community since 2003. She started at Goizueta as a newly tenured associate professor, was promoted to professor in 2010, and was awarded a chaired professorship this year. A prolific researcher, her work is published in an array of academic journals, including the Accounting Review, Contemporary Accounting Research, the Journal of Accounting Research, Organizational Behavior and Human Decision Processes, the Journal of Behavioral Finance, and Auditing: A Journal of Practice and Theory. In addition, Kadous recently completed her second term as editor of The Accounting Review and sits on several editorial boards. Prior to becoming an academic, Kadous worked in the private sector as an auditor and controller.

No stranger to the doctoral program, Kadous is a PhD advisor, has chaired several dissertation committees, and has served as a member of many others. In her new role, she hopes to use that experience to push the program to the next level.

“Professor Swaminathan has been a great role model and mentor to our students,” she says. “I will continue his efforts to increase the stature of Goizueta’s PhD programs by focusing on admitting a diverse set of promising students, ensuring students have the resources and support needed to do their best work, and ensuring our program is designed and implemented in ways that facilitate the development of our students into true scholars.”

At the PhD placement reception in May, Kristy Towry, dean of faculty, thanked Swaminathan for his influence on and dedication to the program. She then welcomed Kadous: “I couldn’t be more pleased to have Professor Kadous take on this role. She has a proven record of mentoring successful doctoral students, as her prior students have won prestigious awards, landed esteemed faculty positions, and contributed meaningfully through their research and teaching to both academia and the business community. I look forward to her leadership as she shares her knowledge and vision for taking our PhD program forward.”

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In other faculty news, Robert Kazanjian is now the Asa Griggs Candler Endowed Chair in Organization & Management, and Kathryn Kadous is the B.F.S. Schaefer Endowed Chair in Accounting.

For more on how you can provide a named gift, click here.

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Willie Choi (University of Pittsburgh) and Marcus Kirk (University of Florida) both studied accounting at Goizueta and mentioned current faculty among their most meaningful mentors.

“The professor I most admire is my Ph.D. advisor, Kristy Towry,” Choi told Poets & Quants. “Perhaps the best lesson I learned from her is to take my work seriously, but to not take myself seriously.”

Choi joined the faculty at Pittsburgh in 2011.

“After my first year at Emory, I decided to transition from pursuing a Ph.D. in Finance to Accounting but I’d missed two accounting seminar courses,” added Kirk. “Kathryn Kadous and Greg Waymire both generously met individually with me over that first summer to let me catch up.”

Kirk has been at Florida since 2009.

RELATED CONTENT: 

• The Poets & Quants 40 Under 40
• Goizueta Ph.D. Placements
• Erika Hall named to 40 Under 40 list
• Choi discusses Emory prior to graduation (video)

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To sign off on financial statements of public companies, top auditors gather information from the company itself, from multiple auditors working under them, and from outside specialists hired by the company and the auditing firm. Auditors use this information to determine whether estimates in corporate financial statements are reasonable, yet their conclusions can be wrong if they fail to question the sources of this information or fail to notice inconsistencies across information.

Kadous’s work centers on the psychological process of accounting and auditing work. “My research focuses on how auditors make judgments about the most complex accounts on financial statements—complex estimates,” she says. Estimates are required for important accounts on the financial statements, including investments and securities, goodwill, allowance for loan losses, intangibles, and more. “This part of the auditor’s job requires considerable judgment, and regulators and researchers, as well as auditors themselves, have been clear that auditors need help in this area,” she says.

Kadous has an insider’s knowledge of the profession, having worked as an accountant herself, and is motivated to better understand how to improve the industry. “Regulators and inspections have made the industry take a step back and look at itself more honestly,” she says. The Sarbanes-Oxley Act of 2002 and its creation of the Public Company Accounting Oversight Board (PCAOB), which provides independent oversight of auditors of US public companies, has improved audit quality, and partners are held accountable for deficiencies. But unconscious bias is a pressing problem that the profession has yet to address.

Her research also looks at how the evolution of the profession has had a role in causing current judgment problems. In the paper “Audits of complex estimates as verification of management numbers: How institutional pressures shape practice,” she and co-authors argue that because auditors are no longer involved in the underlying work that outside specialists now do, they find it difficult to take the broader view of the information collected, which is necessary for high-quality judgment. Kadous adds: “Technology has certainly changed the nature of accounting. Those changes have helped the outsourcing of minor accounting work, but this may cause problems down the line if auditors are not careful to take a broad view.”

She acknowledges the complicated nature of the job and the constant and growing demands placed on auditors. Increased scrutiny and regulation, in addition to continuing changes in the nature of the work, remain a challenge for those in the profession. “You’re on the clock, and there’s tremendous pressure to complete the work,” Kadous says. “It doesn’t always allow you to take a step back and see the big picture.”

Kadous’s research finds that auditors can unlock the ability to take the broader view. For instance, a simple prompt that unconsciously encourages auditors to use a more deliberative approach makes them better able to spot inconsistencies and to question the mistaken numbers in financial statements. Ultimately, people trade based on the financial statements of public companies that are provided to the SEC. It is critical to the success of capital markets, she contends, that auditors are provided with a more consistent and better way to do their jobs on an individual level.

Kadous will continue to address this question in her research and is already gathering data to further this cause. She is currently investigating additional means of encouraging auditors to use their abilities to make better judgments about financial reports. She is working with Goizueta doctoral student Daniel Zhou to assess whether unconsciously prompting auditors’ intrinsic motivation will encourage them to dig deeper to find errors in financial reports. So far, the results are promising.

– Myra Thomas

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The human brain and stock earnings

In pioneering research, Jan Barton, associate professor of accounting, and Emory neuroscientists Greg Berns and Andrew Brooks examined how the human brain processes accounting information, specifically corporate earnings announcements. The study participants acted as investors, first by forecasting the earnings per share of 60 real publicly traded companies, and then by taking an investment position in the companies’ stocks. Participants’ brains were then scanned in an fMRI machine while they learned the companies’ actual earnings. Barton and colleagues found that dopamine neurons deep in the investors’ brains encoded surprises associated with the earnings announcement. They also found that activity in study participants’ brains predicted Wall Street’s reaction to the earnings news—both abnormal stock returns and trading volume around the earnings announcements were strongly correlated with the intensity of the reaction in the participants’ dopamine neurons. The researchers show that how an investor’s brain processes earnings news seems to depend on her personality traits, the investment position she holds in the company’s stock, and the predictability of the company’s earnings. The Accounting Review (2014).

Company name selection and firm value

In research from T. Clifton Green, associate professor of finance, and Russell Jame 10PhD (Gatton College of Business and Economics), the duo found that publicly traded companies with names that are easier to pronounce, a bit more familiar to investors, and shorter in length enjoy increased investor recognition and firm value. The researchers used a number of criteria for their “name fluency” test, citing the use of  English words, the appearance of the company name in the dictionary, the frequency of  letter clusters familiar to English language word patterns, and shorter company names. As name fluency increased, so too did the likelihood of retail investors and mutual fund managers owning the company’s shares. The companies with more fluent names also saw an uptick in liquidity and higher market valuations on common stock. Journal of Financial Economics (2013).

Employee commitment, trust, and fairness

Employees’ commitment to an organization is influenced by whether they believe company decision makers are being fair and whether they receive favorable outcomes. According to research from Emily Bianchi, assistant professor of organization and management, and her coauthors, the notion of fairness in the workplace and its impact on employee commitment to an organization is a bit more complicated than that. Using data from actual work experiences as well as responses to a variety of hypothetical vignettes, the researchers found that reactions to fairness information depended largely on how much employees trusted the organization. When employees had a high level of trust in an organization, commitment was low when the study participants experienced unfair outcomes and unfair procedures. However, when employee trust in the organization was low, commitment was high when the study participants experienced fair outcomes and fair procedures. Personality & Social Psychology Bulletin (2015).

High trading volume and stock volatility

The dramatic increase in US trading volume has transformed the market. Given the historic jump, Ilia D. Dichev, Goizueta chaired professor of accounting, and co-authors Kelly Huang (Florida International U) and Goizueta doctoral candidate Dexin Zhou sought to investigate the impact of high trading volume on stock volatility. The trio examined several settings, including matched ETFs and dual-class stocks, the aggregate timeseries of US stocks since 1926, and the cross section of US stocks during the past 20 years. The research revealed that trading-induced volatility makes up about a quarter of total observed stock volatility today. The study draws special attention to the consequences of increasing trade-induced volatility, specifically the possibility of destabilization of the market. The researchers also ponder whether or not it might be appropriate for market makers and regulators to act proactively in dealing with the impact of high trading volume on stock volatility. Journal of Accounting, Auditing, and Finance (2014).

Communication strategies and captive centers

Technological advances have allowed companies to offshore work to emerging economies. While the practice has led to a reduction in costs, there are communication difficulties that can result between employees and superiors when they are spread across the globe and dealing with language, cultural, and time zone differences. Anandhi Bharadwaj, professor of information systems and operations management; Deepa Mani (Indian School of Business); and Kannan Srikanth (Singapore Management University) investigated more than 130 offshore captive centers owned and operated by multinational corporations to understand the technology-enabled coordination strategies needed to make captive centers work better. The trio studied two work strategies: modularization and information sharing. Modularization requires an organizer to give direct instruction to employees; there is little employee interaction. The information-sharing model requires employees to work together and communicate often with one another. The research indicated that the modularization of work is ineffective if the jobs performed are unfamiliar, less routinized, and less analyzable. Instead, information-sharing is a better option when employees are engaging in new assignments and duties. Information Systems Research (2014).

Second-guessing accounting decisions

Evaluating the appropriateness of accounting choices requires the application of greater judgment when standards are less precise. Consequently, as accounting standards become less precise, US auditors are concerned that they face the risk of increased second-guessing of their decisions and greater legal liability. Kathryn Kadous, professor of accounting, and coauthor Molly Mercer (DePaul U) investigated this possibility by designing an experiment in which participants acted as jurors in a mock auditor negligence case. Kadous and Mercer determined that less precise standards led to more second-guessing of auditor judgments when the client’s accounting choice was fairly conservative. However, when the client’s reporting was aggressive, this did not occur. In fact, jurors were overly lenient with auditors who allowed aggressive reporting under imprecise standards. The results indicate a need for tools to improve jurors’ ability to evaluate an auditor’s reporting decisions under imprecise standards. Auditing: A Journal of Practice and Theory (2014).

Consumer characteristics and smoking choices

Given the health risks associated with smoking, researchers are working hard to better understand the demographics of smokers and those more likely to quit. Furthering the field of study, Michael Lewis, associate professor of marketing and doctoral area coordinator; Carla J. Berg (Emory University Rollins School of Public Health); and Yanwen Wang 14PhD (U of Colorado Boulder) investigated how cigarette preferences impacted the decision to stop smoking. The trio also looked at the type of smoker more likely to quit. Using demographic data, they found that cessation rates among menthol cigarette smokers, particularly in the African-American population, were much lower than that of non-menthol smokers. Households with single men were much less likely to quit than mixed gender households. However, smokers who opted for lower nicotine cigarettes and smokers who purchased lower quality premium cigarettes were more likely to quit smoking. The researchers defined cessation of smoking as a smoker who had not purchased a pack of cigarettes for at least one year. Preventive Medicine (2014).

Informal social ties and team work

Given the ever-increasing amount of work that is accomplished by teams, understanding how teams work and figuring out ways to increase their effectiveness in organizations has become even more relevant. In new research on the subject, Jill E. Perry-Smith, associate professor of organization & management, and coauthor Christina E. Shalley (Georgia Institute of Technology) investigated informal social networks established outside of the team and how those may inform the abilities of individual team members and their work inside the team. Results of a study of 82 long-term MBA project teams suggested that when individual team members have nationality-heterogeneous outside contacts that are weak rather than strong, team creativity is higher. The two note that strong ties usually involve people who are similar in some way. Weaker outside ties are more likely to provide a differing perspective and thus facilitate creative thinking. Notably, diverse outside ties helped teams be more creative regardless of how diverse the actual team was. Organization Science (2014).

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Individuals who enter adulthood during a recession are less likely to be narcissistic, finds Emily Bianchi, assistant professor of organization & management. Using two large, diverse samples of US adults, Bianchi found that people who came of age during periods of high unemployment, specifically during ages 18 through 25, were “more likely to develop an other-oriented and ultimately less narcissistic self-concept.” An additional study similarly found that CEOs who came of age in more difficult economic times exhibited less narcissism than counterparts who came of age in more prosperous economic times. “These findings suggest that macroenvironmental experiences at a critical life stage can have lasting implications for how unique, special, and deserving people believe themselves to be,” she writes. Psychological Science (2014).

Product word-of-mouth & the value of disclaimers

Consumers often rely on word-of-mouth to make decisions on buying a specific product. This is due in part to public exhaustion with the slick and biased messages advertisers often use. But not all word-of-mouth communication is equally persuasive, says Ryan Hamilton, associate professor of marketing, and his co-researchers Ann L. McGill (UChicago) and Kathleen D. Vohs (UMinn). The trio investigated what they term “the dispreferred marker effect,” or the use of disclaimers when a person offers word-of-mouth criticism of a product. They tested the idea in five separate experiments and determined that consumers were more likely to trust product evaluations by other consumers who couched negative criticism in a polite way. The study centered on one kind of dispreferred marker, i.e., idiomatic phrases such as “I’ll be honest” or “I don’t want to be mean, but…” The researchers found that such an approach made the commenter more likeable and appear more credible than those who didn’t offer such a disclaimer. Journal of Consumer Research (2014).

Market reaction to the tone of 10-Ks

In their research, Narasimhan Jegadeesh, Dean’s Distinguished Chair of Finance and interim vice dean for faculty and research, and Di Wu (UPenn) present a new methodology to investigate just how the positive or negative wording in a company’s financial statements are interpreted by the market. The authors used their “content analysis algorithm” to study all 10-Ks filed from January 1995 through December 2010, using only the 10-Ks that were the first filing for the year by the company. The final sample was a large group, representing 45,860 filings for 7,606 unique firms. The researchers concluded that there was a “significant relation between document tone and market reaction for both positive and negative” of 10-Ks. The study also looked at all IPOs during the 1995 to 2010 period, which included 1,475 IPOs in the sample. The coauthors found a negative relation between the tone of the prospectus and IPO underpricing. Journal of Financial Economics (2013).

Organizational failure and job prospects

Potential employers often evaluate job applicants based on the standing of their current employer. If that employer has failed, even a productive employee can suffer a significant disadvantage when looking for a new position. Giacomo Negro, associate professor of management and organization, and Christopher Rider (Georgetown) used the failure of a prominent law firm in their research to show evidence of this “intraprofessional status loss,” analyzing 224 of the firm’s partners and their transitions to subsequent employers. While the majority of the partners were able to find employment at other law firms, the new firms were on average of lower status than the failed firm. But all employees did not experience the loss of status in the same way. Negro and Rider also found that even after accounting for their productivity, graduates of more prestigious law schools who were displaced were less likely to be negatively impacted. Organizational Science (2014).

Understanding investor behavior

Prior research indicates that when it comes to trading patterns, investors hold losing positions far too long and sell off winning positions way too soon. Kathryn Kadous, professor of accounting; William Tayler (BYU); Jane Thayer (UVirginia); and Donald Young (Georgia Tech) take the research a step further by disproving the common belief that investor behavior is primarily motivated by “mean reversion,” which is simply the assumption that “losing stocks will bounce back and that winning stocks will fall” over time. Instead, they argue that self-esteem, self-regard, and confidence are the real reasons for this sort of investor behavior. The motivation of investors is complex, so the researchers completed two separate experiments to tease out the differing motivations of investors in losing vs. winning positions. They conclude, “Investors with lower self-regard hold losing investments longer than those with higher self-regard, and investors with higher confidence hold losing investments longer than those with lower confidence.” This implies that feeling good about oneself, in general, and avoiding overconfidence about one’s investing ability jointly allow for better investment decisions. Journal of Behavioral Finance (2014).

Product differentiation and industry structure

Much is written about how companies use product differentiation to boost margins or gain market share. But little is known about how firms’ efforts to differentiate their products, individually or jointly, impact their industry’s structure. New research by Richard Makadok, associate professor of organization and management, and David Gaddis Ross (Columbia U.) employs formal modeling to examine how product differentiation can not only shape a firm, but also an industry. The researchers separate two of the effects that product differentiation has on firms’ profits. First, they analyze the “competitive advantage effect” of differentiation and how it increases customers’ willingness to pay for the differentiating firm’s product, thereby raising that firm’s profit at the expense of its rivals. Second, they investigate the “rivalry restraint effect,” or when competitors’ products differ enough from one another to reduce the intensity of price competition among them and,  ultimately, raise the profits of all firms in the industry. Since these two effects can either reinforce or counteract each other, competitors may vary in their incentive to  differentiate, and they tend to underinvest in differentiation relative to the industry-wide optimum unless they coordinate with each other on their differentiation decisions. Strategic Management Journal (2013).

Measuring brand sentiment on social media

Large companies increasingly use customer comments on social media for market intelligence. In new research, Wendy Moe (UMaryland) and David Schweidel, associate professor of marketing, argue that these metrics have shortcomings, because they fail to consider structural differences among social media platforms and changes in customer sentiment over time. Taking these differences and changes into account, the two researchers study social media data from firms in two industries, enterprise software and telecommunications, to arrive at a more accurate assessment of customer sentiment. They find that sentiments expressed in various social media platforms evolve in different ways, underscoring the pitfalls of relying on social media comments collected from a single platform. The researchers demonstrate how social media data collected from multiple platforms can be analyzed to better assess brand sentiment, which can serve as an early indicator of shifts in other metrics, such as customer satisfaction surveys and stock prices. Journal of Marketing Research (2014).

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Allison Burdette, Assistant Professor in the Practice of Business Law, received The Marc F. Adler Prize for Excellence in Teaching. This award honors outstanding teaching quality, course innovation and relevance to real-world problem solving in all Goizueta Business School programs.

This spring, J.B. Kurish, Associate Professor in the Practice of Finance, received the Emory Williams Teaching Award. This is the oldest teaching award at the university. Nominations are made by a committee, reviewed by the Dean’s Office and submitted to the Provost for approval.

Crystal Apple Teaching Awards honor Emory faculty members for outstanding achievements in teaching. Faculty members are nominated and selected by students. This year, two of the seven 2014 Emory-wide awards were given to GBS faculty:

• Elliot Bendoly was selected in the Undergraduate Business Category
• Emily Bianchi was selected in the Emerging Excellence Category

Additional awards from student nominations:

• BBA Distinguished Educator Award: Emily Bianchi
• MBA Teaching Excellence Award — Classic Faculty: Ray Hill 
• MBA Teaching Excellence Award — Junior Faculty: David Schweidel
• Evening MBA Distinguished Core Educator Award: Kathryn Kadous
• Evening MBA Distinguished Elective Educator Award: Patrick Noonan 
• MEMBA Distinguished Educator Award: Jeffrey Rummel 
• WEMBA Distinguished Educator Awards: Shehzad Mian 

Finally, two members of the community were recognized for their service.

The Donald R. Keough Award for Excellence, named for and endowed by former Coca Cola President and COO Donald Keough, is the school’s highest service award, and recognizes extraordinary contributions by faculty and staff.  In 2014 the award for staff went to Alicia Sierra and for faculty to Rick Gilkey.

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Reducing home equity bias through transparency

One of the goals of global stock exchange mergers is to create a consolidated trading platform that makes listed firms available to a greater number of investors while providing firms with larger pools of liquidity. But the problem of equity home bias—the tendency of investors to overinvest in domestic securities and underinvest in foreign securities—can thwart optimal global portfolio diversification. In a recent study, Grace Pownall, professor of accounting; Maria Vulcheva 05MBA 11PhD (FIU); and Xue Wang (Ohio State) examine such home bias in Euronext, which was created in 2002 when four European countries merged their stock exchanges. The researchers focus in particular on two structural mechanisms adopted by Euronext: (1) the integration of trading platforms across the four exchanges, and (2) the creation of named segments open to firms that voluntarily pre commit to greater transparency in financial reporting and corporate governance. In their investigation of these mechanisms, the researchers find that firms that choose not to join the segmented list see no diminution of home bias, while the segmented, more transparent firms reap significant increases in all categories of foreign holdings relative to domestic holdings. Management Science (forthcoming).

The challenge of accurately weighting contrary advice