Research Minute

Defining inequality and how
entrepreneurship affects the market

Ariel West
  (October 19, 2017 at 1:19 pm)

Per Bylund

Entrepreneurs are seen to be synonymous with success and innovation, but that innovation can disrupt the market and increase inequality. On the other hand, an entrepreneur who enters the market can increase equality by offering competition, as well. So, why isn’t this topic as simple as we think it is?

Oklahoma State University assistant professor of entrepreneurship Per Bylund researches all things entrepreneur. By researching the topic of inequality and how it relates to entrepreneurial activity, Bylund felt the term “inequality” needed to be defined more clearly. He partnered with Mark Packard, assistant professor at the University of Nevada at Reno, to do just that.

“Inequality is a very provocative and hot topic right now, and what we argue in this paper is that it’s misunderstood and made a little too simple in the debate,” Bylund said. “We think there might be more to it, and a deeper analysis might help us understand the concept and all the nuances to the concept. What we look at is how entrepreneurs, in different ways, contribute to inequality or equality.”

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Do FOMC actions speak loudly?

Ariel West
  (August 7, 2017 at 8:51 am)

(from left) Professor of finance Tim Krehbiel and associate professor of finance Ali Nejadmalayeri investigate the corporate bond market.

Corporate bond market investors bear the risk that the borrower will not pay them as promised; that’s why corporate bond prices tend to be lower than treasury bonds. But why isn’t corporate bond investor behavior consistent with the old adage that “no news is good news?” when the Federal Open Market Committee announces a plan to stay the course?

Oklahoma State University professor of finance Tim Krehbiel and associate professor of finance Ali Nejadmalayeri, along with co-author Siamak Javadi from the University of Texas – Rio Grande Valley, look into corporate bond investor behavior in their latest research, “Do FOMC Actions Speak Loudly? Evidence from Corporate Bond Credit Spreads.”

“If the Federal Reserve announces the intention to ‘stay the course,’ spreads between corporate and treasury bond prices widen,” Krehbiel said. “If the Federal Reserve announces the intention to either raise or lower rates, the spread between bond market prices narrows, and this is somewhat puzzling behavior. We find that staying the course seems to be unsettling for the corporate bond market.”

Corporate bond investors run a high risk of not being repaid by borrowers, so the nature of monetary policy changes is crucial to corporate bond investors.

This research is to be published in the Review of Finance. To view the article online, visit the SSRN copy.

“Ripping off the Band-Aid:” Firm reputation
and communication management

Ariel West
  (July 27, 2017 at 2:13 pm)

Owen Parker, assistant professor of management

When the going gets tough and the world is against you, research says the best thing to do is get all of the negative out at once.

Oklahoma State University assistant professor of management Owen Parker’s latest research focuses on how firms respond to threats to their reputation. When an organization faces scrutiny from the media, it tends to perform more of the unavoidable negative activities to lessen the blow to its reputation.

“Until now, what we thought is that companies don’t really care that much about what the media thinks or what people are looking at,” Parker says. “But with this paper, we’ve looked at the oil and gas industry and we found that drilling, which is sort of a hazardous activity in the industry, happens when the company is already facing negative scrutiny in the media.”

Parker found that smaller and underperforming companies tend to have to go through compounding the negative attention more frequently than larger companies, since managerial behavior tends to be less organized than a larger, more insulated firm. The major key to Parker’s research is that reputation matters: it’s not just an outcome, but what drives decision-making and perception. Continue Reading

Forecasting stock returns using
fluctuations in trading costs

Ariel West
  (July 12, 2017 at 7:50 am)

Assistant professor of finance Greg Eaton’s research shows the importance of monitoring fluctuations in trading costs.

Have you ever wondered when you should invest or make a trade in your stock?

By using United States equity market-level data from 1926 through 2015, Oklahoma State University assistant professor of finance Greg Eaton nailed down the predictive power of trading costs in his latest research, “Micro(structure) before Macro? The Predictive Power of Aggregate Illiquidity for Stock Returns and Economic Activity,” which was accepted into the prestigious Journal of Financial Economics. Eaton cut out the volatility component from trading cost measures and found that embedded volatility was causing misleading results.

“One important aspect of our study is how we measure trading cost,” Eaton said. “We document that most measures of trading cost mechanically embed a volatility component, and it’s important to extract that component so we make sure that our results are driven by actual trading costs as opposed to volatility in disguise. Making this adjustment does have an important impact on our results. What we find is that the trading costs before we made the adjustment did not forecast stock returns, but once we extracted the embedded volatility component, we found strong evidence that trading costs do forecast future stock returns.” Continue Reading

Explaining low self-employment rates among foreign-born STEM graduates: Why start a business if it doesn’t pay?

Ariel West
  (June 8, 2017 at 2:01 pm)

Economics and Legal Studies associate professor John Winters

According to analysis of the American Community Survey, foreign-born college graduates in the science, technology, engineering and mathematics (STEM) field have much lower self-employment rates compared to foreign graduates of other majors. Why aren’t these technologically and scientifically-minded people starting new companies?

Oklahoma State University associate professor of economics and legal studies John Winters and co-author Zhengyu Cai from Southwestern University of Finance and Economics were also curious, as individuals who immigrate to a developed country are generally thought to be more entrepreneurial. One partial yet important explanation is earning differences between STEM and non-STEM fields: employed STEM graduates make a lot more money.

“Only about eight percent of foreign-born STEM graduates own their own businesses compared to 11.3 percent of foreign non-STEM graduates,” Winters said. “We wanted to try to explain this… so we started by documenting that foreign-born STEM graduates, on average, earn much higher in paid employment than their non-STEM counterparts.” Continue Reading

How does unethical behavior affect us?

Ariel West
  (May 19, 2017 at 10:13 am)

We hear about business scandals all the time, from Wells Fargo creating fake bank accounts to increase profits to Hampton Creek’s inflated sales numbers. But what happens to us morally after we do something wrong?

Oklahoma State University associate professor of management Rebecca Greenbaum with co-authors and former OSU PhD students Julena Bonner, assistant professor at Utah State University, and Matt Quade, assistant professor at Baylor University, investigate the aftermath of unethical behavior on an individual in their latest research.

The article combines emotions theories with previous research to explain the effect unethical behavior has on an individual’s self-image. Greenbaum and her co-authors were interested to see if people fear for their own reputations and discovered that people tend to try to “make up” for their shame by displaying desirable qualities. Continue Reading

The changing U.S. audit market structure and pricing: Is there enough competition?

Ariel West
  (December 15, 2016 at 10:49 am)

This article appeared in Discover Spears Research, the quarterly research newsletter released by the Spears School of Business.

Prior governmental and academic research on the structure of the U.S. audit market suggests either no association between market concentration and audit fees or even a negative association, implying that greater concentration actually results in lower audit fees. However, this finding is opposite of what many would expect.

Brad Lawson, assistant professor of accounting at Oklahoma State University’s Spears School of Business, and another researcher decided to take a closer look into this phenomenon in their research titled “Audit Market Structure and Audit Pricing,” which is forthcoming in the Accounting Horizons journal. What they find is that prior studies did not consider the influence of individual city-level characteristics on the association between concentration and audit fees.

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Gender differences in performance are declining, says research

Ariel West
  (December 15, 2016 at 10:23 am)

This article appeared in Discover Spears Research, the quarterly research newsletter released by the Spears School of Business.

Men are more likely to be managers. Women are more likely to be organized and team-oriented. These are common stereotypes we hear all the time, but are they true?

A hot topic in the workforce has been gender differences in performance. Tom Stone, professor of management at Oklahoma State University’s Spears School of Business, teamed up with Hogan Assessment’s Jeff Foster, Ball State University professor Brian Webster, NEOMA Business School professor Jennifer Harrison, and Illinois State University professor I. M. Jawahar to examine performance ratings gathered by Hogan Assessments, a human resource consulting firm in Tulsa, Okla. The sample included more than 20 years of performance ratings from approximately 3,500 managers and 9,500 non-managerial employees.

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Similarities vs. differences – which
appeals to us more?

Ariel West
  (October 5, 2016 at 4:17 pm)

You’re on a diet and trying to kick potato chips from your snacking habits, so you reach for the kale chips instead. After crunching in to the kale chips, even though they are salty and crunchy just like potato chips, you’re not quite satisfied. Why not?

Oklahoma State University assistant professor of marketing Zachary Arens focuses on the reasons why substituting similar items doesn’t seem to satisfy. In his research titled “Why Focusing on the Similarity of Substitutes Leaves a Lot to be Desired,” published in the Journal of Consumer Research, Arens explains how similarities of substitutes affects desires for the original item.

“Consumers can substitute for a number of reasons,” Arens said. “If something is unavailable or too expensive, they may choose a substitute option. The problem with this is that it sometimes doesn’t work. We find that dissimilar substitutes tend to be more effective than similar substitutes. By focusing on the differences of the substitutes to the original item, the consumer had less of a desire for the original item, whereas when the consumer focused on the similarities between the substitute and the original item due to the substitute not meeting that satisfaction they’re used to.” Continue Reading