Research Seminars

Director Risk Exposure and Board Turnover: A Pre- and Post-Crisis Analysis

Accounting & Management Control

Speaker: Gaizka ORMAZABAL
Director Risk Exposure and Board Turnover: A Pre- and Post-Crisis Analysis , IESE Business School, University of Navarra

13 December 2013 - HEC Room T015 - From 2:00 am to 4:00 am


This paper examines the effect of corporate directors’ risk exposure on the supply for director talent. I measure a director’s risk exposure by the stock volatility of her directorships. An analysis of board departures in the years 2006 to 2011 reveals that, in the post-crisis period, directors are more likely to resign from their riskiest directorships. Board resignations related to risk exposure are associated with lower announcement returns, future decreases in profitability, and more conservative risk-taking. The market reaction to subsequent appointments is also decreasing in the probability of experiencing board turnover related to risk exposure. Additional evidence suggests that the outgoing board members at these firms are replaced by directors willing to accept a risky board position to increase their visibility and network opportunities. Overall, my results suggest that (i) after the financial crisis, director risk exposure plays an increasing role on director turnover, and that (ii) the post-crisis emphasis on risk management could be introducing costs to firms more sensitive to risk-related board turnover

Strategy & Business Policy

Speaker: DONAL CRILLY
PROFESSOR , LONDON BUSINESS SCHOOL

12 December 2013 - SALLE DU CONSEIL - From 1:30 pm to 3:00 pm


Understanding the Effectiveness of Loyalty Programs

Marketing

Speaker: Lena Steinhoff
Doctor , University of Paderborn, Germany

12 December 2013 - Room T022, HEC Paris Campus - From 10:30 am to 12:00 pm

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Loyalty programs are popular and ubiquitous marketing instruments, yet many of them perform poorly. To both marketing managers and researchers, reasons for loyalty program failure remain unclear. In response, three studies—two experimental and one field—seek to demonstrate that greater understanding of loyalty program effectiveness demands a broader framework for analyzing loyalty program performance, along three key perspectives. A customer portfolio perspective indicates loyalty programs’ opposing effects on target versus bystander customers; a reward element perspective delineates the varying efficacy of their different reward benefits; and a reward delivery perspective highlights how reward delivery either emphasizes or diminishes programs’ effects. Customer gratitude, status, and unfairness represent positive and negative forces, mediating loyalty programs’ impact on performance outcomes. These findings provide evidence for why and when loyalty programs fail. Overall, this article conceptually and empirically establishes a comprehensive analysis framework to help marketing managers and researchers evaluate loyalty program effectiveness.

Dealing with supply uncertainty in liquid gas bulk supply chain

Informations Systems and Operations Management

Speaker: Nicoleta Neagu
Operations Research Expert , Air Liquide

29 November 2013 - HEC - Jouy en Josas Campus - Building S - Room S118 - From 2:00 pm to 3:00 pm


A main challenge for supply chain management and operational decisions is data uncertainty due, for example, to supply disruptions, sudden unavailable resources, or unusual demand. Air Liquide is particularly concerned with uncertainty in the supply of bulk gas due to plant outages which generate significant losses and impact quality of service. Leveraging operations research techniques in robust and stochastic optimization, we propose methodologies for handling supply uncertainty due to plant outages at both the strategic and the operational levels. In this talk, I will first consider the strategic problem of optimizing customers' allocation coupled with production planning. The main objective is to minimize a total estimated cost which includes production, distribution, and contractual costs over a set of plant outages scenarios. Second, I will address the inventory routing problem for bulk gas distribution under supply uncertainty. I will present the general methodology we proposed for generating, classifying, and selecting ‘robust’ solutions which, by definition, are less impacted when plant outages occur. Finally, I will present some of the results we obtained when applying this methodology to Air Liquide's bulk supply chain.

Nicoleta Neagu received her MS in Computer Science from the University of Bucharest in 1998 and her Ph.D. in Artificial Intelligence from the Ecole Polytechnique Fédérale de Lausanne (EPFL) in 2003. From 2004 to 2006 she was a researcher at Whitestein Technology AG in Zurich. From 2006 to 2008, she was a postdoctoral associate at the Operations Research Center at the Massachusetts Institute of Technology (MIT), Cambridge, USA, where she worked on logistics problems in collaboration with United Parcel Service (UPS). Since 2008, Dr. Neagu has been with the Applied Mathematics group at the Claude Delorme Research Center of Air Liquide where she is now an Operations Research Expert.

THE FRACTURING OF THE AMERICAN CORPORATE ELITE

Strategy & Business Policy

Speaker: MARK MIZRUCHI
PROFESSOR , UNIVERSITY OF MICHIGAN

28 November 2013 - SALLE DU CONSEIL - From 1:30 pm to 3:00 pm


UNEMPLOYMENT BENEFITS AND UNEMPLOYMENT IN THE GREAT RECESSION: THE ROLE OF MACRO EFFECTS

Economics & Decision Sciences

Speaker: Marcus HAGEDORN
Institute for Advanced Studies, Austria

28 November 2013 - Room T 008 - From 11:20 am to 12:20 pm


We exploit a policy discontinuity at U.S. state borders to identify the effects of unemployment insurance policies on unemployment. Our estimates imply that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility. In contrast to the existing recent literature that mainly focused on estimating the effects of benefit duration on job search and acceptance strategies of the unemployed -- the micro effect -- we focus on measuring the general equilibrium macro effect that operates primarily through the response of job creation to unemployment benefit extensions. We find that it is the latter effect that is very important quantitatively.

SIGNAL OR SYMBOL? INTERPRETING FIRM'S STRATEGIC RESPONSES TO INSTITUTIONAL CHANGE IN THE BRAZILIAN STOCK MARKET

Strategy & Business Policy

Speaker: SUSAN PERKINS
PROFESSOR , KELLOG SCHOOL OF MANAGEMENT

26 November 2013 - SALLE DU CONSEIL - From 10:30 am to 12:00 pm


While analyzing how and why firms respond to product market demands has been a long withstanding central issue in the strategy literature, recent research suggests the need for a comparable level of attention on how and why firms respond to non-market (i.e., institutional) demands. In this study, we theoretically and empirically analyze how Brazilian listed firms responded to voluntary institutional reforms (aimed at reducing longstanding agency problems related to pyramidal group ownership) to the BOVESPA stock market to better understand strategic response to institutional changes. This study provides insight on which types of firms are more likely to adopt new institutional practices; how firm market signals affect firm stock performance; and whether implementing new organizational practices, or not, affects the longevity of changes in performance. We show that firms that signaled to the market better governance practices received abnormal stock returns at the time of announcement and migration. However, we also find that in many cases, the changes observed are more symbolic than substantive. In cases where the main shareholder is a family-owned pyramidal group, the firm is more likely to decouple. Conversely, government-owned and dual-listed firms are less likely to be non-implementers of the new corporate governance practices.

The expressive role of performance measurement systems: A field study of a mental health development project

Accounting & Management Control

Speaker: Matt HALL
London School of Economics

22 November 2013 - HEC Campus, salle T022 - From 2:00 pm to 4:00 pm


In this paper we examine how performance measurement systems (PMS) can be used within organizations to help organizational members to express their values and beliefs. This use of PMS, which we term its expressive role, is important as pluralistic and expressive forms of organization are becoming more prevalent. Furthermore, prior research indicates that enabling the expression of values and beliefs by organizational members can generate energy and commitment that are important to the achievement of organizational objectives. In a field study of a mental health development project, we draw on Huy’s (1999) concepts of display freedom and playfulness to examine the design and operational characteristics that are important in the development of an expressive role for PMS. We also examine the interplay
between the expressive role and other uses of PMS, and identify circumstances in which these roles can clash and/or be complementary. This study of the expressive role of PMS study broadens understanding of the functioning of PMS in organizations (Burchell et al., 1980; Ansari & Euske, 1987), the way in which management control systems can be used to signal values and preferences, and the use of PMS in NGOs to help manage potential tensions between service delivery and humanitarian values.

The Role of Earnings Forecast Uncertainty in Explaining Zero and Small Positive Earnings Surprises

Accounting & Management Control

Speaker: David VEENMAN
Erasmus University Rotterdam

15 November 2013 - HEC Campus, salle T004 - From 2:00 pm to 4:00 pm


Prior studies link zero and small positive earnings surprises to earnings management. In this study, we examine earnings forecast uncertainty as an alternative explanation. Specifically, we argue that rational analysts trade off the benefits and costs of forecast bias and that earnings forecast uncertainty (the inverse of the precision of analysts’ information) is negatively associated with the net benefits of pessimistically biased short-term forecasts. Accordingly, we predict and find that earnings forecast uncertainty is significantly negatively related to the likelihood of small positive versus small negative earnings surprises, holding constant incentives for earnings management. Similarly, we find that earnings forecast uncertainty is significantly related to the likelihood of zero and small positive earnings surprises. Our results have important implications for studies that categorize firms as "suspect" based on the sign and magnitude of earnings surprises. We highlight the potential importance of empirically controlling for earnings forecast uncertainty in studies that employ the "meet/just beat dichotomy" to capture constructs related to earnings quality.

Multisourcing newsvendor problem with a service level constraint: a distributionnally robust solution

Informations Systems and Operations Management

Speaker: Jean-Philippe VIAL
Professor , HEC Genève - Université de Genève

7 November 2013 - HEC - Campus Jouy en Josas - Building S - Room S120 - From 2:00 pm to 3:30 pm


The multi-sourcing Newsvendor problem is highly relevant as well as in the context of a reseller or a producer, but it poses challenging issues. In this problem, the decision maker needs to cover an uncertain demand by ordering from multiple suppliers. Each supplier faces a random yield factor with a general probability distribution.
The problem amounts to selecting how much to order from each supplier, so as to minimize expected procurement cost. Each supplier is characterized by given costs and a distribution of his random yield factor.
Determining the optimal ordering quantities is prohibitively difficult. We consider a maximin expected cost model, where the objective function is the worst-case expected cost over a set of probability distributions with given mean and covariance information. We derive the corresponding exact and approximate optimal ordering strategies. The optimal orders are identified using a tractable conic programming approach.


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