First Look

Abstract—Golden parachutes (GPs) have attracted substantial attention from investors and public officials for more than two decades. We find that GPs are associated with higher expected acquisition premiums and that this association is at least partly due to the effect of GPs on executive incentives. However, we also find that firms that adopt GPs experience negative abnormal stock returns both during and subsequent to the period surrounding their adoption. This finding raises the possibility that even though GPs facilitate some value-increasing acquisitions, they do have, on average, an overall negative effect on shareholder wealth; this effect could be due to GPs weakening the force of the market for control and thereby increasing managerial slack, and/or to GPs making it attractive for executives to go along with some value-decreasing acquisitions that do not serve shareholders' long-term interests. Our findings have significant implications for ongoing debates on GPs and suggest the need for additional work identifying the types of GPs that drive the identified correlation between GPs and reduced shareholder value.

Publisher's link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718488

Abstract—Objectives: To assess whether the addition of a peer testimonial to an informational mailing increases conversion rates from brand name prescription medications to lower-cost therapeutic equivalents, and whether the testimonial's efficacy increases when information is added about an affiliation the quoted individual shares with the recipient. Research Design and Methods: A total of 5,498 union members were randomly assigned to receive 1 of 3 different informational letters: 1 without a testimonial (No Testimonial Group), 1 with a testimonial from a person whose shared union affiliation with the recipient was not disclosed (Unaffiliated Testimonial Group), and 1 with a testimonial from a person whose shared union affiliation with the recipient was disclosed (Affiliated Testimonial Group). Results: The conversion rate for the No Testimonial Group was 12.2%, which is higher than the Unaffiliated Testimonial Group rate of 11.3% and the Affiliated Testimonial Group rate of 11.7%. The differences between the groups are not statistically significant. Conclusions: Short peer testimonials do not increase the impact of a mailed communication on conversion rates to lower-cost, therapeutically equivalent medications, even when the testimonial is presented as coming from a more socially proximate peer.

Publisher's link: http://www.ajmc.com/publications/issue/2013/2013-1-vol19-n9/Testimonials-Do-Not-Convert-Patients-From-Brand-to-Generic-Medication

Abstract—In 2000 the English National Health Service (NHS) began a series of workforce redesign initiatives that increased the number of doctors and nurses serving patients, expanded existing staff roles and developed new ones, redistributed health care work, and invested in teamwork. The English workforce redesign experience offers important lessons for U.S. policy makers. Redesigning the health care workforce is not a quick fix to control costs or improve the quality of care. A poorly planned redesign can even result in increased costs and decreased quality. Changes in skill mix and role definitions should be preceded by a detailed analysis and redesign of the work performed by health care professionals. New roles and responsibilities must be clearly defined in advance, and teamwork models that include factors common in successful redesigns such as leadership, shared objectives, and training should be promoted. The focus should be on retraining current staff instead of hiring new workers. Finally, any workforce redesign must overcome opposition from professional bodies, individual practitioners, and regulators. England's experience suggests that progress is possible if workforce redesigns are planned carefully and implemented with skill.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=45847

Abstract—Individuals often feel anxious in anticipation of tasks such as speaking in public or meeting with a boss. I find that an overwhelming majority of people believe trying to calm down is the best way to cope with pre-performance anxiety. However, across several studies involving karaoke singing, public speaking, and math performance, I investigate an alternative strategy: reappraising anxiety as excitement. Compared to those who attempt to calm down, individuals who reappraise their anxious arousal as excitement feel more excited and perform better. Individuals can reappraise anxiety as excitement using minimal strategies such as self-talk (e.g., saying "I am excited" out loud) or simple messages (e.g., "get excited"), which lead them to feel more excited, adopt an opportunity mindset (as opposed to a threat mindset), and improve their subsequent performance. These findings suggest the importance of arousal congruency during the emotional reappraisal process.

Abstract—How is economic policy made? In this paper we study a key determinant of the answer to the question: lobbying by firms. Estimating a binary choice model of firm behavior, we find significant evidence for the idea that barriers to entry induce persistence in lobbying. The existence of these costs is further confirmed in studying how firms responded to a particular policy change: the expiration of legislation relating to the H-1B visa. Due to its influence on firm behavior, we argue that this persistence fundamentally changes the environment in which legislation is made.

Publisher's link: http://www.people.hbs.edu/wkerr/DynamicsOfFirmLobbying.pdf

Abstract—Industrial policy programs are frequently used by governments to stimulate economic activity in particular sectors of the economy. This study explores how an industrial policy program can affect the creation and evolution of an industry and, ultimately, the long-term performance of firms. We examine the history of the Brazilian bioethanol industry, focusing on the industrial policy program implemented by the Brazilian government in the 1970s to develop the industry. We put together a novel data set containing detailed information about the history of bioethanol producers. Our findings show that plants founded during the industrial policy program tend to be, in the long run, more productive than those founded before the program was in place. Based on additional analyses and complementary fieldwork, we infer that the wave of acquisitions that occurred after the end of the industrial policy program had an important effect on the performance of the plants founded when the program was in place. Industrial policy, especially in conjunction with a competitive post-industrial policy business landscape, can succeed in nurturing competitive firms.

Abstract—We show that media coverage of mutual fund holdings affects how investors allocate money across funds. Controlling for fund performance, fund holdings with high past returns attract extra flows only if these stocks were recently featured in major newspapers. In contrast, holdings that were not covered in the media do not affect flows. We present evidence that media coverage tends to amplify investors' chasing of past returns rather than facilitate the processing of useful information in fund portfolios. Fund managers exploit this behavior by purchasing media-covered past winners at reporting dates, a strategy most prevalent among poorly performing funds. Our evidence suggests that media coverage can exacerbate investor biases and that it is the primary mechanism that makes window-dressing effective.

Publisher's link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1934978

Abstract—Technological innovations have produced robots capable of jobs that, until recently, only humans could perform. The present research explores the psychology of "botsourcing"-the replacement of human jobs by robots-while examining how understanding botsourcing can inform the psychology of outsourcing-the replacement of jobs in one country by humans from other countries. We test four related hypotheses across six experiments: (1) Given people's lay theories about the capacities for cognition and emotion for robots and humans, workers will express more discomfort with botsourcing when they consider losing jobs that require emotion versus cognition; (2) people will express more comfort with botsourcing when jobs are framed as requiring cognition versus emotion; (3) people will express more comfort with botsourcing for jobs that do require emotion if robots appear to convey more emotion; and (4) people prefer to outsource cognition-oriented versus emotion-oriented jobs to other humans who are perceived as more versus less robotic. These results have theoretical implications for understanding social cognition about both humans and nonhumans and practical implications for the increasingly botsourced and outsourced economy.

Publisher's link: http://www.hbs.edu/faculty/Pages/download.aspx?name=waytz%20norton.pdf

Abstract—No abstract available.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=45889