First Look

Abstract—No abstract available.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=53729

Abstract—Although both media commentary and academic research have focused much attention on the dilemma of employees being too busy, this paper presents evidence of the opposite phenomenon, in which employees do not have enough work to fill their time and are left with hours of meaningless idle time each week. We conducted six studies that examine the prevalence and work pacing consequences of involuntary idle time. In a nationally representative cross-occupational survey (Study 1), we found that idle time occurs frequently across all occupational categories; we estimate that employers in the United States pay roughly $100 billion in wages for time that employees spend idle. Studies 2a through 3b experimentally demonstrate that there are also collateral consequences of idle time; when workers expect idle time following a task, their work pace declines and their task completion time increases. This decline reverses the well-documented deadline effect, producing a dead-time effect, whereby workers slow down as a task progresses. Our analyses of work pace patterns provide evidence for a time discounting mechanism: workers discount idle time when it is relatively distant but act to avoid it increasingly as it becomes more proximate. Finally, Study 4 demonstrates that the expectation of being able to engage in leisure activities during post-task free time (e.g., surfing the Internet) can mitigate the collateral work pace losses due to idle time. Through examination and discussion of the effects of idle time at work, we broaden theory on work pacing.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=53749

Abstract—We propose a statistical model of the term structure of U.S. treasury yields tailored for long-term probability-based scenario generation and forecasts. Our model is easy to estimate and is able to simultaneously reproduce the positivity, persistence, and factor structure of the yield curve. Moreover, we incorporate heteroskedasticity and time-varying correlations across yields, both prevalent features of the data. The model also features a regime-switching short-rate model. We evaluate the out-of-sample performance of our model in terms of forecasting ability and coverage properties and find that it improves on the standard Diebold and Li model.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=53731

Abstract—During the financial crisis, financial firm leverage and volatility both rose dramatically. Consequently, institutions are being asked to reduce leverage in order to reduce risk, though the effectiveness depends upon the role of capital structure in volatility. To address this question, we build a statistical model of equity volatility that accounts for leverage. Our approach blends Merton’s insights on capital structure with traditional time-series models of volatility. Using our model we quantify how capital injections impact the risk of financial institutions and estimate firm-specific precautionary capital needs. In addition, the longstanding observation that volatility is more responsive to negative shocks than positive is shown to be less a consequence of actual leverage than it is of risk premiums.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=53733

Abstract—No abstract available.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=49783

Abstract—This paper examines investments made by 13 angel groups across 21 countries. We compare applicants just above and below the funding cutoff and find that these angel investors have a positive impact on the growth, performance, and survival of firms as well as their follow-on fundraising. The positive impact of angel financing is independent of the level of venture activity and entrepreneur friendliness in the country. However, we find that the development stage and maturity of startups that apply for angel funding (and those that are ultimately funded) is inversely correlated with the entrepreneurship friendliness of the country, which may reflect self-censoring by very early stage firms that do not expect to receive funding in these environments.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=51657

Abstract—Analyses relying on two international surveys from over 100,000 men and women across 29 countries explore the relationship between maternal employment and adult daughters’ and sons’ employment and domestic outcomes. In the employment sphere, adult daughters, but not sons, of employed mothers are more likely to be employed and, if employed, are more likely to hold supervisory responsibility, work more hours, and earn higher incomes than their peers whose mothers were not employed. In the domestic sphere, sons raised by employed mothers spend more time caring for family members, and daughters spend less time on housework. Analyses provide evidence for two mechanisms: gender attitudes and social learning. Finally, findings show contextual influences at the family and societal levels: family-of-origin social class moderates effects of maternal employment, and childhood exposure to female employment within society can substitute for the influence of maternal employment on daughters and reinforce its influence on sons.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=53811

Abstract—We decompose bank activities into passive and active components and evaluate the performance of the active components of the bank business model by controlling for passive maturity transformation strategies that can be executed in the capital market. Over the period 1960–2016, we find that (1) unlevered bank assets underperform passive portfolios of maturity-matched U.S. Treasury bonds; (2) the cost of bank deposits exceeds the cost of bank debt; (3) bank equities have CAPM betas near one, while passive maturity transformation strategies have CAPM betas near zero; and (4) portfolios of bank equities consistently underperform portfolios designed to passively mimic their economic exposures. The very strong investment performance of passive maturity transformation strategies over this period may mask the underperformance of the specialized bank activities.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=53722

In the early 21st century, there was a noticeable trend of declining productivity growth. Despite the persistent decline in productivity growth, a consensus on its explanation had not been reached. Some of the debate focused on the technicalities of productivity measurement, and the structural shift involved with the increased usage and introduction of robots in place of workers, garnering the interest of academic economists, businesses and policymakers. Another contention was whether declining productivity was the result of secular stagnation, a more permanent economic state of low growth and lack of economic progress, or whether it was the result of deleveraging and the post-Global Financial Crisis period, a mere cyclical phase. Distilling the sources and drivers of productivity decline was further complicated by the rise in economic integration across countries, and even more so considering research findings that research and innovation was becoming less productive and more difficult. What, if anything, was the role of government? Should businesses play a role? If so what should they do?

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No abstract available.

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The launch of the Chase Sapphire Reserve credit card was enthusiastically received by millennial consumers, a cohort that had previously eluded JPMorgan Chase and its competitors. With the one-year anniversary of the launch approaching, managers are focused on retaining customers attracted by a one-time signup bonus of 100,000 reward points and on acquiring new customers now that the bonus had been reduced to 50,000 points. They were also refocusing on the remainder of the Chase Sapphire product portfolio to assess differentiation among the products and to identify white space in the market that could support additional new product launches.

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In March 2010, Burak Dalgin (HBS MBA 2004) led private equity firm Darby's investment in Sirma, a local Turkish water and beverage company. Sirma was owned and managed by members of two Turkish business families. The existing management, while being highly entrepreneurial, had paid less attention to managing the company in a professional manner, leading to a highly leveraged balance sheet and a significant need for financing. After the investment, Sirma introduced new products, opened a new factory, and built up its financial reporting system from scratch. Two years after Darby’s investment, Sirma’s operational performance had improved. However, the company was still suffering from significant financial problems. By early 2013, although Sirma had received two cash injections from Darby, the company still required another round of financing. Dalgin was looking at three potential options: Should Darby make another investment in Sirma? If Darby stayed invested in Sirma, should it replace its managing partners? If Dalgin advised Darby to exit, would that be a premature move?

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