PHD Publications

This thesis explores the impact of artificial intelligence (AI) on human work. It consists of three essays that investigate the influence of exposure to AI on creative work, the interaction between an algorithm's prescriptive authority and human uniqueness beliefs, and how humanness perceptions are established in opposition to AI. In the first essay, I show that exposure to AI impacts creative work differently than non-creative work, and that creative effort increases only when a schema violation event takes place. In the second essay, I propose a theoretical distinction between a prescriptive and a suggestive algorithm and find that in high human uniqueness contexts, people are as reluctant and critical of algorithmic suggestions as they are of prescriptions. In the third essay I develop the concept of situated humanness that recognizes the dynamic and contextually determined qualities that differentiate humans from AI and discussed its implications for organizational processes and outcomes. Overall, this thesis contributes to the understanding of how people interact and collaborate with AI in organizational settings, highlighting the importance of context and perceptions in shaping these interactions Kaywords: Artificial intelligence, humanness, creativity, human uniqueness Abstract:

This thesis is made of three distinct chapters that investigate innovation and human capital in the investment management industry. The first chapter studies the adoption of artificial intelligence (AI) by venture capitalists (VCs) to screen startups and shows how it affects the funding of early-stage companies. The second chapter focuses on the mobility of fund managers across mutual fund firms and shows that it plays an important role in the efficient allocation of capital within the mutual fund industry. The third chapter, joint with Anastasia Buyalskaya and Tianhao Yao, explores product differentiation in the mutual fund industry and shows how funds with low quality can still compete for investors by choosing to be more differentiated and cater to a smaller set of consumers.Keywords: investment management, innovation, human capital, technology, venture capital, mutual funds

Purpose-driven companies propose to reintroduce morality at the most foundational level of organizations and suggest new articulation between businesses, societies and the environment. This dissertation examines the consequences of the moral dimension that a corporate purpose induces. I highlight that the moral dimension of a corporate purpose shapes firm members’ legitimacy judgments on the purpose-driven company. In turn, firm members’ legitimacy judgments impact firm performance.Keywords: Corporate Purpose, Legitimacy judgments, Morality, Corporate Social Responsibility

This dissertation examines the implications on corporate innovation and other learning outcomes of incumbents that build relationships with early-stage ventures through Corporate Venture Capital(CVC) investments. As entrepreneurial ventures draw the attention as external sources of valuable knowledge and skills, past literature has investigated how incumbents build inter-organizational relationships with these ventures through CVC investments. Among them, early-stage ventures without a visible product or service are often considered to be uncertain investment targets in terms of their technologies and potential performance. Contrary to this view, empirical evidence shows that number of incumbents are participating in early-stage CVC deals. This raises an intriguing question about what corporate investors can achieve by targeting such ventures with higher uncertainty. However, theories and empirical examinations on this topic are relatively limited in previous studies. In my first essay, I examine whether firms achieve greater innovative performance when increasing their early-stage CVC investments. I theorize that knowledge of early-stage ventures can be relatively more accessible for firms, as it is mostly intangible and not yet embodied in products and eventually develops corporate investors’ integrative and exploitative skills for innovation. I find that early-stage CVC investments indeed increase firms’ short-term innovation even after controlling for total CVC investments and the investment in Independent Venture Capital (IVC)-backed ventures of corporate investors. Furthermore, I find empirical support that greater industry diversity of a firm’s CVC portfolio attenuates this relationship by adding knowledge complexity to organizational learning. This study contributes to the CVC and organizational learning literature by highlighting the importance of early-stage ventures as external sources of innovation for incumbents. In my second essay, I extend discussion on CVC literature about CVC governance by examining corporate investors’ decision on the formation of exclusive ties with early-stage ventures depending on the type of CVC structure. Focusing on exclusive access to valuable resources as a key advantage of early-stage CVC investments, I theorize that while exclusivity can serve as a strategy for corporate investors to form strong bonds with early-stage ventures, a trade-off exists as information asymmetries arise from the lack of external information to value these ventures as partners. Through an empirical analysis, I demonstrate that corporate investors with autonomous CVC units are more likely to opt for exclusive ties with early-stage ventures, as opposed to integrated CVC units, which are more sensitive to risk and managerial consent. In addition, this trend is moderated by the knowledge originality of corporate investors’ existing knowledge stocks. This study expands the understanding of the organizational features of corporate investors as they influence investment decisions and the role of knowledge stocks on firms’ explorative behavior. In my third essay, I examine the relationship between CVC investments and Corporate Social Performance (CSP), and propose that certain aspects of CVC investments can lead to positive outcomes from a CSR perspective. Specifically, I focus on early-stage CVC investments, which require resource acquisition under conditions of uncertainty. I theorize how accumulating resources through continuous investments in early-stage ventures can contribute to higher social outcomes. This research suggests that it is not just a single early-stage investment that impacts CSR, but rather the accumulated experience gained through such investments that can be positively associated with external evaluations of CSR.Keywords: Corporate Venture Capital, Early-Stage Investment, Exclusivity, Corporate Social Performance.

Professional investors advertise some of their investment ideas to other investors at investment conferences, on social media, or on their own website. In doing so, they disseminate various arguments and estimates to support their stock recommendations. In this thesis, I document the nature of professional investors’ equity research and examine the economic implications by particularly focusing on the unique role of target prices. In the first essay, I study whether the stock ownership of fund managers improves or impairs the informativeness of their equity research disclosed at investment conferences. Overall, I find that fund managers’ ownership improves the informativeness of their equity research. However, as fund managers’ incentives are uncertain and they sometimes trade against their own stock recommendations and target prices, investors learn and discount their equity research. In the second and third essays, I restrict my analysis to equity research disclosed by activist short sellers. In the second essay, I examine activist short sellers’ target prices and find that they are pessimistically biased, but informative, as they predict future returns in various windows. Target prices are informative, as activist short sellers have reputation concerns and target prices are summary statistics of their investment theses. Finally, I find that including target prices accelerates price discovery, that activist short sellers exhibit differential abilities to forecast stock prices, and that retail investors seem not to understand the informativeness of activist short sellers’ target prices. In the third essay, I investigate how earnings announcements are critical events for activist short sellers and attacked firms. On the one hand, I find that activist short sellers use investors’ fixation on earnings and increase their Twitter activity at earnings announcements. On the other hand, I provide evidence that attacked firms manage earnings to deter short sellers from disclosing allegations and reclaim the control of the investment narrative surrounding their stock.Keywords: Professional investors, Stock recommendations, Target prices, Short selling, Narratives, Stock ownership.

The thesis contains three essays. In the first essay, I investigate whether ESG environmental, social and governance) education promotes ESG awareness and affects job choices. Exploiting the radual introduction of mandatory ESG courses in MBA curricula, I find that students who have taken mandatory ESG courses change their careers to work at firms with better ESG performance and in more sustainable sectors. School-level wages decrease after the introduction of mandatory ESG courses. Graduates with ESG education are more likely to state ESG concerns on their CVs, and are less (more) likely to leave better (worse) ESG-performing companies. My results imply that ESG teaching affects how students trade off pecuniary benefits and externalities, and thereby affects the matching between employees and firms. In the second essay, I investigate how sell-side analysts adjust their earnings forecasts following negative ESG incidents. I find that after learning about negative ESG news, analysts significantly downgrade their earnings forecasts over all horizons, including long-term horizons. Negative ESG incidents affect earnings forecasts at longer horizons than other types of corporate incidents. The negative revisions of earnings forecasts reflect expectations of lower future sales (rather than higher future costs). Forecast revisions explain most of the negative impacts of ESG incidents on firm value. In the third essay, I study product differentiation in the mutual fund industry. I design a model in which funds with heterogeneous perceived quality can choose their level of product differentiation. In equilibrium, high quality funds choose broad market designs appealing to many investors, while low quality funds adopt niche designs that investors either love or loath. Using as a measure of fund differentiation the degree of textual uniqueness of investment strategy description in fund prospectuses, I confirm empirically that funds with lower expected performance tend to differentiate more. I use the issuance of Morningstar rating as an exogenous shock to perceived quality to show the effect is causal.Key words: Sustainable Finance, ESG, Mututal Funds.

Three chapters are included in my dissertation. These three chapters concern the interplay between national security policies and corporate behavior. The first chapter focuses on corporate investment. The second chapter examines financial analysts behavior. The third chapter investigates information exchanges within the sovereign debt market. This dissertation sheds new light on the consequences of this relevant but unexplored policy area.Keywords : national security, corporate investment, banks

The main objective of this dissertation is to investigate how organizational governance affect the performance of nonprofit and hybrid organizations tackling Grand Challenges. I explore how nonprofit organizations and cross-sector collaborations can take advantage of innovative governance systems to be more effective at social value creation. The first essay examines the effectiveness of a bundle of governance mechanisms consisting of social performance-based incentives combined with auditing and feedback in a randomized governance program conducted in the Democratic Republic of Congo’s healthcare sector. I found that within ten quarters following the treatment, nonprofit health centers experienced significant improvements in operating efficiency and social performance. Additionally, analysis reveals that funding is not a substitute for governance. Indeed, health centers that only receive lump sum funding increase their scale but do not improve operating efficiency nor social performance. In contrast, health centers receiving funding and governance treatment enhance their scale, operating efficiency, and social performance. The second essay investigates how board composition affect nonprofit organizational effectiveness. I investigate the underserved context of the Democratic Republic of Congo, which is ranked among the most gender unequal areas in the world. I find that female leadership and gender diversity have a positive and significant correlation with organizational effectiveness, proving that governing bodies are major determinants of organizational performance. Even more, we highlighted the mediating role of board meeting frequency in the gender diversity-effectiveness link, exhibiting a mechanism through which governing bodies influence organizational performance. The third essay theorizes on the governance trade-off dual-purpose public-private collaborations face as they create and distribute value. It sheds light on the role of partners’ capabilities, stakeholder orientation, and social purpose centrality as key determinants of the most suitable partnering mode. Overall, the findings of my three essays show that governance plays a critical role in fostering social value creation, tackling Grand Challenges, and can contribute to attaining the United Nations Sustainable Development Goals.

This thesis contains three chapters which investigate how new developments affect financial outcomes. The first two chapters study digitalization within firms and the impact of being user-focused for these firms. The third chapter explores the phenomenon of ESG ratings for firms. The first chapter examines whether digitalization is priced in stock markets. I build a dynamic measure of digitalization that encapsulates a firm’s exposure to computers, data analytics, and programming. I find that this measure predicts stock returns beyond well-known predictors. This digital alpha is concentrated in firms which focus on users, where it averages 9.0% in annual realized excess returns over the past two decades. This figure likely compensates for risk, as user-focused digital firms have greater systematic risk. The second chapter focuses on these user-focused digital firms during the COVID-19 crisis. This setting is particularly suitable since the COVID-19 crisis catalyzed a shift from the offline world to the online world. I find that when firms are more digital, being userfocused drives increased search interest to these firms in the months following COVID-19’s arrival, which translates into better real performance through higher return on assets. Correspondingly, these firms experience relatively higher abnormal stock returns during this period. In the third chapter, I document that upwards of 40% of public firms in the U.S. do not have any ESG scores. Smaller or more financially constrained firms are less likely to receive scores. Firms which receive ESG scores for the first time enjoy higher employment, sales, and investment, as well as lower leverage and financial constraints. Hence ESG scores act as a club where new membership brings benefits.Keywords : digitalization, users, Google search, ESG

In my first paper, I study the spillover effects of removing barriers to growth in one product market on entry and growth of firms in the downstream market. Firms that are constrained produce low quality goods and, in turn, constrain the downstream market. I exploit the repeal of product reservation in India, whereby hundreds of products stop being reserved for exclusive production by small firms. With a more efficient input market, entry in the downstream product market increases with no observable decline in quality of entrants. Productive downstream firms grow and less productive ones shrink. My results imply that business dynamism has positive spill-over effects along the supply chain. In another paper, I study the process of creative destruction and whether incumbents faced with displacement risk continue to innovate. To do so, I construct a measure of displacement risk using patent text similarity measures. Theory predicts that threat of technologically advanced entry incentivises firms closer to the frontier to catch up but may discourage innovation in firms further away from the frontier. As predicted by theory, firms far away from the frontier decrease their investment in R&D when faced with displacement risk. At the same time, I find that ex-ante low productivity firms are not more likely to exit than ex-ante high productivity firms. Moreover, while firms far away from the frontier reduce in-house R&D spending, they are more likely to engage in mergers and acquisitions and invest as corporate venture capitalists. My findings suggest that upon facing displacement risk, firms regain their innovation edge by investing outside the boundaries of the firm. In a third paper, my co-authors and I investigate the role of banks in propagating the negative effects of large corporate bankruptcies to the real economy. Banks that suffer from large corporate bankruptcies on their loan portfolio increase loan spreads in subsequent commercial lending. The effect persists after controlling for borrower risk, industry and geographical contagion. The effect does not manifest via deterioration of the bank’s balance sheet, loss of reputation or bank learning about its screening ability. Rather, it stems from earnings management by the bank and disproportionately affects small firms with fewer outside options for raising financing. Overall, our findings suggest that banks play an important role in disseminating microeconomic shocks.Keywords : Innovation, entrepreneurship, bankruptcy, barriers to growth