Columbia Business School Research

We investigate firms that stop providing earnings guidance ("stoppers") either by publicly announcing their decision ("announcers") or doing so quietly ("quiet stoppers"). Relative to firms that continue guiding, stoppers have poorer prior performance, more uncertain operating environments, and fewer informed investors. Announcers commit to non-disclosure because they (i) do not expect to report future good news or (ii) have lower incentives to guide due to the presence of long-term investors. The three-day return around the announcement is negative.

Cross-national research on social description documents that Westerners favor abstract linguistic categories (e.g., adjectives rather than verbs) more than East Asians. Whereas culture-related schemas are assumed to underlie these differences, no research has examined this directly. The present study used the cultural priming paradigm to distinguish the role of cultural schemas from alternative country-related explanations involving linguistic structures or educational experiences.

We propose a distinction between two types of interpersonal compatibility in determining partner preferences for joint tasks: outcome compatibility and strategic compatibility. We argue that these two types of compatibility correspond to preferences for similar and complementary task partners, respectively. Five studies support this distinction.

In 5 studies, we investigated the relation between regulatory focus and the tendency to copy a role model’s managing behavior after one experiences this behavior as its recipient and later takes on the same managing role. Because enacting role-related behaviors fulfills interpersonal norms that fit prevention concerns, we predicted a stronger tendency to copy among individuals with a stronger prevention focus on duties and obligations (“oughts”) but not among those with a stronger promotion focus on aspirations and advancements (ideals).

This article discusses the diffusion process in an online social network given the individual connections between members. The authors model the adoption decision of individuals as a binary choice affected by three factors: (1) the local network structure formed by already adopted neighbors, (2) the average characteristics of adopted neighbors (influencers), and (3) the characteristics of the potential adopters. Focusing on the first factor, the authors find two marked effects. First, an individual who is connected to many adopters has a greater adoption probability (degree effect).

Several researchers have proposed models of buyer behavior in noncontractual settings that assume that customers are "alive" for some period of time and then become permanently inactive. The best-known such model is the Pareto/NBD, which assumes that customer attrition (dropout or "death") can occur at any point in calendar time. A recent alternative model, the BG/NBD, assumes that customer attrition follows a Bernoulli "coin-flipping" process that occurs in "transaction time" (i.e., after every purchase occasion).

A complete model of smile interpretation needs to incorporate its social context. We argue that embodied simulation is an unlikely route for understanding dominance smiles, which typically occur in the context of power. We support this argument by discussing the lack of eye contact with dominant faces and the facial and postural complementarity, rather than mimicry, that pervades hierarchical relationships.

We consider a pricing problem in an environment where the customers' willingness-to-pay (WtP) distribution may change at some point over the selling horizon. Customers arrive sequentially and make purchase decisions based on a quoted price and their private reservation price. The seller knows the WtP distribution pre- and post-change, but does not know the time at which this change occurs. The performance of a pricing policy is measured in terms of regret: the loss in revenues relative to an oracle that knows the time of change prior to the start of the selling season.

The financial crisis of 2007 to 2009 can be divided into two distinct phases. The first and more limited phase from August 2007 to August 2008 stemmed from losses in one relatively small segment of the U.S. financial system — namely, subprime residential mortgages. Despite this disruption to financial markets, real GDP in the United States continued to rise into the second quarter of 2008, and forecasters were predicting only a mild recession. In mid-September 2008, however, the financial crisis entered a far more virulent phase.

Five experiments investigated the hypothesis that perspective taking — actively contemplating others' psychological experiences — attenuates automatic expressions of racial bias. Across the first 3 experiments, participants who adopted the perspective of a Black target in an initial context subsequently exhibited more positive automatic interracial evaluations, with changes in automatic evaluations mediating the effect of perspective taking on more deliberate interracial evaluations.

Three experiments explored whether hierarchical role and body posture have independent or interactive effects on the main outcomes associated with power: action in behavior and abstraction in thought. Although past research has found that being in a powerful role and adopting an expansive body posture can each enhance a sense of power, two experiments showed that when individuals were placed in high- or low-power roles while adopting an expansive or constricted posture, only posture affected the implicit activation of power, the taking of action, and abstraction.

We propose and analyze a general periodic-review model in which the firm has access to a set of potential suppliers, each with specific yield and price characteristics. Assuming that unsatisfied demand is backlogged, the firm incurs three types of costs: (i) procurement costs, (ii) inventory-carrying costs for units carried over from one period to the next, and (iii) backlogging costs.

Global climate change poses one of the greatest challenges facing humanity in this century. This article, which introduces the American Psychologist special issue on global climate change, follows from the report of the American Psychological Association Task Force on the Interface Between Psychology and Global Climate Change.

This article considers scientific and public understandings of climate change and addresses the following question: Why is it that while scientific evidence has accumulated to document global climate change and scientific opinion has solidified about its existence and causes, U.S. public opinion has not and has instead become more polarized? Our review supports a constructivist account of human judgment.

This article considers scientific and public understandings of climate change and addresses the following question: Why is it that while scientific evidence has accumulated to document global climate change and scientific opinion has solidified about its existence and causes, U.S. public opinion has not and has instead become more polarized? Our review supports a constructivist account of human judgment.

Null-hypothesis significance tests (NHSTs) have received much criticism, especially during the last two decades. Yet, many behavioral and social scientists are unaware that NHSTs have drawn increasing criticism, so this essay summarizes key criticisms. The essay also recommends alternative ways of assessing research findings. Although these recommendations are not complex, they do involve ways of thinking that many behavioral and social scientists find novel.

We propose a message-passing paradigm for resource allocation problems. This serves to connect ideas from the message-passing literature, which has primarily grown out of the communications, statistical physics, and artificial intelligence communities, with a problem central to operations research. This also provides a new framework for decentralized management that generalizes price-based systems by allowing incentives to vary across activities and consumption levels.

Many economic decisions can be described as an option exercise or optimal stopping problem under uncertainty. Motivated by experimental evidence such as the Ellsberg Paradox, we follow Knight (1921) and distinguish risk from uncertainty. To afford this distinction, we adopt the multiple-priors utility model. We show that the impact of ambiguity on the option exercise decision depends on the relative degrees of ambiguity about continuation payoffs and termination payoffs. Consequently, ambiguity may accelerate or delay option exercise.

Developing countries traditionally experience pass-through of exchange rate changes that is greater and more rapid than high-income countries experience. This is true equally of the determination of prices of imported goods, prices of local competitors' products, and the general CPI. But developing countries in the 1990s experienced a rapid downward trend in the degree of pass-through and speed of adjustment, more so than did high-income countries. As a consequence, slow and incomplete pass-through is no longer exclusively a luxury of industrial countries.

The current investigation explores how power and stability within a social hierarchy interact to affect risk taking. Building on a diverse, interdisciplinary body of research, including work on non-human primates, intergroup status, and childhood social hierarchies, we predicted that the unstable powerful and the stable powerless will be more risk taking than the stable powerful and unstable powerless.

We analyze contagious sovereign debt crises in financially integrated economies. Under financial integration banks optimally diversify their holdings of sovereign debt in an effort to minimize the costs with respect to an individual country"s sovereign debt default. While diversification generates risk diversification benefits ex ante, it also generates contagion ex post. We show that financial integration without fiscal integration results in an inefficient equilibrium supply of government debt.

Consider a firm that sells products over repeated seasons, each of which includes a full-price period and a markdown period. The firm may deliberately understock products in the markdown period to induce high-value customers to purchase early at full price. Customers cannot perfectly anticipate availability. Instead, they use observed past capacities to form capacity expectations according to a heuristic smoothing rule. Based on their expectations of capacity, customers decide to buy either in the full-price period or in the markdown period.

This article studies whether the volume and composition of capital flows affect the degree of credit crunch during the 2007–2009 crisis. Using data on 3,823 firms in 24 emerging countries, we find that, on average, the decline in stock prices was more severe for firms that are intrinsically more dependent on external finance for working capital. Interestingly, while the volume of capital flows per se has no significant effect, the composition matters a lot.

More and more firms are engaging in greenwashing, misleading consumers about their environmental performance or the environmental benefits of a product or service. The skyrocketing incidence of greenwashing can have profound negative effects on consumer and investor confidence in green products. Mitigating greenwashing is particularly challenging in a context of limited and uncertain regulation.

This paper documents that intermediaries play an important role in facilitating international trade. We modify a heterogeneous firm model to allow for an intermediary sector. The model predicts that firms will endogenously select their mode of export-either directly or indirectly through an intermediary-based on productivity. The model also predicts that intermediaries will be relatively more important in markets that are more difficult to penetrate.

In this paper we study the determinants of business groups’ ownership structure using unique panel data on Korean chaebols. In particular, we attempt to understand how groups form over time. We find that chaebols grow vertically (that is, pyramidally) as the family uses well-established group firms (“central firms”) to set up and acquire firms that have low pledgeable income (e.g., low profitability) and high acquisition premia.

Blight findings have functioned as a cornerstone for condemnation since the great urban decline of the mid-twentieth century prompted governments at all levels throughout the country to intervene in the real estate market. Elements of blight, and then the term itself, became a basis for this intervention. But the use of blight as a basis for takings has become increasingly controversial as its application has migrated from slum clearance to urban renewal, then to economic development projects, and on to revenue-enhancing projects.

This paper exploits India's rapid, comprehensive and externally imposed trade reform to establish a causal link between changes in tariffs and firm productivity. Pro-competitive forces, resulting from lower tariffs on final goods, as well as access to better inputs, due to lower input tariffs, both appear to have increased firm-level productivity, with input tariffs having a larger impact. The effect was strongest in import-competing industries and industries not subject to excessive domestic regulation.

We propose a new, valuation-based measure of world equity market segmentation. While we observe decreased levels of segmentation in many developing countries, the level of segmentation is still significant. In contrast to previous research, we characterize the factors that account for variation in market segmentation both through time as well as across countries.

First we discuss how extrinsic incentives may come into conflict with other motivations. For example, monetary incentives from principals may change how tasks are perceived by agents, with negative effects on behavior. In other cases, incentives might have the desired effects in the short term, but they still weaken intrinsic motivations. To put it in concrete terms, an incentive for a child to learn to read might achieve that goal in the short term, but then be counterproductive as an incentive for students to enjoy reading and seek it out over their lifetimes.

The current research investigated whether mind-sets and contexts that afford a focus on self-other differences can facilitate perceptual and conceptual forms of perspective taking. Supporting this hypothesis, results showed that directly priming a difference mind-set made perceivers more likely to spontaneously adopt other people's visual perspectives (Experiment 1) and less likely to overimpute their own privileged knowledge to others (Experiments 2 and 3).

Dominant theories of trade tend to ignore the role of finance as a source of comparative advantage. On the other hand, the finance literature places financial institutions as a driver of economic growth. This paper unites these two competing schools of thought in a general equilibrium framework. For economies with high-quality institutions (defined by the competitiveness of the financial sector, the quality of corporate governance, and the level of property rights protection), finance is passive.

This paper reviews the pattern of bank failures during the financial crisis and asks whether there was a link with corporate governance. It revisits the theory of bank governance and suggests a multiconstituency approach that emphasizes the role of weak creditors. The empirical evidence suggests that, on average, banks with stronger risk officers, less independent boards, and executives with less variable remuneration incurred fewer losses. There is no evidence that institutional shareholders opposed aggressive risk-taking.