I demonstrate that, on average, information asymmetry grows between earnings announcements and falls right after each new earnings announcement. I estimate that percent effective spreads typically grow 3.1% over the course of the inter-announcement period. I demonstrate that this inter-announcement growth in information asymmetry occurs gradually throughout the entire inter-announcement period and not just right before each new earnings announcement. This inter-announcement growth has implications for reporting frequency decisions. A semiannual reporter that switches to quarterly reporting cuts the growth time in half by cutting each semiannual reporting period into two quarterly reporting periods. As a result, it reduces information asymmetry in what would have been the second half of the semiannual reporting period. I confirm this in a European setting, showing that the average reduction in bid-ask spreads from the inter-announcement growth channel is 1.6% when firms switch from semiannual to quarterly reporting. This paper was accepted by Suraj Srinivasan, accounting.
{"title":"The Growth of Information Asymmetry Between Earnings Announcements and Its Implications for Reporting Frequency","authors":"Robert C. Stoumbos","doi":"10.1287/mnsc.2022.4408","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4408","url":null,"abstract":"I demonstrate that, on average, information asymmetry grows between earnings announcements and falls right after each new earnings announcement. I estimate that percent effective spreads typically grow 3.1% over the course of the inter-announcement period. I demonstrate that this inter-announcement growth in information asymmetry occurs gradually throughout the entire inter-announcement period and not just right before each new earnings announcement. This inter-announcement growth has implications for reporting frequency decisions. A semiannual reporter that switches to quarterly reporting cuts the growth time in half by cutting each semiannual reporting period into two quarterly reporting periods. As a result, it reduces information asymmetry in what would have been the second half of the semiannual reporting period. I confirm this in a European setting, showing that the average reduction in bid-ask spreads from the inter-announcement growth channel is 1.6% when firms switch from semiannual to quarterly reporting. This paper was accepted by Suraj Srinivasan, accounting.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"31 1","pages":"1901-1928"},"PeriodicalIF":0.0,"publicationDate":"2022-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80651745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In their 2012 paper, Bemmaor and Glady introduced the gamma/Gompertz/negative binomial distribution model for customer base analysis. Their model uses exponentially distributed interpurchase times and a Gompertz distributed customer lifetime, where the latter distribution is nonmemoryless. This comment corrects an error in their expression for the conditional expected number of individual future purchases [Formula: see text] in a forecasting interval of length [Formula: see text]. Contrary to their approach, the correct derivation of the conditional expectation must be based on the conditional survival and density functions of the lifetime distribution. Using the wrong formula leads managers to overestimate the expected future customer purchases. Further, the comment corrects the erroneous expressions for the conditional variance [Formula: see text] and the conditional mean residual lifetime [Formula: see text]. This paper was accepted by Raphael Thomadsen, marketing.
{"title":"Comment on \"Modeling Purchasing Behavior with Sudden 'Death': A Flexible Customer Lifetime Model\"","authors":"Jost Adler","doi":"10.1287/mnsc.2022.4422","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4422","url":null,"abstract":"In their 2012 paper, Bemmaor and Glady introduced the gamma/Gompertz/negative binomial distribution model for customer base analysis. Their model uses exponentially distributed interpurchase times and a Gompertz distributed customer lifetime, where the latter distribution is nonmemoryless. This comment corrects an error in their expression for the conditional expected number of individual future purchases [Formula: see text] in a forecasting interval of length [Formula: see text]. Contrary to their approach, the correct derivation of the conditional expectation must be based on the conditional survival and density functions of the lifetime distribution. Using the wrong formula leads managers to overestimate the expected future customer purchases. Further, the comment corrects the erroneous expressions for the conditional variance [Formula: see text] and the conditional mean residual lifetime [Formula: see text]. This paper was accepted by Raphael Thomadsen, marketing.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"33 1","pages":"1929-1930"},"PeriodicalIF":0.0,"publicationDate":"2022-04-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83675959","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sompong Pornupatham, H. Tan, Thanyaluk Vichitsarawong, G-Song Yoo
The decision usefulness of the direct versus indirect presentation method of a cash flow statement has been a long-standing issue in both practice and accounting research. By capitalizing on comparative advantages of experimental methods, we provide insights into how investors process the information contained in different presentation methods to make cash flow forecasts, especially in the context of various types of nonrecurring items. We predict and find that, when nonrecurring accrued expenses are present, the indirect method leads to lower forecast errors by activating investors’ underlying knowledge structures of operating cash flows in terms of an accrual (versus cash) basis. We also find that, in the presence of nonrecurring cash or nonrecurring accrued revenues, there is no difference in forecast errors between the indirect and direct methods. Moreover, we find that the combination of the direct and indirect methods (the direct-plus-indirect method) leads to lower forecast errors than the direct method, but it does not provide an incremental benefit for forecast accuracy beyond the indirect method. This paper was accepted by Brian Bushee, accounting.
{"title":"The Effect of Cash Flow Presentation Method on Investors' Forecast of Future Cash Flows","authors":"Sompong Pornupatham, H. Tan, Thanyaluk Vichitsarawong, G-Song Yoo","doi":"10.2139/ssrn.3975918","DOIUrl":"https://doi.org/10.2139/ssrn.3975918","url":null,"abstract":"The decision usefulness of the direct versus indirect presentation method of a cash flow statement has been a long-standing issue in both practice and accounting research. By capitalizing on comparative advantages of experimental methods, we provide insights into how investors process the information contained in different presentation methods to make cash flow forecasts, especially in the context of various types of nonrecurring items. We predict and find that, when nonrecurring accrued expenses are present, the indirect method leads to lower forecast errors by activating investors’ underlying knowledge structures of operating cash flows in terms of an accrual (versus cash) basis. We also find that, in the presence of nonrecurring cash or nonrecurring accrued revenues, there is no difference in forecast errors between the indirect and direct methods. Moreover, we find that the combination of the direct and indirect methods (the direct-plus-indirect method) leads to lower forecast errors than the direct method, but it does not provide an incremental benefit for forecast accuracy beyond the indirect method. This paper was accepted by Brian Bushee, accounting.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"444 1","pages":"1877-1900"},"PeriodicalIF":0.0,"publicationDate":"2022-04-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77514086","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The United Nations Principles for Responsible Investment (PRI) is the largest global environmental, social, and governance (ESG) initiative in the asset-management industry to date. We analyze what happens after active U.S. mutual funds sign the PRI to assess whether they exhibit ESG implementation. We find that PRI signatories attract a large fund inflow, but we do not observe improvements in fund-level ESG scores or fund returns. We consider a battery of ways to proxy for funds’ ESG incorporation (e.g., entry/exit, screening, engagement, voting for pro-ESG proposals), but fail to observe evidence of meaningful on average follow-through. Next, we explore cross-sectional fund characteristics and find that only quant funds exhibit small improvements in ESG performance versus other funds, mainly through buying high-ESG-performing stocks. Furthermore, we note that signatories are not superior performers in ESG issues prior to joining the PRI relative to non-PRI funds, but PRI affiliation tends to be widely advertised on company websites, marketing materials, and fund documents. Overall, a reasonable reader may perceive our findings as consistent with PRI funds’ greenwashing. We note, however, that what we uncover is based only on outcome-based measures and may miss some actual efforts of signatories. This paper was accepted by Brian Bushee, accounting.
{"title":"Analyzing Active Fund Managers' Commitment to ESG: Evidence from the United Nations Principles for Responsible Investment","authors":"Soohun Kim, Aaron S. Yoon","doi":"10.1287/mnsc.2022.4394","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4394","url":null,"abstract":"The United Nations Principles for Responsible Investment (PRI) is the largest global environmental, social, and governance (ESG) initiative in the asset-management industry to date. We analyze what happens after active U.S. mutual funds sign the PRI to assess whether they exhibit ESG implementation. We find that PRI signatories attract a large fund inflow, but we do not observe improvements in fund-level ESG scores or fund returns. We consider a battery of ways to proxy for funds’ ESG incorporation (e.g., entry/exit, screening, engagement, voting for pro-ESG proposals), but fail to observe evidence of meaningful on average follow-through. Next, we explore cross-sectional fund characteristics and find that only quant funds exhibit small improvements in ESG performance versus other funds, mainly through buying high-ESG-performing stocks. Furthermore, we note that signatories are not superior performers in ESG issues prior to joining the PRI relative to non-PRI funds, but PRI affiliation tends to be widely advertised on company websites, marketing materials, and fund documents. Overall, a reasonable reader may perceive our findings as consistent with PRI funds’ greenwashing. We note, however, that what we uncover is based only on outcome-based measures and may miss some actual efforts of signatories. This paper was accepted by Brian Bushee, accounting.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"21 1","pages":"741-758"},"PeriodicalIF":0.0,"publicationDate":"2022-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85981458","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine competition between two-sided platforms in a sharing economy. In sharing economies, workers self-schedule their supply based on the wage they receive. The platforms compete for workers as well as consumers. To attract workers, platforms use diverse wage schemes, including fixed commission rate, dynamic commission rate, and fixed wage. We develop a model to examine the impacts of the self-scheduled nature of the supply on competing platforms and the role of the wage scheme in the platform competition. We find that the price competition between platforms is more intense in a sharing economy compared with an economy with a fixed supply of workers if and only if the platforms serve more consumers and workers in the sharing economy than in the traditional economy, regardless of the wage scheme employed by the platforms. Further, any of the three wage schemes can be the best for the platforms and the worst for consumers and workers, depending on the market characteristics. In markets where the competition is more fierce on the demand side than on the supply side, the fixed-wage scheme results in the highest profits for the platforms and lowest surpluses for consumers and workers. In contrast, in markets where the competition on the supply side is more competitive, when the supply is highly (mildly) more competitive, the fixed-commission-rate (dynamic-commission-rate) scheme generates the highest profits for platforms, leading to the lowest surpluses for consumers and workers and the lowest social welfare. The differential impacts of the wage scheme on the price (demand side) and quantity (supply side) competition explain our findings. This paper was accepted by Kartik Hosanagar, information systems.
{"title":"Two-Sided Platform Competition in a Sharing Economy","authors":"Chenglong Zhang, Jianqing Chen, Srinivasan Raghunathan","doi":"10.1287/mnsc.2022.4302","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4302","url":null,"abstract":"We examine competition between two-sided platforms in a sharing economy. In sharing economies, workers self-schedule their supply based on the wage they receive. The platforms compete for workers as well as consumers. To attract workers, platforms use diverse wage schemes, including fixed commission rate, dynamic commission rate, and fixed wage. We develop a model to examine the impacts of the self-scheduled nature of the supply on competing platforms and the role of the wage scheme in the platform competition. We find that the price competition between platforms is more intense in a sharing economy compared with an economy with a fixed supply of workers if and only if the platforms serve more consumers and workers in the sharing economy than in the traditional economy, regardless of the wage scheme employed by the platforms. Further, any of the three wage schemes can be the best for the platforms and the worst for consumers and workers, depending on the market characteristics. In markets where the competition is more fierce on the demand side than on the supply side, the fixed-wage scheme results in the highest profits for the platforms and lowest surpluses for consumers and workers. In contrast, in markets where the competition on the supply side is more competitive, when the supply is highly (mildly) more competitive, the fixed-commission-rate (dynamic-commission-rate) scheme generates the highest profits for platforms, leading to the lowest surpluses for consumers and workers and the lowest social welfare. The differential impacts of the wage scheme on the price (demand side) and quantity (supply side) competition explain our findings. This paper was accepted by Kartik Hosanagar, information systems.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"19 1","pages":"8909-8932"},"PeriodicalIF":0.0,"publicationDate":"2022-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84900346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Although leveraged exchange-traded funds (ETFs) are popular products for retail investors, how to hedge them poses a great challenge to financial institutions. We develop an optimal rebalancing (hedging) model for leveraged ETFs in a comprehensive setting, including overnight market closure and market frictions. The model allows for an analytical optimal rebalancing strategy. The result extends the principle of “aiming in front of target” introduced by Gârleanu and Pedersen (2013) from a constant weight between current and future positions to a time-varying weight because the rebalancing performance is monitored only at discrete time points, but the rebalancing takes place continuously. Empirical findings and implications for the weekend effect and the intraday trading volume are also presented. This paper was accepted by Agostino Capponi, finance.
{"title":"Leveraged Exchange-Traded Funds with Market Closure and Frictions","authors":"M. Dai, S. Kou, H. Soner, Chen Yang","doi":"10.1287/mnsc.2022.4407","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4407","url":null,"abstract":"Although leveraged exchange-traded funds (ETFs) are popular products for retail investors, how to hedge them poses a great challenge to financial institutions. We develop an optimal rebalancing (hedging) model for leveraged ETFs in a comprehensive setting, including overnight market closure and market frictions. The model allows for an analytical optimal rebalancing strategy. The result extends the principle of “aiming in front of target” introduced by Gârleanu and Pedersen (2013) from a constant weight between current and future positions to a time-varying weight because the rebalancing performance is monitored only at discrete time points, but the rebalancing takes place continuously. Empirical findings and implications for the weekend effect and the intraday trading volume are also presented. This paper was accepted by Agostino Capponi, finance.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"62 1","pages":"2517-2535"},"PeriodicalIF":0.0,"publicationDate":"2022-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72964442","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We extend the existing literature on gender differences in competitive behavior by investigating tournament entry choices when a principal decides for an agent. In a laboratory experiment, we randomly assign subjects the role of either principal or agent. The principal decides whether the agent performs a real-effort task under piece-rate or tournament incentives. When deciding, the principal is informed about the agent’s previous performance, age, and residency. Between treatments, we vary whether the principal knows the agent’s gender. In a baseline treatment, we replicate the standard setting in which subjects decide for themselves whether to compete. Our main findings are, first, that there is no gender gap in tournament entry when principals decide for agents as opposed to the baseline treatment. Second, the gender gap closes because more women are made to compete by principals. Third, whereas there is no gender gap in either of the principal treatments, revealing the agent’s gender is associated with higher overall tournament entry rates. Exploratory analyses of principals’ choice determinants reveal a positive effect of preferences to take risks, competitiveness, and confidence in agents’ performances on making agents compete. In addition, we find no difference in how principals evaluate male and female agents’ performances. Finally, we test the efficiency of principals’ competition choices and show that they lead to fewer payoff-maximizing outcomes than when subjects decide for themselves. Additionally, overall tournament performances and winners’ performances are lower when agents are made to compete, but this effect is not robust to controlling for agents’ previous performances. This paper was accepted by Yan Chen, behavioral economics and decision analysis.
{"title":"Choosing Competition on Behalf of Someone Else","authors":"Helena Fornwagner, Monika Pompeo, N. Serdarevic","doi":"10.1287/mnsc.2022.4413","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4413","url":null,"abstract":"We extend the existing literature on gender differences in competitive behavior by investigating tournament entry choices when a principal decides for an agent. In a laboratory experiment, we randomly assign subjects the role of either principal or agent. The principal decides whether the agent performs a real-effort task under piece-rate or tournament incentives. When deciding, the principal is informed about the agent’s previous performance, age, and residency. Between treatments, we vary whether the principal knows the agent’s gender. In a baseline treatment, we replicate the standard setting in which subjects decide for themselves whether to compete. Our main findings are, first, that there is no gender gap in tournament entry when principals decide for agents as opposed to the baseline treatment. Second, the gender gap closes because more women are made to compete by principals. Third, whereas there is no gender gap in either of the principal treatments, revealing the agent’s gender is associated with higher overall tournament entry rates. Exploratory analyses of principals’ choice determinants reveal a positive effect of preferences to take risks, competitiveness, and confidence in agents’ performances on making agents compete. In addition, we find no difference in how principals evaluate male and female agents’ performances. Finally, we test the efficiency of principals’ competition choices and show that they lead to fewer payoff-maximizing outcomes than when subjects decide for themselves. Additionally, overall tournament performances and winners’ performances are lower when agents are made to compete, but this effect is not robust to controlling for agents’ previous performances. This paper was accepted by Yan Chen, behavioral economics and decision analysis.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"28 1","pages":"1555-1574"},"PeriodicalIF":0.0,"publicationDate":"2022-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89408313","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines how female directors (FDs) affect firm value in the absence of mandatory gender quotas. Using a newly collected data set on director deaths around the globe, we find that stock prices decrease approximately 2% more when an FD passes away, compared with a male director. What explains this negative capital market reaction? We find evidence that finding successors for deceased FDs is challenging for firms: Succession delays are longer, and although firms try to replace FDs with women, two-thirds of their successors are male. Furthermore, their successors tend to be younger, less experienced, and more often externally hired. Stock prices decline less if more potential female successors exist in a country, the firm is larger, or FDs other than the deceased woman were on the board. Because observable characteristics such as age, tenure, education, and network centrality cannot explain the negative stock market reaction, unobserved differences across genders that lead to a lower fit of male successors to the existing board are the most likely explanation for the firm value loss after the death of an FD. This paper was accepted by David Simchi-Levi, finance.
{"title":"Female Directors and Firm Value: New Evidence from Directors' Deaths","authors":"Thomas Schmid, Daniel Urban","doi":"10.1287/mnsc.2022.4412","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4412","url":null,"abstract":"This paper examines how female directors (FDs) affect firm value in the absence of mandatory gender quotas. Using a newly collected data set on director deaths around the globe, we find that stock prices decrease approximately 2% more when an FD passes away, compared with a male director. What explains this negative capital market reaction? We find evidence that finding successors for deceased FDs is challenging for firms: Succession delays are longer, and although firms try to replace FDs with women, two-thirds of their successors are male. Furthermore, their successors tend to be younger, less experienced, and more often externally hired. Stock prices decline less if more potential female successors exist in a country, the firm is larger, or FDs other than the deceased woman were on the board. Because observable characteristics such as age, tenure, education, and network centrality cannot explain the negative stock market reaction, unobserved differences across genders that lead to a lower fit of male successors to the existing board are the most likely explanation for the firm value loss after the death of an FD. This paper was accepted by David Simchi-Levi, finance.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"149 1","pages":"2449-2473"},"PeriodicalIF":0.0,"publicationDate":"2022-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79425101","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study mismarking of newly purchased odd lot and two classes of round lot structured product positions in mutual funds. Such mismarking artificially inflates net asset values and overstates cumulative returns. Applied to funds launched after January 2010, a simulation-tested mismarking fund filter identifies 12 Highly Questionable funds managing $75 billion. The performance of these funds matches closely the predicted pattern of mismarking: extremely high alpha and skewness, particularly immediately after launch. We show that structured product mismarking can seriously inflate return-since-inception metrics. We also provide evidence consistent with return smoothing for one quarter of the sample structured product funds. The inflated performance metrics benefit fund managers through significantly higher Sharpe ratios, Morningstar ratings, and asset growth but cause material losses to later investor cohorts. This paper was accepted by Agostino Capponi, finance.
{"title":"Mismarking in Mutual Funds","authors":"V. Atanasov, John J. Merrick, Philipp Schuster","doi":"10.1287/mnsc.2022.4366","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4366","url":null,"abstract":"We study mismarking of newly purchased odd lot and two classes of round lot structured product positions in mutual funds. Such mismarking artificially inflates net asset values and overstates cumulative returns. Applied to funds launched after January 2010, a simulation-tested mismarking fund filter identifies 12 Highly Questionable funds managing $75 billion. The performance of these funds matches closely the predicted pattern of mismarking: extremely high alpha and skewness, particularly immediately after launch. We show that structured product mismarking can seriously inflate return-since-inception metrics. We also provide evidence consistent with return smoothing for one quarter of the sample structured product funds. The inflated performance metrics benefit fund managers through significantly higher Sharpe ratios, Morningstar ratings, and asset growth but cause material losses to later investor cohorts. This paper was accepted by Agostino Capponi, finance.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"5 1","pages":"1275-1300"},"PeriodicalIF":0.0,"publicationDate":"2022-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85211024","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Firm-induced migration typically entails firms relocating workers to fill value-creating positions at destination locations. But such relocated workers are often exposed to external employment opportunities at their destinations, possibly triggering turnover. We conceptualize the firm-induced migration path, consisting of the relocated workers’ place of origin and destination, as relevant in determining worker performance and turnover postrelocation. Using a unique data set from a large Indian technology firm that hires talent from both large cities and smaller towns, we document robust econometric patterns by exploiting the firm’s randomized assignment of workers to production centers across the country. These production centers are located in the largest technology cluster in India (Bangalore), smaller technology clusters, and noncluster locations. We find that the firm-induced migration path shapes both worker performance and turnover. Compared with workers from large cities, workers from smaller towns achieve higher performance when relocated to Bangalore than to other production centers, but are also more likely to join competing firms. Fine-grained data on employment and human-capital-augmentation opportunities at workers’ destination locations, and on socioeconomic conditions in workers’ places of origin, help us rule in an abductive explanation: across firm-induced migration paths, differences in external labor-market opportunities between workers’ places of origin and their destinations, as well as intrafirm skill-development opportunities at the destination, are related to heterogeneous human-capital outcomes. This paper was accepted by Alfonso Gambardella, business strategy.
{"title":"Firm-Induced Migration Paths and Strategic Human-Capital Outcomes","authors":"P. Choudhury, T. Khanna, V. Sevcenko","doi":"10.1287/mnsc.2022.4361","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4361","url":null,"abstract":"Firm-induced migration typically entails firms relocating workers to fill value-creating positions at destination locations. But such relocated workers are often exposed to external employment opportunities at their destinations, possibly triggering turnover. We conceptualize the firm-induced migration path, consisting of the relocated workers’ place of origin and destination, as relevant in determining worker performance and turnover postrelocation. Using a unique data set from a large Indian technology firm that hires talent from both large cities and smaller towns, we document robust econometric patterns by exploiting the firm’s randomized assignment of workers to production centers across the country. These production centers are located in the largest technology cluster in India (Bangalore), smaller technology clusters, and noncluster locations. We find that the firm-induced migration path shapes both worker performance and turnover. Compared with workers from large cities, workers from smaller towns achieve higher performance when relocated to Bangalore than to other production centers, but are also more likely to join competing firms. Fine-grained data on employment and human-capital-augmentation opportunities at workers’ destination locations, and on socioeconomic conditions in workers’ places of origin, help us rule in an abductive explanation: across firm-induced migration paths, differences in external labor-market opportunities between workers’ places of origin and their destinations, as well as intrafirm skill-development opportunities at the destination, are related to heterogeneous human-capital outcomes. This paper was accepted by Alfonso Gambardella, business strategy.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"31 1","pages":"419-445"},"PeriodicalIF":0.0,"publicationDate":"2022-04-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89853522","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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