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Outside director protection, reduced monitoring, and capital structure decisions

Outside director protection, reduced monitoring, and capital structure decisions

Primary author: Yoonsoo Nam
Faculty sponsor: Douglas (DJ) Fairhurst

Primary college/unit: Carson College of Business
Campus: Pullman

Abstract:

I assess the effects of increased outside director protection from shareholder lawsuits on debt-to-assets ratio of U.S. industrial firms. Outside directors are non-employees of the firm. As increased director protection is considered to decrease directors’ monitoring efforts, it may reduce debt because mangers prefer having less debt to protect their undiversified human capital and would likely decrease debt in response to reduced monitoring. However, increased director protection may raise debt because firms could use debt as a controlling mechanism to counterbalance reduced monitoring because debt pressures managers to work hard to pay principal and interest payments. This study is important as it highlights this substituting effect of debt.
I use the staggered enactment of the Limited Liability Statutes by all 50 U.S. states between 1986 and 2002 to measure increased director protection. As different states enacted the laws during different time periods, this setting helps draw stronger causal inferences. I measure firm-level characteristics using Compustat database. I implement a difference-in-differences research design.
I find that the laws increase debt-to-assets ratio suggesting that firms raise debt to offset increased director protection. Specifically, firms where debt is more effective controlling mechanism, the interests of managers and shareholders are more closely aligned, managers have more incentives to maximize their human capital, and that are less financially constrained increase debt. Finally, I find that firms raising debt in response to increased director protection engage in activities likely raising firm value while firms that do not increase debt engage in activities likely reducing firm value.

Service Robots: Boon or Bane?

Service Robots: Boon or Bane?

Primary author: Pavan Munaganti
Faculty sponsor: Dr. Babu John Mariadoss, Dr. Andrew Perkins

Primary college/unit: Carson College of Business
Campus: Pullman

Abstract:

Until a few years ago, robot operated cafés and restaurants would have been seen as too futuristic and limited to works of fiction. However, with rapidly evolving technology, this no longer is the case. Service providers across several industries are now employing humanoid robots as frontline employees. For instance, Pizza Hut has teamed up with MasterCard and SoftBank to introduce robot waiters in its restaurants in Asia that are capable of taking orders and engaging with customers (Curtis, 2016). While nascent, robots as frontline employees in restaurants, hotels and other service settings appears to be gaining steam. In fact, in countries like Singapore, where a shortage of manpower in the housekeeping, front office, and food and beverage industries is a persistent problem, the government is encouraging small and medium sized enterprises to use robotics to help boost productivity (Tan, 2017).
While the real-world examples suggest a level of comfort with robotic frontline employees from a company and governmental perspective, the impact on customer is less clear. We contribute to existing literature by investigating whether humanoid service robots are in fact a bane or boon to service providers. In five studies, we find that humanoid robot (versus human) frontline employees elicit lower levels of perceived warmth and higher levels of perceived creepiness amongst customers, ultimately resulting in more negative perceptions of service quality, service satisfaction, reduced tipping (gratuity), diminished return intentions, and higher willingness to spread negative word of mouth.

Customers’ Attitudes toward the Acceptance of AI Service Devices Cross Different Service Contexts

Customers’ Attitudes toward the Acceptance of AI Service Devices Cross Different Service Contexts

Primary Author: Hengxuan Chi

Faculty Sponsor: Dogan Gursoy

 

Primary College/Unit: Carson College of Business

Category: Business, Communication, and Politial Sciences

Campus: Pullman

 

Abstract:

 

Principal topic

Nowadays, service providers introduced Artificially intelligent (AI) service devices (e.g., robots) into their regular service operations. These devices are used to directly interact with customers and provide services that were originally delivered by human employees. As a result, the use of these AI devices challenges not only customers’ perceptions of service but also employees’ job security. Therefore, it is critical to understand when (service contexts) customers want to use AI and when they prefer to be served by humans.

 

Method

This study hypothesized that consumers’ attitudes towards the use of AI devices differ across hedonic (enjoyment-focused) and utilitarian (task-focused) service contexts. A conceptual model was proposed using the theory of Artificially Intelligent Device Use Acceptance. The data was collected from the customers of hospitality and airline industries, which are dominated by either more utilitarian or hedonic offerings (airline and hospitality services, respectively). A cross-group SEM analysis and a series of t-test were performed to test the hypotheses.

 

Results/implications

This study confirms the applicability of the AIDUA theory in both service contexts. Findings indicate that social influence is a stronger determinant of AI device acceptance in hedonic services (e.g. hospitality services); individuals have higher performance expectancy toward the use of AI device in utilitarian services (e.g., airline services); individuals’ willingness to use AI devices is lower in hedonic services due to the need for human-human interaction. This result highlights that, in hedonic services, AI devices should be used to empower rather than to replace human employees.

 

A Methodology for the Identification and Measurement of Corporate Social Responsibility Constructs with Existing Analyst Data

A Methodology for the Identification and Measurement of Corporate Social Responsibility Constructs with Existing Analyst Data

Primary Author: Michael Craven

Faculty Sponsor: Bernard Wong-On-Wing

 

Primary College/Unit: Carson College of Business

Category: Business, Communication, and Politial Sciences

Campus: Pullman

 

Abstract:

PRINCIPAL TOPIC

Research on Corporate Social Responsibility (CSR) and business outcomes has produced inconsistent results, which may be associated with difficulties in measuring CSR. Prevailing measurement methodologies use existing databases with indicators of strengths and weaknesses on environmental, social, and governance (ESG) issues including MSCI ESG KLD STATS. However, current research assumes that the strengths and weaknesses of each category accurately reflect differentiable constructs, that strengths are equivalently reduced by weaknesses, and that each indicator is equal when measuring those constructs.

 

METHOD

A scale development methodology is created to overcome the limitations of the existing data and to empirically identify and measure CSR constructs from the analyst data. Because indicators are added and removed, the indicators are screened with a co-measurement based variation of Cronbach’s Alpha to ensure sufficient covariance for further analysis. These indicators are then analyzed with logistic regression based exploratory factor analysis to identify the latent CSR constructs represented by the data and confirmatory factor analysis to provide continuous measures from the dichotomous indicators.

 

RESULTS AND IMPLICATIONS

The results indicate that prior measurement models for CSR poorly reflect the underlying aspects of CSR. In most categories, the assumption of differentiable strengths and weaknesses misidentifies the extant constructs. The assumption of equal weighting of indicators does not hold. Work is needed to validate these new measures against know CSR outcomes, such as fines for pollution. These empirically identified CSR constructs and measurements will resolve a long-standing issue and contribute to resolving the inconsistent results of prior CSR research.

 

When the Sublime Backfires: Detrimental Effect of Threat-Based Awe for Devastating Nature on Sustainable Consumption

When the Sublime Backfires: Detrimental Effect of Threat-Based Awe for Devastating Nature on Sustainable Consumption

Primary Author: Eujin Park

Faculty Sponsor: Howlett

 

Primary College/Unit: Carson College of Business

Category: Business, Communication, and Politial Sciences

Campus: Pullman

 

Abstract:

 

PRINCIPAL TOPIC

The influence of awe for nature has mostly been known to be positive and successful for sustainability campaigns. Nonetheless, not all awe for nature campaigns are likely to be successful since threat-based awe entails dissimilar emotional consequence in comparison with general positive awe. Hence, we conducted empirical studies to test for the detrimental effect of threat-based awe derived from experiencing devastating nature on sustainable consumption and related mechanism.

 

METHOD

Experimental studies were conducted to manipulate ‘awe for nature’ for one group and ‘threat-based awe for devastating nature’ for the other through audiovisual stimuli adopted from existing literature respectively. Analysis of variance and conditional PROCESS analysis were utilized to test for the effect of threat-based awe for devastating nature on sustainable consumption and related mechanism.

 

RESULTS/IMPLICATIONS

We demonstrate that threat-based awe for devastating nature leads to diminished willingness-to-pay for sustainable consumption (study 1). Threat-based awe for devastating nature also reduces accepting promotional offer related to sustainable consumption (study 2). Threat-based awe for devastating nature even lessens the actual amount of money spent for sustainable consumption (study 3). Threat-based awe for devastating nature diminishes individual’s perceived sense of control over his/her life and hence reduces sustainable consumption (study 3). Yet, imbuing public accountability ameliorates the detrimental effect of threat-based awe for devastating nature on sustainable consumption (study 3). Hence, the empirical findings discuss the significance of the effect of threat-based awe for devastating nature on sustainable consumption and a practical solution to resolve for the detrimental effect.

 

I work for my own: The effect of psychological ownership on emotional labor

I work for my own: The effect of psychological ownership on emotional labor

Primary Author: Lu Yuan

Faculty Sponsor: Jenny Kim

 

Primary College/Unit: Carson College of Business

Category: Business, Communication, and Politial Sciences

Campus: Pullman

 

Abstract:

 

PRINCIPAL TOPIC

Service workers experience stress not only from frivolous behavioral tasks but emotional display rules required during customer contacts. Stress grows even larger when authentic emotions differ from required expressions during work. Psychological ownership in the organization induces affective attachment, makes employees consider the organization as their extended self and feel responsible for customers to benefit the firm. Consequently, personal goals keep consistent with organizational goals and this enables employees to display genuine, positive emotions and service behavior. This influence of psychological ownership on employees’ customer-oriented behavior and emotional acting, which refers to emotional labor, have drawn little attention up to now.

The purpose of this paper is to explore the influence of employees’ psychological ownership on their emotional labor directly and indirectly through customer orientation. Additionally, this paper explores how job autonomy interacts with customer orientation and affects employees’ deep and surface acting behavior.

METHOD

Survey data were collected from 251 employees in 4 Chinese 5-star hotels. All the variables were measured by reliable scales developed and validated by existing studies. SEM was employed for the paths analysis.

RESULTS/IMPLICATIONS

Results demonstrate psychological ownership has a positive, direct influence on deep acting and an indirect influence on deep acting through customer orientation. Conversely, psychological ownership shows a direct, negative association with surface acting, and an indirect association with surface acting through customer orientation. Further, the positive influence of customer orientation on deep acting is stronger in a high-autonomy condition. This moderation effect does not show for surface acting.

 

The effect of mindsets and ex-offenders’ redemptive narratives on managers’ willingness to consider hiring ex-offenders

The effect of mindsets and ex-offenders’ redemptive narratives on managers’ willingness to consider hiring ex-offenders

Primary Author: Eunjeong Shin

Faculty Sponsor: Jerry Goodstein

 

Primary College/Unit: Carson College of Business

Category: Business, Communication, and Politial Sciences

Campus: Pullman

 

Abstract:

Principal Topic

The United States has been one of the most punitive countries with the highest rate of incarceration. Previous research has suggested that employers play an essential role in reintegrating ex-offenders back to the community as they offer job opportunities. This paper aims to investigate managers’ mindsets that influence their willingness to consider hiring ex-offenders. I explored two categories of managers’ mindsets – justice mindsets (punitive and restorative mindsets) and fixed vs. growth mindsets – and how ex-offenders’ use of redemptive narratives moderate the relationships between managers’ mindsets and their hiring decisions.

 

Method

We collected data from 251 U.S. managers from various industries through Amazon M-Turk. All participants were randomly assigned to read one of the two versions of the scenarios (either high or low redemptive narrative) and were then asked to indicate their willingness to consider hiring the applicant with a 7-points Likert scale. I adopted the existing justice mindsets and fixed vs. growth mindset scale to measure managers’ mindsets. We used SPSS hierarchical regression analysis to analyze the data.

 

Results / implications

The results indicated that all four mindsets significantly influenced the managers’ hiring decision, supporting our hypotheses. Managers with punitive or fixed mindset were less willingness to consider hiring ex-offenders while managers with restorative or growth mindset were more willingness to consider hiring ex- offenders. The moderating effect of redemptive narrative was not supported. Interestingly, however, contrary to our expectation, high usage of ex-offender’s redemptive narratives was negatively related to managers’ willingness to consider hiring the applicant.

 

Exploring and Quantifying Unsystematic Risk in US Hotel REITs

Exploring and Quantifying Unsystematic Risk in US Hotel REITs

Primary Author: Hongwei Zhao

Faculty Sponsor: Ming-Hsiang Chen

 

Primary College/Unit: Carson College of Business

Category: Business, Communication, and Politial Sciences

Campus: Pullman

 

Abstract:

 

Principal topic:

Although Real Estate Investment Trusts (REITs) were originally conceptualized as mechanisms for individual investors to participate in institutional real estate, the ownership of REIT stocks has recently become dominated by institutional investors. Meanwhile, the hybrid nature of REITs is problematic for investors, particularly less diversified, individual investors who cannot mitigate unsystematic risk. This study included three sections intended to deconstruct unsystematic risk and enable investors to make more informed decisions in their investment portfolios.

Method:

Section one investigated unsystematic risk by selecting all publicly-traded company daily returns from January 2001 to December 2018 and running Fama-French model. Section two conducted a parallel analysis of unsystematic risk and institutional ownership. Section three investigated herding behavior in the Hotel REIT sector by parallel regression.

Results/implications:

Hotel REIT stocks have experienced wide variations in unsystematic risk between 14% and 92.5%. The trend toward institutional ownership of stocks is shown to have a significant negative impact on the levels of unsystematic risk. The implications remain to be identified as to whether higher levels of institutional ownership improve management efficiency and account for more monitoring power, in which price reflects more information and contains less individual specific risk. The unsystematic risk from REIT market returns is significantly lower than the one from the entire market returns, supporting that herding behavior in the Hotel REIT sector might “systematize” a portion of the unsystematic risk. Tracking investor sentiment may be one of factors explaining unsystematic risk for Hotel REITs.

 

Safe by comparison: Unintended Consequences of the Effects of Comparison Between Alternative Tobacco Products.

Safe by comparison: Unintended Consequences of the Effects of Comparison Between Alternative Tobacco Products.

Primary Author: Kamal Ahmmad

Faculty Sponsor: Elizabeth Howlett

 

Primary College/Unit: Carson College of Business

Category: Business, Communication, and Politial Sciences

Campus: Pullman

 

Abstract:

Principle topic: Graphic Health Warnings (GHWs) on cigarette packages are used to discourage smoking. However, the use of GHWs on cigarette packages may have unintended negative consequences. We examined how GHWs on cigarette packages can bias consumers’ evaluation of e-cigarettes. Negative emotions such as fear, guilt, and disgust generated by warnings and disclosures on cigarette packages lead to changes in cognitions, judgments, and behaviors (Andrews et al 2014, Netemeyer et al 2016). Similarity and preference judgment literature also posit that consumers’ engage in comparison processes when they asses product similarity (Simonson & Tversky 1992. Hagius & Mason 1993). Since cigarettes and e-cigarettes are two similar product and most smokers switch to e-cigarettes as a means to quit smoking, counter-marketing of cigarettes with GHWs would influence the evaluation of e-cigarettes.

Method: We conducted two online studies and one lab study to examine the mechanism through which GHWs influence e-cigarette-related consumer responses. In addition to testing behavioral intention related to e-cigarettes, we also tested consumers’ information seeking behavior in response to GHWs on cigarette pack.

Results and Implications: Results from three studies show that GHWs on cigarette packages increase cigarette related fear and decrease e-cigarette related fear. The elicited fear influences attitudes and health hazard beliefs related to e-cigarettes. We also find that GHWs on cigarettes increase the information seeking behavior related to e-cigarettes. The results have significant policy implications which show that counter-marketing efforts of one harmful products have unintended negative consequences by increasing the preference for another potentially harmful product.

 

How to say it to earn better online reviews? The Effect of Firm’s Communication Language on Word-of-Mouth: The Case of Mobile Applications

How to say it to earn better online reviews? The Effect of Firm’s Communication Language on Word-of-Mouth: The Case of Mobile Applications

Primary author: Seyednasir Haghighibardineh
Co-author(s): Chadwick Miller
Faculty sponsor: Chadwick Miller

Primary college/unit: Carson College of Business
Campus: Pullman

Abstract:

The importance and impact of online reviews continues to increase in both online and brick-and-mortar businesses. Based on the annual survey conducted by BrightLocal (2018)—a search agency focused on Local Search Engine Optimization tools—86% of consumers read reviews for their desired local businesses (this number further increases to 95% for ages 18-34). Additionally, the content of these reviews makes a difference in consumption decisions. For instance, consumers read 10 online reviews, on average, before putting their trust in a local business and 57% of consumers will only use a business if it has at least 4 stars. In this study, we suggest that how a firm describes its products—in terms of the level of analytical language used in the description—affects the valence of online word-of-mouth (WOM) as represented in consumer reviews. Further, we explore how the product’s price moderates this relationship. Applying text analysis tools, we test our hypotheses using data from the mobile applications industry. We analyze the sample of 2,396 mobile games and apps with more than 6 million online reviews in total. We find that using a description with analytical language has a negative impact on WOM—operationalized as star rating. Also, we find that price strengthens this relationship. These findings contribute to the marketing literature by expanding our knowledge about the drivers of WOM. Specifically, this study enables marketers to design and implement marketing actions-in terms of product descriptions and pricing strategies to improve consumers’ reviews of the products.