Faculty & Research
In a recently accepted paper in the Journal of Financial Economics, Dr. Amber Anand, professor of finance and Haydon Family Fellow, and his co-author, Kumar Venkataraman, use audit-trail data from the Toronto Stock Exchange for an in-depth exploration of voluntary liquidity providers in the markets.
In the study, titled “Market conditions, fragility and the economics of market making,” the researchers find support for regulatory concerns that voluntary market makers scale back in unison when market conditions are unfavorable, which contributes to covariation in liquidity supply, both within, and across stocks. Market conditions lower aggregate participation via their impact on trading profits and risk. However, contrary to regulatory view, higher stock volatility is associated with more participation and higher profits, even after controlling for other market conditions, including stock volume. Further, fragility concerns induced by the correlated participation decisions extend to larger stocks, and to active participants.
The Designated Market Maker mitigates periodic illiquidity created by synchronous withdrawal of market makers in large and small stocks. Thus, the research underlines the importance of market maker obligations across the market.
In a recently accepted paper in the Journal of Accounting and Economics, Dr. Craig Nichols, assistant professor of accounting, and his co-authors, Dr. Daniel Beneish (Indiana University) and Dr. Charles Lee (Stanford University), examine the role played by the supply of lendable shares in both equity price formation and returns prediction.
The researchers’ results show that the supply of lendable shares is frequently binding, and the constraint is related to firms’ accounting characteristics. They have three specific findings. First, controlling for expected borrowing costs and other determinants, a stock’s supply of lendable shares is a function of accounting variables associated with the types of stocks short sellers target. As a result, shares are least available when they are most attractive to short sellers. Second, when the lendable supply is binding (non-binding), short-sale supply (demand) is the main predictor of future stock returns. Third, abnormal stock returns to the short-side of nine well-known market anomalies are attributable solely to “special” stocks that generally have low supply and are hard to borrow.
Research by Todd Moss, assistant professor of entrepreneurship, has been accepted for publication by the Academy of Management Journal. The paper, titled “Cooperation vs. Competition: Alternative Goal Structures for Motivating Groups in a Resource Scarce Environment,” finds that competitive goal structures generally lead to higher levels of motivation within groups in a resource-scarce environment. Co-authors are Geoff Kistruck (York University), Robert Lount (Ohio State University), Brett Smith (Miami University) and Brian Bergman (Miami University).
Moss and his coauthors undertook a field experiment within a base-of-the-pyramid setting where resource scarcity is extremely high. Specifically, they collected data on 44 communities in rural Sri Lanka tasked with contributing a portion of their resources to the construction of a school building; 24 were assigned to a competition condition and 20 to a cooperation condition. The results, and subsequent follow-up interviews and focus groups, collectively suggest that competitive goal structures are more effective at motivating groups within a resource scarce environment. However, the results also suggest that cooperative goal structures can be highly motivating when groups are unfamiliar with one another, as cooperating with unfamiliar groups can provide access to valuable and rare knowledge within such settings.
Research by Lai Xu, assistant professor of finance, has been accepted for publication by the Journal of Financial Economics. The paper, titled “Tail Risk Premia and Return Predictability,” found empirical support for the idea that market fears play an important role in understanding the predictability of stock returns. Lai and her coauthors, Tim Bollerslev (Duke University) and Viktor Todorov (Northwestern University), show that much of the predictability of future stock market returns may be attributed to the variation over time of the extra compensation that investors demand for bearing the risk of sharp changes in the price of a stock from its current price (formally, the jump tail risk). Another novel aspect of the researchers’ work is their new, model-free (nonparametric) procedure for decomposing the variance risk premium.
A paper co-authored by Professor of Entrepreneurship Johan Wiklund and Professor Tom Lumpkin, The Chris J. Witting Chair in Entrepreneurship, has been selected to receive the 2015 Greif Research Impact Award. Given annually by the Greif Center for Entrepreneurial Studies at the University of Southern California, the award recognizes an entrepreneurship paper that appeared in the top-tier management and entrepreneurship journals six years ago and received the highest citations (based on the Social Sciences Citations Index) in the five years following publication.
Wiklund and Lumpkin’s paper, entitled “Entrepreneurial orientation and business performance: Assessment of past research and suggestions for the future,” (with Rauch, A. and Freese, M.) was published in 2009 in the Entrepreneurship Theory & Practice Journal.
The two professors will be honored during the business meeting of the entrepreneurship division at the Academy of Management meeting in Vancouver in August, 2015.
In a paper recently accepted for publication in Contemporary Accounting Research, Lihong Liang, associate professor of accounting at the Martin J. Whitman School of Management at Syracuse University, found that shareholder participation improves financial reporting quality. Co-authors were William Barber (Georgetown University), Sok-Hyon Kang (George Washington University) and Zinan Zhu (National University of Singapore).
The paper, titled “External Corporate Governance and Misreporting,” analyzed external governance provisions, specifically those provisions that limit direct shareholder participation in the governance process. The researchers found that fewer restrictions on shareholder participation are associated with a relatively low incidence of accounting restatements.
In a recently accepted paper in Operations Research, Dr. Burak Kazaz, the Laura J. and L. Douglas Meredith Professor of Teaching Excellence and associate professor of supply chain at Syracuse University’s Martin J. Whitman School of Management, and his co-author, Dr. Scott Webster (Arizona State University, formerly Syracuse University), analyze the economic tradeoffs associated with uncertain supply of a perishable product, reviewing how risk aversion and the source of uncertainty – demand and/or supply – affect supply chain decisions.
Their paper, titled “Technical note – Price-setting newsvendor problems with uncertain supply and risk aversion,” explores how economic decisions are affected by supply uncertainty. The researchers found that when risk aversion is incorporated into the joint price and quantity decision under uncertainty, it does not create structural problems when the source of uncertainty is demand. However, risk aversion creates significant problems when the source of uncertainty stems from supply fluctuations. The authors develop a new elasticity measure that enables scholars to solve such complex problems. Managerially, their work finds that a firm will order more and price the commodity higher when the source of uncertainty is supply. The research builds on earlier studies that demonstrated that risk-averse firms price lower and order fewer items when the source of uncertainty is demand.