Research Magazine 2021

Coles Research Magazine Seventh Issue | 2021

While the challenges of the last year have turned the academic world upside down, they have not stopped the faculty of the Michael J. Coles College of Business from conducting relevant, dynamic research that expands our understanding of the theories and practices surrounding modern business. The 7 th edition of The Coles Research Magazine is a testament to our faculty’s dedication to pursuing knowledge. Readers will find two executive summaries from Coles College PhD candidates; four papers published in Financial Times Top 50 journals; research that earned the Coles College Outstanding Publication and Competitive Grant awards; and the winners of the College’s Working Paper Series. Realizing that to be actionable, research must be relatable, the magazine’s editors have taken great care to ensure that the content presented here is accessible to fellow academics and business partners alike. Executive summaries of each paper and a concise listing of key takeaways ensure that the value of each publication is clear. The Michael J. Coles College of Business is home to some of the most distinguished and frequently cited researchers in the world. Their findings have changed how organizations do business and how educators teach it. In this latest edition of The Coles Research Magazine , I invite you to discover for yourself the power of Coles College research.

Robin Cheramie Dean, Michael J. Coles College of Business Tony and Jack Dinos Eminent Scholar Chair of Entrepreneurial Management Kennesaw State University

Table of Contents

Journal Publications - Financial Times Top 50 Journals 4 RIMS: A New Approach to Measuring Firm Internationalization By Victor B. Marshall, Lance E. Brouthers , and Dawn L. Keig 6 State Contract Law and the Use of Accounting Information in Debt Contracts By Colleen Honigsberg, Sharon P. Katz, Sunay Mutlu , and Gil Sadka 8 Corporate Cash Shortfalls and Financing Decisions By Rongbing Huang and Jay R. Ritter 10 The Puzzle of Frequent and Large Issues of Debt and Equity By Rongbing Huang and Jay R. Ritter Journal Publication - Distinguished Journal 12 Supply Location and Transportation Planning for Hurricanes: A Two-Stage Stochastic Programming Framework By Jomon A. Paul and Minjiao Zhang

PhD Summaries 14 Efficient vs. Effective Technology Use

By Jason Williams , Saurabh Gupta , Adriane B. Randolph , and Stacie Petter 16 Shedding Light on Sales Relationships: What Effect Does the Sunshine Act Have on Salesperson Ethical Behavior and Customer Response? By Rebecca Burcham , Brian N. Rutherford , Joseph F. Hair, Jr., O.C. Ferrell, and Greg Marshall.

Table of Contents

Research Grant 18 ImPACT IT: Increasing the Participation and

AdvanCemenT of Women in Information Technology By Adriane B. Randolph

Working Papers 20 Market Microstructure and Informational Efficiency By Rafael R. Guthmann and Brian C. Albrecht 22 “Think Leader—Think Male”?: Challenging the Centrality of Masculinity within the Ideal Leader Concept By Graham Lowman , Mark Hiatt , Lee Macenczak, Ji Qi, and Peter D. Harms 24 Assessment of US Healthcare Informatics Education: The Current State and Comparisons across Program Types By Oluwagbenga Ogungbemi , Saurabh Gupta , and Sweta Sneha 26 Seasoned Equity Issuers’ Prospectus Filings: How Informative is their Tones? By Rongbing Huang , Hong Qian, and Santhosh Ramalingegowda 28 Effects of Gender Disparity and Social Costs of Failure on Entrepreneurship Across Countries By Sharon A. Simmons, Chong Kyoon Lee, Susan L. Young , and MaQueba Massey

* Coles College of Business faculty highlighted in bold.

RIMS: A New Approach to Measuring Firm Internationalization Victor B. Marshall, Lance E. Brouthers, and Dawn L. Keig

Journal of International Business Studies Vol. 51, Issue 5 (March) 2020, pp. 1133–1141

Overview

Empirical research that tests hypotheses regarding the drivers and/or consequences of firm internationalization needs a valid measure. This paper develops a new measure: the ratio of international market shares (RIMS). It measures to what degree a firm conforms to the theoretically grounded characteristics of a maximally global firm. We compare RIMS theoretically and empirically to three widely used measures of firm internationalization: foreign sales to total sales (FSTS), international diversification, and international scope. RIMS is clearly demonstrated superior in capturing both the breadth and depth of a firm’s internationalization and in the ease with which it can be calculated and interpreted.

4 | Journal Publications - Financial Times Top 50 Journals

■ RIMS compares a firm’s penetration of its primary target market in terms of market share to the rest of the world’s markets. ■ RIMS captures both the breadth and depth of a firm’s internationalization. ■ RIMS is easy to calculate and interpret. ■ RIMS can be calculated for more firms than diversification or foreign sales to total sales (FSTS). Executive Takeaways

Lance E. Brouthers, Professor of Management

State Contract Law and the Use of Accounting Information in Debt Contracts Colleen Honigsberg, Sharon P. Katz, Sunay Mutlu, and Gil Sadka

Review of Accounting Studies Vol. 26, 2021, pp. 124-171

Overview This paper examines the relationship between state contract law and the use of accounting information in debt contracts. Contract theory suggests that balance sheet-based covenants resolve debtholder-shareholder conflicts ex ante, while income statement-based covenants trigger the switch of control rights ex post. Lenders find it more difficult to exert their control rights ex post if the contract law is more favorable to debtors, suggesting that balance sheet-based covenants are more efficient in these jurisdictions. We test and find evidence that lenders using pro-debtor law are more likely to rely on balance sheet-based covenants than those using pro-lender law. We measure reliance using both the weight of balance-sheet covenants relative to income-statement covenants and covenant strictness. Our analysis also shows that contracts with performance-pricing grids are less likely to include interest-increasing grids when the law is more favorable to debtors. Results provide initial evidence that contract law is an important determinant in the design of debt contracts.

6 | Journal Publications - Financial Times Top 50 Journals

Executive Takeaways

■ State contract laws affect the nature of accounting information in debt contracts. ■ Balance-sheet numbers are more desirable in contracts governed by pro-debtor state laws. ■ Interest-increasing performance clauses are more common under pro-lender state laws.

Sunay Mutlu, Assistant Professor of Accounting

Corporate Cash Shortfalls and Financing Decisions Rongbing Huang and Jay R. Ritter

The Review of Financial Studies Vol. 34, Issue 4 (April) 2021, pp. 1789-1833

Overview Firms may raise external capital to fund investment and operations, rebalance capital structures, or increase cash balances. In this paper, we find that US firms’ external financing decisions from 1972 to 2013 were primarily motivated by near- term cash shortfalls, and the choice of financing instrument was determined by how persistent the cash shortfalls were and what the issuance proceeds would be used for. Given their actual revenue and spending, most net equity issuers and an overwhelming majority of net debt issuers would have faced immediate cash depletion without external financing. In contrast, moving towards a stationary target capital structure and pure cash stockpiling appeared to be second-order considerations for most companies. We also examine the proportion of issuance proceeds retained as cash. On average, debt issuers immediately spent almost all of the proceeds, while equity issuers retained a good deal in cash. Anticipated near-future cash needs and the fixed costs of financing help to explain the fraction of proceeds retained. Our findings suggest that, when making financing decisions, most firms are primarily concerned about the opportunity costs of failing to meet cash needs. A funding-horizon theory that optimizes both security issuance and capital structure to meet immediate and future funding needs best describes observed capital structures.

8 | Journal Publications - Financial Times Top 50 Journals

Executive Takeaways

■ Firms generally seek external financing when they would otherwise run out of cash. ■ The specific cash need determines the choice between debt and equity financing. ■ The fixed costs of financing help to explain the fraction of the proceeds to keep as cash. ■ More research on the opportunity costs of cash shortfalls is needed.

Rongbing Huang, Professor of Finance

The Puzzle of Frequent and Large Issues of Debt and Equity Rongbing Huang and Jay R. Ritter

Journal of Financial and Quantitative Analysis (forthcoming)

Overview Larger, more frequent, and more recent debt and equity issues in three consecutive fiscal years are followed by lower stock returns in the subsequent year. The value-weighted (VW) averages of raw returns during the next year are 12.2% for firms with no significant external financing in the prior three fiscal years; 10.8% for firms that issued debt or equity only once; 3.9% for firms that issued debt or equity at least three times; and -1.2% for firms with at least three large issues. The q-factor model time-series regression intercept from 1975 to 2018 decreases in the subsequent year from 0.12% per month (t-statistic=2.88) for the VW portfolio of firms with no external financing in the prior three years to -0.00%, -0.32%, and -0.63% per month (t-statistics= -0.08, -2.54, and -4.31), for the VW portfolios of firms with one debt or equity issue, three or more equity or debt issues, and at least three large issues, respectively. Purging the factor returns of recent issuers increases the magnitude of the estimated underperformance following frequent equity issues. A value-weighted Fama-MacBeth regression shows that firms with three equity issues underperform non-issuers by 0.65% per month (t-statistic =-2.65). Earnings announcement returns are low following frequent issues, especially equity issues.

10 | Journal Publications - Financial Times Top 50 Journals

Executive Takeaways

■ Many firms engage in substantial external financing activity. ■ Firms with substantial external financing activity have low subsequent stock returns. ■ Abnormal post-issuance stock returns decay over time. ■ Purging the factors of recent issuers helps to detect abnormal post-issuance returns.

Rongbing Huang, Professor of Finance

Supply Location and Transportation Planning for Hurricanes:A Two-Stage Stochastic Programming Framework Jomon A. Paul andMinjiao Zhang

European Journal of Operational Research Vol. 274, Issue 1 (April) 2019, pp. 108-125

Overview We develop a two-stage stochastic programming model with recourse actions for hurricane preparedness. In the first stage, it works to optimize the locations of Points of Distribution (PODs), medical supply levels, and transportation capacity; in the second, transportation decisions and flow. Our model minimizes the total social cost, comprised of deprivation and commercial logistics costs, and facilitates determination of the optimal deployment time. We demonstrate the benefits of our approach in a case study. As risk attitude goes from optimistic to pessimistic, the optimal number of PODs increases exponentially to distribute the risk. A similar trend holds for total costs as a function of hurricane category and its interplay with risk: for weaker hurricanes, regardless of risk attitude, the optimal decision is to deploy closer to landfall at 12 hours; for stronger, resources are best deployed earlier, at 36 hours. Since deployment cost also increases exponentially as landfall approaches, when budget is limited, risk attitude influences deployment decisions and a preference for lower severity-level supplies. Our model addresses hurricanes but can be adapted to other disasters with forewarnings, such as winter storms, floods, or disease outbreaks.

12 | Journal Publications - Distinguished Journal

■ The two-stage stochastic programming model optimizes social cost effectively. ■ Total cost is a function of hurricane category and its interplay with risk. ■ Early deployment is preferable for strong hurricanes due to increased demand. ■ The number of dispensing sites increases exponentially with aversion to risk. ■ Funding lower severity-level supplies is preferred when the budget is limited. Executive Takeaways

Jomon A. Paul, Professor of Quantitative Analysis Minjiao Zhang, Associate Professor of Quantitative Analysis

Efficient vs. Effective Technology Use JasonWilliams (PhDGraduate) Saurabh Gupta (Dissertation Chair) Adrianne Randolph (Second Supervisor) Stacie Petter (Reader)

Overview Information technology (IT) is foundational to modern work systems, but its nuances like how to best use technology for a given situationare not fully understood. This study develops a theory of workplace IT use combining individual, organizational, and technical influences. The first, continued use , describes employment of a technology to complete a job task efficiently; such as checking email. The second, novel use , describes recruitment of previously unused features of a technology to perform novel job tasks. Managers can help workers use a technology efficiently or innovatively as the needs of the organization change.

14 | PhD Summaries

Executive Takeaways

■ To ensure efficient technology use, maintain stable work conditions and organizational structure. ■ Workers tend to move toward more efficient technology use. ■ Additional input is often required to prompt and support innovative use. ■ To allow innovation, managers should give employees the freedom to explore how the technology can best support job tasks.

JasonWilliams, PhD Graduate Saurabh Gupta, Professor of Information Systems Adriane B. Randolph, Professor of Information Systems

Shedding Light on Sales Relationships: What Effect Does the Sunshine Act Have on Salesperson Ethical Behavior and Customer Response? Rebecca Burcham (PhDGraduate) Brian N. Rutherford (Dissertation Chair) Joseph F. Hair, Jr. (Committee Co-Second) O.C. Ferrell (Committee Co-Second) Greg Marshall (Reader) Overview The financial relationship between physicians and pharmaceutical salespeople has long been scrutinized for the potential ethical issues that may arise from the influence that financial incentives have on physician prescribing behavior. Until recently, details of these financial incentives were only available to physicians and salespeople. In order to shed light on this relationship, Congress passed legislation, known as the Sunshine Act, with the intent to make transparent financial information. By shedding light on this information, the legislation’s intent is to mitigate the potential ethical issues that such a financial relationship poses. While previous studies examined the impact that the Sunshine Act has on physician ethical behavior, this study introduces the potential effect of information transparency on pharmaceutical salesperson ethical behavior. Additionally, the study looks to address how the change in salesperson ethical behavior brought about by information transparency mediates the effect on salesperson outcome and behavioral performance. Finally, the study seeks to understand how the change in salesperson ethical behavior mediates the relationship with physicians by measuring their loyalty to and trust in the salesperson and in the pharmaceutical manufacturer.

16 | PhD Summaries

Executive Takeaways

■ Salesperson ethical behavior results in higher customer loyalty and trust in the firm. ■ Salesperson ethical behavior results in higher customer loyalty and salesperson trust. ■ Information transparency may not result in positive behavior responses.

Rebecca Burcham, PhD Graduate Brian N. Rutherford, Professor of Marketing & Professional Sales

National Science Foundation Grant:

ImPACT IT: Increasing the Participation and AdvanCemenT of Women in Information Technology

Adriane B. Randolph

Overview Currently, only 20 percent of US Information Systems faculty at the rank of full professor are women. Moreover, the >Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32

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