Category Archives: Original Article

How Professionals Adapt to Artificial Intelligence: The Role of Intertwined Boundary Work

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Abstract

The rise of artificial intelligence (AI) has generated extensive debates about the future of work in the professions. However, few studies take account of the potential for AI's disruptive effects to trigger robust defence by professionals of their interests and resources. By examining the adoption of AI in accounting and law professional service firms (PSFs), we show how professionals respond through intertwined boundary work, this being the process by which professionals respond to disruptions and protect interests and resources by engaging in multiple interdependent modes of boundary work. We also examine the way professionals collaborate with other groups as part of intertwined boundary work, and the implications for some key features of PSF organization. Our study reveals that the responses of professionals to AI are leading to new types of professional work and services. This means that rather than spelling the ‘end of the professions’, AI is leading to reconfigured forms of professional activity, jurisdiction, and PSFs.

To see is to believe: Corporate site visits and mutual fund herding

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Abstract

Using a unique data set of corporate site visits by mutual funds to Chinese firms listed on the Shenzhen Stock Exchange from 2013 to 2021, we find that firms with visits (more visits) are associated with lower mutual fund herding than those with no (fewer) visits. In addition, we demonstrate that mutual funds’ visits to a firm drive the change in their herding propensity by verifying hard information (e.g., the firm's technology, innovation, accounting, and finance information) and obtaining soft information (e.g., management's risk appetite, employee morale, and corporate culture). Furthermore, corporate site visits are found to strengthen herding's price impact without return reversals. Overall, our results are consistent with information cascade theory.

The Elites‐Mutual‐Attraction Effect: How Relative Reputation Influences Employee Flows between Organizations

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Abstract

In this study, we draw on signalling theory to examine the organization-level relationship between reputation and employee movement in and out of organizations. Focusing on organizations’ media reputations relative to their peers, we map all employee flows between organizational dyads in a population of English hospitals. We find support for our main argument that an organization's relative reputation predicts employee mobility above and beyond what can be explained by its absolute level of reputation. In particular, our findings suggest that the number of employees moving between two organizations is highest when both organizations have a high reputation. We refer to this as the elites’ mutual attraction effect (EMA-effect). We also find that the motives of voluntary leavers and geographical distance between two organizations influence the strength of this EMA-effect. Overall, this study shows that developing and testing dyadic theory can extend research on organizational reputation and collective turnover in meaningful ways.

Why Do Analysts use a Zero Forecast for Other Comprehensive Income?

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Accounting theory and accounting researchers stress the importance of clean surplus accounting and comprehensive income to corporate valuation. However, casual observation suggests that sell-side equity analysts routinely ignore other comprehensive income (OCI) in their forecasts and instead focus on forecasting earnings (before OCI). Using a sample of analyst reports, I first confirm that analysts normally omit forecasts of OCI or comprehensive income from their reports, consistent with analysts forecasting OCI as zero. I then predict and find that a zero forecast for OCI generally produces lower forecasting errors than alternative time-series models, such as a random walk or AR(1) model, suggesting a rational reason why analysts take this approach. Finally, I predict and find that although analysts’ point forecasts of future OCI are usually zero, their implied cost of equity estimates are consistent with analysts forecasting a positive variance for OCI.

How is the Illusio of Gender Equality in Entrepreneurship Sustained? A Bourdieusian Perspective

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Abstract

Studies of gender and entrepreneurship highlight the problematic emphasis of the gender equality discourse in entrepreneurship that ignores wider structural inequalities but provide a limited explanation of how the allure of this discourse is sustained. To address this lacuna, we draw on Bourdieu's theoretical ideas to theorize and demonstrate how certain women trade-off their capital endowments to compensate for gender inequality in entrepreneurship. Through an analysis of forty-nine biographical interviews with women entrepreneurs in London (UK), we show two forms that the ‘illusio’ of gender equality manifests: ‘illusio of work-life balance’, and ‘illusio of meritocracy’, and reveal how this doxic experience that escapes questioning and allows certain women to continue to play the game, entrenches the illusio of an entrepreneurial field free from gender bias. We thus illustrate the conditions of possibility and the various trade-off mechanisms through which gender inequality in entrepreneurship is reproduced or contested.

Analyst Research Activity During the COVID‐19 Pandemic

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This paper documents that, in response to the COVID-19 pandemic, analysts increase their research activity and significantly revise their forecasts when compared to the pre-pandemic period. Uncertainty-adjusted forecast errors are either comparable or smaller during the pandemic compared to the pre-pandemic period. Investor attention and price reactions to analyst forecast revisions are higher during the pandemic and the effect is stronger in periods where investors actively search for information about firms. During the pandemic, investors value analyst price discovery role more than their role in interpreting public information. Jointly, the results suggest that analysts play an important information intermediation role during the COVID-19 pandemic.

Catch Up with the Good and Stay Away from the Bad: CEO Decisions on the Appointment of Chief Sustainability Officers

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Abstract

Why do some chief executive officers (CEOs) appoint chief sustainability officers (CSOs) for their firms while others do not? We answer this question by examining CEOs' attention allocation to competition for stakeholders' approval, which can be triggered by both industry peers' corporate social responsibility (CSR) and corporate social irresponsibility (CSiR). An increase in peers' CSR triggers CEOs' attention allocation by observing that peers have improved and thus pose a competitive threat to their own firms. An increase in peers' CSiR triggers CEOs' attention allocation by perceiving that stakeholders will demand more for sustainability and thus place higher sanctions on their own firms in the future. CEOs' attention allocated to industry peers' CSR and CSiR, in turn, can increase their perceived importance and urgency of appointing CSOs for their firms to ‘catch up with the good’ (responsible peers) and to ‘stay away from the bad’ (irresponsible peers). We also theorize the moderating roles of CEOs' motivational attributes, such that predominantly prevention-focused CEOs are more (less) likely to appoint CSOs as peers increase CSR (CSiR), and future-oriented CEOs are more (less) likely to appoint CSOs as peers increase CSiR (CSR).

Acquisition Relatedness in Family Firms: Do the Environment and the Institutional Context Matter?

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Abstract

Research on the acquisition behaviour of family firms has produced conflicting theoretical arguments and mixed empirical findings on their propensity to acquire related or unrelated targets. While previous work has mainly focused on firm-level variables, this study examines the environment in which family firms operate and the institutional context where acquisitions take place. Drawing on the mixed gambles logic of the behavioural agency model, we theorize that family firms are more likely than nonfamily firms to undertake related acquisitions when they operate in uncertain environments to avoid losses to the family's current socioemotional wealth. However, family firms are more likely to undertake unrelated acquisitions, when the environment is uncertain but the target operates in a similar and more developed institutional context where prospective financial gains are more predictable. Overall, building on a sample of 1014 international acquisitions, our study offers important contributions to the literature on family firms and acquisitions.

Board Connections and Dividend Policy

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We examine the role of firm board connectedness in shaping a firm's dividend policy. We show that firms with well-connected boards not only have a higher likelihood of paying dividends in the pooled sample of both dividend payers and non-payers but also pay more dividends in the sample of dividend payers, compared with those with poorly connected boards. Further analysis reveals that the relation between board connectedness and dividend-paying behaviour tends to be economically stronger in firms pre-identified to have more severe agency conflicts, suggesting that well-connected boards tend to use dividends to mitigate agency problems in these firms. These findings are robust to different measures of board connectedness, different dividend payout measures, alternative estimation methods, and tests that account for endogeneity.

Stretch Goals, Factual/Counterfactual Reflection Strategies, and Firm Performance

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Abstract

Popular business press and academic publications have advocated for stretch goals, particularly to enhance firm performance. The general assumption is that stretch goals can create a more challenging task environment that upsets complacency, inspires motivation, encourages outside-the-box thinking, stimulates search and innovation, and guides efforts and persistence. Surprisingly few systematic empirical studies have been conducted to support stretch goal deployment, such as when and how to use them. This study introduces two reflection strategies – counterfactual reflection (managers confront performance feedback and create possible alternatives) and factual reflection (managers analyse their own decisions and explain performance feedback) – and uses two experimental laboratory studies to test how different reflection strategies contribute to the stretch goal-performance relationship. The results indicated that using stretch goals does not affect firm performance, although theoretically, using stretch goals can create a more challenging task environment and enhance performance. Rather, it is the combination of the type of goal and reflection strategy that affects performance. I suspect that under stretch goals, managers may be unable to implement new ideas as expected, leading to growing performance gaps and perceived continuous failures over time. Consequently, their motivation to search for alternative solutions declines, and they may fall into a spiral of self-constrained thinking. The results demonstrate that under stretch goals, managers use factual reflection strategies to deliberately reflect on performance feedback to achieve higher performance. In contrast, managers who are assigned moderate goals perform better if they use a counterfactual reflection strategy. I suggest that by using a different reflection strategy, managers can further improve performance by encouraging directed search behaviour and avoiding self-constrained thinking spirals. My study provides a richer theoretical and empirical appreciation of the effect of reflection strategy depending on the task environment and goal-setting.