First Look

Abstract—Using trade-level data, we study whether brokers play a role in spreading order flow information. We focus on large portfolio liquidations, which result in temporary drops in stock prices, and identify the brokers that intermediate these trades. We show that these brokers’ best clients tend to predate on the liquidating funds: at the beginning of the fire sale, they sell their holdings in the liquidated stocks in order to then cover their positions once asset prices start recovering. Predation leads to profits of about 25 basis points over ten days and increases the liquidation costs for the distressed fund by 40%. These results suggest a broker’s role in fostering predatory behavior and raise a red flag for regulators. Moreover, our findings highlight the trade-off between slow execution and potential information leakage in the decision of optimal trading speed.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55258

Abstract—When prosecutors, courts, and regulators make charging and sentencing decisions, they must evaluate whether firms have effective compliance programs. Such evaluations are difficult because of the challenges associated with measuring effectiveness. Notably, these obstacles are not limited to evaluation by external parties, as firm managers also struggle to assess the returns associated with investments in compliance. To address these limitations and to facilitate a more consistent assessment, this article provides a framework to rigorously evaluate the effectiveness of compliance programs. I present empirical models that use data collected from compliance initiatives—including whistleblower hotlines, training exercises, and disciplinary procedures—to evaluate whether the initiatives are fulfilling their desired objectives. By being able to more rigorously evaluate compliance programs with data and empirical analysis, prosecutors and courts will be able to more readily discern “window-dressing,” and firm managers will be able to better understand the efficacy of their investments in compliance.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55233

Abstract—Although it is well known that organizational and team performance influences strategic decision-making, little is known about its impact on ascriptive inequality. This study proposes a performance effect on racial bias: higher team performance reduces managers’ performance pressure and, therefore, leads to more managerial bias in the subsequent round. I find strong evidence for this proposition using a fine-grained dataset from the National Basketball Association. In this highly competitive industry, team performance is positively associated with coaches’ subsequent exercise of racial bias: players experience more favorable treatment from same-race coaches after their teams have won more games. This study demonstrates an important relationship between performance feedback and racial bias and suggests that even in highly competitive industries, managerial bias may be prevalent in high-performing teams and organizations.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55048

Abstract—How does the appearance of a new out-group affect the economic, social, and cultural integration of previous outsiders? We study this question in the context of the first Great Migration (1915–1930), when 1.5 million African Americans moved from the U.S. South to urban centers in the North, where 30 million Europeans had arrived since 1850. We test the hypothesis that black inflows led to the establishment of a binary black-white racial classification and facilitated the incorporation of—previously racially ambiguous—European immigrants into the white majority. We exploit variation induced by the interaction between 1900 settlements of southern-born blacks in northern cities and state-level outmigration from the U.S. South after 1910. Black arrivals increased both the effort exerted by immigrants to assimilate and their eventual Americanization. These average effects mask substantial heterogeneity: while initially less integrated groups (i.e., Southern and Eastern Europeans) exerted more assimilation effort, assimilation success was larger for those that were culturally closer to native whites (i.e., Western and Northern Europeans). These patterns are consistent with a framework in which perceptions of racial threat among native whites lower the barriers to the assimilation of white immigrants.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=54963

Abstract—The past 40 years has seen a large increase in the number of articles submitted to journals ranked in the top-5 of their discipline. This increase is the rational response, by faculty, to the overweighting of publications in these journals by university promotions and tenure committees. The ranking factors for academic journals, however, arose for a completely different purpose, to guide the journal acquisition decisions by budget-constrained university librarians. Using journal impact factors to infer the quality of a faculty members’ publications incurs a high incidence of both Type 1 errors, when we conclude incorrectly that a paper published in a top-5 journal is a high-impact paper, and Type 2 errors, when we conclude that papers (and books) not published in top-5 journals have low impact. In addition, a third type of error gets introduced as faculty pursue the research they perceive is favored by editors of top-5 journals, at the potential expense of more innovative and relevant research, perceived to be unpublishable in a top-tier journal. Accounting scholarship, in particular, has underinvested in research about innovative practices or the emerging accounting issues faced by contemporary organizations (Kaplan, 2011), likely because such research is viewed as unpublishable in top-5 journals. This gap persists despite recent scholarship that has documented how important, fundamental ideas can emerge from “use-inspired” research (see Pasteur’s Quadrant (Stokes, 1997)). The paper concludes by suggesting reforms to overcome the dysfunctional fixation on publication in top-5 journals.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=55235

Abstract—In this paper, I show that political opposition to immigration can arise even when immigrants bring significant economic prosperity to receiving areas. I exploit exogenous variation in European immigration to U.S. cities between 1910 and 1930 induced by World War I and the Immigration Acts of the 1920s and instrument immigrants’ location decision relying on pre-existing settlement patterns. Immigration increased natives’ employment and occupational standing and fostered industrial production and capital utilization. However, despite these economic benefits, it triggered hostile political reactions, such as the election of more conservative legislators, higher support for anti-immigration legislation, and lower public goods provision. Stitching the economic and the political results together, I provide evidence that natives’ backlash was, at least in part, due to cultural differences between immigrants and natives, suggesting that diversity might be economically beneficial but politically hard to manage.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=54793

No abstract available.

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This case, set in 1990, describes the history of Walmart and asks what competitive strategies Kmart might adopt in response to Walmart's success. It discusses the strategy and organization of both companies in terms of HR practices, store location, distribution, information technology, procurement, pricing, and company culture. This (A) case is the first in a multi-part series that goes on to describe the results of Kmart's competition with Walmart, as well as Walmart's later grappling with ecommerce and Amazon.

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This case follows up on the competition between Kmart and Walmart as discussed in the (A) case. It summarizes the companies' positions in the early 2000s and discusses events between 1990 and Kmart's declaration of bankruptcy in 2002. Walmart grew significantly, expanded internationally, and became a leading player in groceries. However, it also faced criticism regarding its wage and labor practices. Meanwhile, Kmart faced an identity crisis, falling between the cracks while customers sought lower prices at Walmart and higher-end goods at Target. In the 1990s, its growth stemmed mainly from acquisitions, not all of which proved beneficial in the long term.

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In early 2015, Amy Hood, CFO of Microsoft, and the rest of the senior leadership team faced a set of fundamental choices. The firm had opportunities to serve customers in ways that would be associated with higher growth but lower margin. Some of these opportunities involved a shift from perpetual licensing to subscription sales. Whatever choices are made must be articulated to investors and employees.

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No abstract available.

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Nobel Foundation leadership is addressing a range of issues related to its key role to safeguard the reputation of the Nobel Prizes. Included are outreach to global audiences, the variety of sources of communications about the Prizes, the advent of new high-value awards, and the effects on the Nobel brand of recent troubling events in partner organizations. The “essence of the brand” is a focus. Includes brand reputation survey information.

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In 2018, private equity firm Clayton, Dubilier & Rice celebrated its 40th anniversary and its 20th year under the leadership of CEO Don Gogel. In those decades, CD&R showed solid portfolio performance and generated strong returns for its investors—accomplishments attributed to its unique balance between operations and finance professionals. The firm made sure that, for every deal, it had both the finance and operations expertise to grow revenues, streamline operations, and truly turnaround distressed companies. But as CD&R entered into its fifth decade and its largest fund to date (nearly $10 billion AUM), competition, AUMs, industry "dry powder," and buyout valuations were all on the rise. Within CD&R, rapidly evolving technologies, talent retention, and the prospect of Gogel's retirement presented additional sources of pressure. Gogel and his team had to consider whether CD&R could maintain its unique identity and continue to add value as it had in the past in the face of such circumstances.

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No abstract available.

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No abstract available.

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A company commits to providing investors a 200% return on their investment if either the firm or its founder is investigated for corruption.

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