Although store brands (SBs) are becoming increasingly important across the world, their success varies dramatically across consumer packaged goods categories and countries. The purpose of this paper is to provide insight into how such differences in SB success originate.
This paper develops a dynamic rational expectations model of the credit rating process, incorporating three critical elements of this industry: (i) the rating agencies' ability to misreport the issuer's credit quality, (ii) their ability to issue unsolicited ratings, and (iii) their reputational concerns.
In this paper, we study the effect of a firm’s local channel exits on prices charged by incumbents remaining in the marketplace. Exits could result in higher prices due to tempered competition or lower prices due to reduced co-location or agglomeration benefits. The net effect of these two countervailing forces remains unknown. In addition, little is known about how this effect could change depending on incumbents’ geographic locations.
Kenan Institute Executive Director Greg Brown, Director of Research Christian Lundblad and Senior Research Associate Philip Howard's research warns of the risks of investing in crowded hedge funds – particularly during periods of market distress. “The crowdedness of an equity position is an important ingredient for characterizing risk,” the trio wrote in their latest paper "Crowded Trades and Tail Risks."
The collapse of the securitization market during the 2007-2008 Financial Crisis resulted from investors’ concern with the value of securitized assets and securities issued by special purpose entities (SPEs). Research has shown that prior to the Crisis, investors valued equity of sponsor-originator banks (S-Os) as if there were an implicit guarantee extended to SPE creditors that would be fully honored. We predict that the Crisis caused investors to value S-O equity as if such guarantees would not be honored.
We model a dynamic economy with strategic complementarity among investors and government interventions that mitigate coordination failures. We establish equilibrium existence and uniqueness, and show that one intervention can affect subsequent interventions through altering public information structures. Our results suggest that optimal policy should emphasize initial interventions because coordination outcomes tend to correlate. Neglecting informational externalities of initial interventions results in over- or under-interventions.
This paper studies the emergence of debt financing by private equity funds. Using confidential data on U.S. buyout funds, we document the increasing use of subscription lines of credit (SLCs) as an additional source of capital.
Our briefing paper offers a perspective that centers on what we can reliably learn from the general direction of AI impacts on business change, rather than just speculate about. Only then can executives assess what AI points to for their firm’s development in its current and potential competitive ecosystem, leveraging its organization, technology and financial capabilities.
For African Americans and individuals from other historically underrepresented groups, work cultures can be difficult to navigate. In a new white paper, The Seven "What Matters" In a System Not Designed for Us, Urban Investment Strategies Center Director Jim Johnson draws upon his 40 years of experience in academia to offer strategies for individuals in these groups to thrive within work cultures that do not fully embrace and may even be antagonistic to diversity and inclusion.
This paper examines how US immigration-induced labor mobility frictions affect entrepreneurship and firm monopsony. I exploit a natural experiment in the US immigration system that unexpectedly increased Green Card (GC) related job-switching frictions for Indian and Chinese immigrants in October 2005. Using matched employee-employer data from LinkedIn, I confirm that this shock reduced inter-firm employee mobility for Indian and Chinese employees.
This paper explores the ups and downs of innovation and productivity growth in the US economy and potential connections to the ups and downs of business dynamism and entrepreneurship over the last few decades.
The behavioral response to public disclosure of income tax returns figures prominently in policy debates about its advisability. Although supporters stress that disclosure encourages tax compliance, policy debates proceed in the absence of empirical evidence about this, and any other, claimed behavioral impact.
How much should you trust your intuition about other people's job performance? Different literatures provide different answers to this question. Social psychological research on “thin slices” suggests that untrained observers can predict a person's job performance based on a few moments of observation.
Determining how best to route work is a key element of service system design. Not surprisingly then, many analytical models have identified various optimal routing algorithms for service operations management. However, in many settings, humans make routing decisions dynamically, either because algorithms don't exist, decision support tools have not been implemented, or existing rules are not enforced.
“Mega-threats”—negative, identity-relevant societal events that receive significant media attention—are frequent occurrences in society, yet the influence of these events on employees remains unclear. We draw on the theory of racialized organizations to explain the process whereby exposure to mega-threats leads to heightened avoidant work behaviors for racial minority employees.
The Biden administration's $2.3 trillion American Jobs Plan comes with a hefty price tag, which the president hopes to pay in part by introducing a 15% minimum tax on corporate book income. Predictably, policymakers from both sides of the aisle are sounding off, but the argument is more complicated and nuanced than partisan rhetoric. In this Kenan Insight, we outline the intricacies and implications of taxing book income.
Using a large sample of nonfinancial firms from 47 countries, we examine the effect of derivative use on firm risk and value. We control for endogeneity by matching users and nonusers on the basis of their propensity to use derivatives. We also use a new technique to estimate the effect of omitted variable bias on our inferences. We find strong evidence that the use of financial derivatives reduces both total risk and systematic risk. The effect of derivative use on firm value is positive but more sensitive to endogeneity and omitted variable concerns. However, using derivatives is associated with significantly higher value, abnormal returns, and larger profits during the economic downturn in 2001–2002, suggesting that firms are hedging downside risk.
The Wall Street Journal details how MIT economist and Kenan Institute Distinguished Fellow David Autor rose to become one of the most influential scholars studying the U.S. labor market today.
We clarify differences among moderation, partial mediation, and full mediation and identify methodological problems related to moderation and mediation from a review of articles in Strategic Management Journal and Organization Science published from 2005 to 2014.