Hofstra Horizons - Spring 2019

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CREATING NEW KNOWLEDGE Research at the Frank G. Zarb School of Business


president’s COLUMN

HOFSTRAhorizons Research and Scholarship at Hofstra University


ver the past decade, Hofstra’s national – and international – reputation has increased and at the center of its success is the University’s faculty. As a whole, research at Hofstra continues to expand. This year five faculty submitted proposals to the National Science Foundation’s Faculty Early Career Development Program. Also of note, Hofstra received a $1 million grant from the National Science Foundation for a research project headed by Assistant Professor Dr. Jessica Santangelo and her research team that aims to improve student success in the sciences. In this issue of Hofstra Horizons, we highlight the research of the faculty at the Frank G. Zarb School of Business. The Frank G. Zarb School of Business has, with leadership and input from our faculty, recently opened a new building, featuring a business research lab and an incubator and maker space, and are in the process of upgrading all of their classroom space. Our faculty’s equal commitment to excellent scholarship and classroom teaching are evident in their hands-on approach, and this approach makes a genuine difference in the lives of our students and the projects on which they work. Inside this edition are five scholarly articles by our business school faculty, on topics as varied as corporate governance, workplace relations, memory, Chinese family-run business and short selling. These articles serve as examples of how our faculty use excellent scholarship to connect to the professions, society and the global community. This is an exciting time for Hofstra University and the Frank G. Zarb School of Business. I hope you enjoy reading about the research of our faculty. Sincerely,

table of contents


Corporate Governance Research: How Financial Regulation Impacts Audit Committees and Annual Financial Reports


Race Relations in the Workplace: Investigating the “Angry Black Woman” Stereotype

Stuart Rabinowitz, JD President Herman A. Berliner, PhD Provost and Senior Vice President for Academic Affairs Robert Brinkmann, PhD Vice Provost for Scholarship and Engagement

Stuart Rabinowitz, JD President, Hofstra University

Sofia Kakoulidis, MBA Associate Provost for Research and Sponsored Programs Alice Diaz-Bonhomme, BA Assistant Provost for Research and Sponsored Programs


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provost’s COLUMN



Watch Out! Your Memories Shared on Social Media May Slip Away From Your Brain


Family Involvement, Environmental Turbulence, and R&D Investment: Evidence From Chinese Listed SMEs


Short Sellers: Harmful or Helpful to the Financial Markets?


Zarb Faculty Research

HOFSTRA HORIZONS is published annually by the Office for Research and Sponsored Programs, 144 Hofstra University, Hempstead, NY 11549-1440.

am pleased to introduce this special issue of Hofstra Horizons featuring the research and scholarship of the Frank G. Zarb School of Business faculty. I am always proud of the academic excellence and commitment evident in the scholarly work of our faculty but am also delighted to note their dedication to teaching excellence. In this issue, we see the wide range of scholarly initiatives that are pursued by our faculty. In the first article, Dr. Jack Castonguay discusses corporate governance research and the passage of the most recent laws of the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. In an educational piece by Dr. Daphna Motro, she and her team of researchers investigate the effects of stereotypes in the workplace. Her article, “Race Relations in the Workplace: Investigating the ‘Angry Black Woman,’ Stereotype,” examines the hurdles faced by black women at work because of socially and cultural reinforced stereotypes. The next article by Dr. Li Huang fills an important gap in research with her work on the impact of technology on consumer memories. In the following piece, Dr. Jieqiong Ma’s research examines the business relationship between research and development in China and family involvement. Finally, Dr. Dominique Outlaw details her recent study that focuses on the valuable information that may be gained by studying the behavior of short sellers. As the former dean of the Frank G. Zarb School of Business, I know these faculty well and admire and appreciate the quality of their work. The best faculty are scholar-teachers, leaders in their disciplines who recognize the importance of teaching and research. I am pleased to note that our faculty fulfill this role in an exemplary manner. I am proud to highlight their work in Hofstra Horizons. Congratulations to all our authors. Sincerely,

Each issue describes in lay language some of the many research and creative activities conducted at Hofstra. The conclusions and opinions expressed by the investigators and writers are their own and do not necessarily reflect University policy. ©2019 by Hofstra University in the United States. All rights reserved. No part of this publication may be reproduced without the consent of Hofstra University. Inquiries and requests for permission to reprint material should be addressed to: Editor, Hofstra Horizons, Office for Research and Sponsored Programs, 144 Hofstra University, Hempstead, NY 11549-1440. Telephone: 516-463-6810.

Herman A. Berliner, PhD Provost and Senior Vice President for Academic Affairs, Hofstra University

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Introduction from the Dean of the Zarb School of Business

Our faculty are the driving force behind all the innovative and successful programs at Zarb. Their commitment to student learning is unmatched, and their passions fuel our curriculum.


It is my distinct pleasure to share a small sample of the research conducted by our immensely talented faculty. This issue of Hofstra Horizons highlights the work of our newest faculty, demonstrating the breadth of interests within the various disciplines at Zarb. Examining topics such as current trends in business that affect performance, and workplace biases, each of the faculty represented in this issue focuses on a theme that is important to the world of business. Zarb is a top-ranked business school with a global perspective. Our approach to business education is rooted in experiential learning. Our recent partnership with IBM Global University will provide students with the opportunity to gain competencies in new technologies, such as AI, blockchain, and data sciences. This adds to the already robust hands-on learning opportunities at Zarb, including the Martin B. Greenberg Trading Room, the Student Managed Investment Fund, a dual-degree program with Dongbei University of Finance and Economics that includes a summer internship in China, and our global entrepreneurship courses. Moreover, Zarb offers a co-op option for MBA students seeking organizational experience.


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Research and Scholarship at Hofstra University

It is an exciting time for the Frank G. Zarb School of Business. We recently moved into our new home — a 52,000-square-foot building that was intentionally designed to enhance student learning through innovative hands-on facilities and dedicated space for student organizations, study space, and student lounge space. Equipped with a state-of-the-art behavioral research lab, students get to work with cutting-edge technology, including eye-tracking software and facial analysis, to better understand human behavior and its impact on business strategy. In addition, the building houses a 5,000-square-foot incubator space, and an innovative makerspace furnished with the latest tools to create prototypes for new business ideas. All Zarb students take an entrepreneurship class working with faculty and entrepreneurs-in-residence — providing further experiences to enhance their creativity. Our new building meets LEED standards, thereby keeping with our commitment to environmental stewardship. Everything we do at Zarb is focused on preparing the business leaders of tomorrow to successfully meet the challenges that lie ahead. I trust you will enjoy reading the articles in this issue, and I invite you to further explore all that Zarb has to offer at business.hofstra.edu.

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Corporate Governance Research:

How Financial Regulation Impacts Audit Committees and Annual Financial Reports John “Jack” Castonguay, PhD, CPA, Assistant Professor of Accounting, Taxation, and Legal Studies in Business, Frank G. Zarb School of Business, Hofstra University What is corporate governance research? As an accounting professor who focuses on corporate governance research, I’m frequently asked, “What is corporate governance research and how does that relate to accounting?” I often find myself answering these questions in sports-related terms. Corporate governance research is like assessing the coaching staff of your favorite baseball team. If the team pitches well, scores runs, and wins the game, the players on the field get the credit and fans don’t think twice about the coaches. However, if the coaches put a player on the field out 6

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of position, use a pitcher late in the game who is tired and doesn’t have full arm strength, or gets a runner thrown out on the basepath, fans forget about the players and focus their ire on the coaching staff for their failure to execute game strategy. This is similar to how the corporate governance of public companies is studied. The CEO and employees of the company are akin to the star player and the rest of the team, while the board of directors and various committee members are the coaching staff. Given that dynamic, most people rarely think about the boards of

directors of their favorite companies. That is, until the board fails to execute the company’s strategic business plan or fails to monitor the chief executive officer or chief financial officer. The highest profile failures lead to investor responses and regulations that can change the governance landscape for all companies. Corporate governance failures at Enron and WorldCom precipitated the passage of the Sarbanes-Oxley Act of 2002 (SOX), while corporate governance lapses and operational oversights at U.S. financial institutions led to the passage of the Dodd-Frank Wall Street Reform and Consumer


Protection Act in 2010 (Dodd-Frank). These laws and regulations are often reactive and come as a response to errors, omissions, or oversight failures on the part of individual companies. Their wide-ranging implications for all public companies – not just those that necessitated the regulation or who had governance problems leading up to the regulation – provide an opportunity for corporate governance researchers to help provide guidance on which part of the laws were effective, which have failed to improve governance, and what residual effects or unintended outcomes the laws have had. Essentially, what happened as a result of the legislation?

Financial Regulation and the Quality of Annual Reports Corporate governance, via the audit committee of the board of directors, plays a key role in the quality of information that is presented to shareholders and investors. Investors use the financial statements filed by public companies – the balance sheet, income statement, and statement of cash flows – to make informed decisions on whether to buy or sell a company’s stock. If the information is inaccurate or incomplete, it can lead to the investor making a suboptimal investment decision and cause them financial harm through a depressed stock price. I find that between 2004

Step 1: Financial statements are prepared by management (CEO, CFO, etc.).

and 2014 approximately 9.7 percent of annual financial statements contained inaccurate or incomplete information, and were restated and refiled with updated information (Castonguay, 2019). For this to have happened, the board members on the audit committee likely failed to sufficiently monitor and oversee the financial reporting process (Figure 1). It is true that it is the job of the company management, through the CEO and CFO, to prepare the financial statements in accordance with Generally Accepted Accounting Principles. And it is the external auditors’ job to assess evidence to support the information contained within the statements. It is the audit committee that is responsible for designing a system of safeguards and processes to identify any inaccuracies or omissions in the financial statements before they are sent to the public. The audit committee is the de facto last line of defense. The first of the major financial regulations that occurred during the 2000s, SOX, had the most significant effect on the financial reporting process and formally established the corporate governance process used to monitor financial statement presentation. SOX established strict new guidelines for the audit committee, the committee within the

Step 2: Auditor audits the statements, proposes adjustments, and issues an opinion.

Corporate governance research is like assessing the coaching staff of your favorite baseball team.

board of directors that is tasked with overseeing the financial statements submitted to the Securities and Exchange Commission and used by the investing public (institutional and retail investors). The law mandated that the audit committee must be fully independent (the CFO can’t sit on the audit committee even though he can sit on the overall board), be solely responsible for the selection and appointment of the company’s financial statement auditor, and serve as the sole fee negotiator – essentially removing the CEO and CFO from the external audit process (U.S. House of Representatives, 2002). The independence requirement, coupled with the requirement that the board designate a financial expert (i.e., CPA, financial manager, former CFO, etc.), led to fewer and

Step 3: Audit committee reviews the statements and settles any disputes between management and the auditor.

Step 4: Statements are filed with the Securities and Exchange Commission and are made available to the public.

Figure 1: Public company financial statement issuance process Hofstra HORIZONS t Spring 2019



Figure 2: The effect of overboarding/busyness on the quality of financial reports by time period Time Period

Effect of Overboarding on the Quality of Annual Reports

Parties That Positively Aided Monitoring

2004 to 2007 (Post-SOX to Financial Crisis)



2008 to 2009 (Financial Crisis)

No relation

2010 to 2014 (Post-Financial Crisis)


Auditor & Audit Committee

fewer directors meeting the legal definition to serve on the committee. Because of that, many audit committee members now serve on multiple other boards and multiple other audit committees. This has led to concerns from shareholders and proxy advisors, who advise shareholders on how to vote their shares, that directors are serving on too many other boards and are unable to spend the time and resources necessary to effectively do their jobs as the “coaches.” Accordingly, one of the largest proxy advisors in the U.S., Institutional Shareholder Services (ISS), has lowered its bar for what it considers an “overboarded” or busy director. ISS now proposes that shareholders vote against or withhold votes for any director who sits on more than five corporate boards – down from a previous threshold of six or more boards (Institutional Shareholder Services, 2017). The concern is that multiple board seats divides a director’s focus and doesn’t allow for their full attention to any one commitment.

Does overboarding impair financial report quality? Bolstering the ISS recommendation to limit the number of board seats on which audit committee members may


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serve, prior research finds that in the period directly after the passage of SOX, more overboarded audit committees had more material financial statement errors and more instances of restated financial statements than committees that were less overboarded (Sharma and Iselin, 2012). Sharma and Iselin find that audit committees composed of members that serve on multiple other boards were too busy (i.e., overboarded) to apply the appropriate level of monitoring to the companies they served. Their multiple job commitments prevented more overboard audit committees from devoting the necessary amount of time to each board, leading to lower-quality financial statements and more restatements. In the short run, SOX potentially created a bottleneck of work as audit committee members had a new slate of regulations to follow and new job responsibilities to attend to, and were subject to increased pressure and scrutiny from investors to avoid being the next major public company to collapse around governance failures (Sherman, Carey, & Brust, 2009). My research finds some support for this bottleneck notion in the initial years directly following the implementation

of SOX. Using a larger sample than previously studied and one that extends over a 10-year period, I find that in the immediate aftereffect of SOX, more overboarded audit committees had to rely more heavily on their auditor to aid in the monitoring process. Also, more overboarded audit committees were more likely to switch from a small or mid-tier auditor to a Big-4 auditor (PwC, EY, Deloitte, and KPMG) and were more likely to pay their existing auditors more in fees in the instances where they did not elect to switch. Put simply, more overboarded audit committees transferred some of the work required to monitor the financial statements to the external auditor. By having the auditor perform additional work through the performance of more extensive tests of details or increasing the sample size and confidence level of statistical testing, or by employing an auditor with more resources, more overboarded audit committees recognize that their multiple board commitments could potentially make it more difficult to perform their oversight duties. In the years immediately following SOX, these actions led to more overboarded audit committees having lower misstatement rates than less overboarded committees – a finding that runs counter to prior literature but supports the belief of approximately two-thirds of current audit committee members (KPMG, 2015). More overboarded audit committees use their role as the only company representatives permitted to negotiate with the auditor to protect their reputations and maintain high-quality financial statements. By transferring monitoring from the committee to the external auditor, their busyness/overboarding not only is unproblematic, but it can lead to positive outcomes with respect to the quality of their company’s annual financial statements.


Expanding upon these results, I find that since getting through the initial learning period directly after the legislation’s passage, and since the financial crisis of 2008, more overboard audit committees no longer need to rely on the financial statement auditor to help them monitor the annual financial reports. As they have moved farther away from the passage of SOX and through the worst years of the financial crisis, more overboarded committees are able to monitor the quality of the annual report on their own, without having to pay their auditor more as a substitute for their own monitoring capabilities. In fact, the public companies that have more overboarded audit committees have higher-quality annual reports than companies with less overboarded audit committees via lower restatement levels, regardless of the level of auditor involvement. Those that continue to engage the auditor to perform more work still benefit from the additional involvement. For those that do not engage the auditor for more work, their overboarding has not negatively affected their ability to meet their corporate governance responsibilities and objectives despite concerns from some investors and proxy advising firms. Audit committees composed of directors who had other commitments at first recognized the need for more monitoring from the external auditor.

Since then, their drive to preserve their reputations and prospects for other future board seats has led them to apply an additional level of monitoring and oversight effort that leads to high-quality financial statements (Fama and Jensen, 1983). Either way, the companies they serve do not suffer from their other board commitments.

Conclusion Audit committees are the coaches of the financial statement team. With oversight duties mandated by SOX, they are the last line of defense when deciding what information is released to shareholders. This important responsibility led to some worries that if audit committees held other outside board seats, they would become overboarded and unable to properly monitor the financial statements that their companies issued. I find that more overboarded audit committees initially addressed this concern by contracting with the financial statement auditor – using the auditor as a substitute for their monitoring, leading to higher-quality reports. Since then, more overboarded audit committees have learned to adjust to their revised regulatory environment and are associated with better-quality annual reports regardless of the level of auditor involvement. SOX added more work for audit committees; more overboarded audit committees learned

how to respond despite their additional commitments.

References Castonguay, J. (2019). The long-run implications of audit committee overboarding on auditor contracting and financial reporting quality in the decade following SOX. Working paper. Fama, E. F., & M. C. Jensen. (1983). Separation of ownership and control. Journal of Law & Economics 26 (2):301-325. Institutional Shareholder Services. Director Overboarding (US) (2017). [cited]. Available from https://www. issgovernance.com/file/policy/2017americas-iss-policy-updates.pdf. KPMG. (2015). 2015 Global Audit Committee Survey. Montvale, NJ: KPMG. Sharma, V. D., & E. R. Iselin. (2012). The association between audit committee multiple-directorships, tenure, and financial misstatements. Auditing – A Journal of Practice & Theory 31 (3):149-175. Sherman, H. D., D. Carey, & R. Brust. (2009). The audit committee’s new agenda. Harvard Business Review 87 (6):92-99. U.S. House of Representatives (2002). Sarbanes-Oxley Act of 2002. In Public Law No. 107-204. Washington, D.C.: Government Printing Office.

John “Jack” Castonguay is an assistant professor in the Accounting, Taxation, and Legal Studies in Business Department in the Frank G. Zarb School of Business at Hofstra University. He holds a PhD in accounting from the University of Tennessee. He completed his undergraduate studies and master’s degree in accounting from James Madison University. Dr. Castonguay is an active licensed CPA in the state of Virginia and previously worked as an auditor for a public accounting firm before returning for his doctoral studies. His primary research interests include corporate governance, financial regulation, and ethics in accounting practice. His personal interests include reading political and historical nonfiction, watching the Yankees, and running marathons.

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Race Relations in the Workplace: Investigating the “Angry Black Woman” Stereotype Daphna Motro, PhD, Assistant Professor of Management and Entrepreneurship, Frank G. Zarb School of Business, Hofstra University The official definition of a stereotype is a person’s generalized and widely accepted belief about the personality of members of another group (Taylor & Stern, 1997). From a young age, most of us are taught that stereotypes are prejudiced and inaccurate, and that we shouldn’t judge people based on surface characteristics (e.g., race, gender, age). However, research in the field of psychology and organizational behavior has consistently shown that doing that is much easier said than done. In fact, many people are influenced by stereotypes even though they may not think they are. 10

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For example, research shows that there is a widespread stereotype that black men tend to be more violent than white men. As a result, studies have found that an elbow nudge by a black man is more likely to be interpreted as a violent shove, while an elbow nudge by a white man is more likely to be interpreted as a jovial push (Thagard & Verbeurgt, 1998). My colleagues and I wanted to investigate the power of stereotypes even further to see if people really are influenced by certain stereotypes, even though they may think they aren’t. More specifically,

we wanted to explore the effects of stereotypes in the workplace – where we spend so much of our time. If we find that there is a stereotype present that negatively affects our perceptions, it is important to inform managers and practitioners of our findings. By making employees aware of this stereotype and its effects on our behavior, we hope that employees, managers, and supervisors are better equipped to navigate around it.

The Stereotype of the “Angry Black Woman” One stereotype that has long permeated mainstream culture –


but has not been studied in the workplace – is that of the angry black woman, or the notion that black women tend to be hostile, aggressive, overbearing, illogical, and bitter (Ashley, 2014). This stereotype has also been referred to as the “matriarch” or “sapphire” stereotype. It depicts an aggressive, unfeminine black woman who continuously emasculates her black male partner (who then refuses to stay with her), leaving her to tend to her children alone in poverty (WalleyJean, 2009). The stereotype of the angry black woman is rooted in the institution of slavery in the United States. It oversimplifies the image of the black woman who refused to conform to the era’s expectations of being a hardworking and submissive worker. According to several researchers, the unrelenting array of cultural and social injustices toward black women has inevitably manifested, at least partly, as anger (Applebaum, 2013). The stereotype of the angry black woman has subsequently been reinforced across several different forms of media, including radio, text, television, and films (Cheers, 2017). For instance, the stereotype of the angry black female matriarch first appeared on television in the 1950s show Amos ’n’ Andy as a character named Sapphire. Today, many reality television shows include a token angry black female character who is expected to entertain the audience with her irrational anger and hostility. In addition to cultural evidence, academic research attests to the presence of the angry black woman stereotype. For example, Weitz and Gordon (1993) found that undergraduate white participants (but not black participants) were more likely to characterize black women (as opposed to American women, in general) as loud, talkative, and

aggressive. In addition, Salerno, Peter-Hagene, and Jay (2017) examined the interrelated roles of gender, race, and anger in a group mock jury decision-making task. The researchers found evidence of the angry black woman stereotype: Participants reported that anger was significantly more stereotypical for black women compared to white women. While the existence of this stereotype has received empirical support in other fields, it has not yet garnered attention among organizational scholars. To fill this gap, we wanted to see whether the stereotype of the angry black woman manifests in one important workplace context – performance feedback sessions.

Examining Stereotypes in the Context of Performance Feedback If we wanted to examine the role of the angry black female stereotype in the workplace, we needed to test it in a specific situation. We chose the performance feedback context – in which a supervisor delivers feedback to an employee – because providing regular performance feedback is considered a critical activity for company leaders. Feedback enables employees to more effectively regulate performance through goal-setting, by reinforcing job-relevant behavior and fostering awareness of discrepancies between one’s goals and one’s performance. Feedback provides employees with information on how to achieve their personal and professional goals by indicating desired and undesired behaviors. Feedback is an essential task for most supervisors. In fact, one of the primary functions of human resource managers is to deliver performance feedback. Although performance feedback is viewed as an essential managerial activity, it often represents an emotion event for employees, particularly when

... studies have found that an elbow nudge by a black man is more likely to be interpreted as a violent shove, while an elbow nudge by a white man is more likely to be interpreted as a jovial push.

the feedback is unfavorable (Ilies, De Pater, & Judge, 2007). Receiving criticism is difficult and can result in a variety of negative emotions, including anger. However, not all anger is perceived equally. Reactions can be influenced by the characteristics of the person getting angry, such as the person’s race. We hypothesize that observers will react more harshly to an angry black woman than to an angry white woman during a performance evaluation because of the angry black woman stereotype embedded in American society (Jordan-Zachery, 2017). More specifically, we argue that individuals are more likely to attribute a black woman’s anger to her personality (as opposed to something about the external situation, such as out-of-date policies), thereby reflecting a Hofstra HORIZONS t Spring 2019



Our results suggest that black women are evaluated more harshly than white women for displaying the same anger in reaction to negative performance feedback, likely due to the socially reinforced angry black woman stereotype.

fundamental aspect of who the employee is as a person. As anger is not regarded as a very desirable characteristic in the workplace, we expect this attribution to have detrimental consequences for black female employees in terms of poorer performance evaluations, lower assessments of leadership capability, fewer reward recommendations, and worse job recommendations by those who observe the employee’s reaction.

Methodology In order to test our predictions, we ran an experiment using 188 students (Figure 1). The average age was 20.9 years. Students were informed that they were going to watch a video recording of a performance evaluation.


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They were instructed to imagine that they were the direct supervisor giving the performance evaluation, with the expectation that afterwards they would be asked questions about the employee who received the feedback. Before watching the video, participants read a copy of the CV for a female grocery store manager named Jordan. Jordan was described as a “resourceful grocery store manager with great experience in directing and managing store staff.” It also listed her qualifications (e.g., knowledge of inventory management and merchandising practices), professional experience (e.g., assistant manager), awards (e.g., Employee of the Month), and education (bachelor’s degree in business administration). Participants were then asked to watch a video of Jordan receiving performance feedback from her direct supervisor, who was always the same male.

(“Jordan – General Manager”) and a white button-down shirt. The direct supervisor, who was a white male, sat across the table from her and gave the performance feedback. Only a small part of the back of the supervisor’s head was visible so that participants never saw his face. The script for all four videos was identical. Each video began with a short introduction in which the direct supervisor explained to Jordan the process of performance evaluations. He then offered Jordan the chance to judge her own performance over the past six months. After this, the direct supervisor told Jordan that her performance as general manager has been unsatisfactory and stressed that she had not achieved the goals that upper management had set for her. In the anger display videos, Jordan’s tone increased drastically, and she started to shout and yell at the direct supervisor. Her nonverbal behavior changed as well. She would furrow her brow,

Two actresses, both university students in their early 20s, auditioned and were selected to play the role of Jordan. Both were Figure 1: majoring in drama and Video Recording of a Performance Evaulation had significant experience in theater and Participant Demographics: acting. One actress was Variables n % white (non-Hispanic) and the other was black Gender (Figure 2). The same Male 95 50.5 actress played Jordan for both the anger display Female 93 49.5 and neutral display Total 188 100 videos. The four videos, each approximately five Ethnicity minutes long, were White Non-Hispanic 104 55.3 filmed and edited by a professional African-American/Black 8 4.3 videographer. They were Hispanic 40 21.3 staged in such a way that the camera was always Asian 28 14.9 focused on Jordan, who Other 8 4.2 was sitting at a table and Total 188 100 wearing a name tag


Figure 2: Shots from the performance feedback videos. Both females are actresses playing the role of Jordan, who reacts angrily to negative feedback delivered by her supervisor.

bang her fists down on the table, throw her hands up in outrage, and shift frequently in her seat. She became increasingly more agitated as the video went on. In the neutral conditions, she would make the exact same statements, but keep her tone even and gestures minimal. The video ended after the direct supervisor told Jordan that she could leave the room. Following the video, participants answered questions about Jordan’s personality, and then provided their (a) performance evaluations, (b) assessments of leadership capability, (c) reward recommendations (e.g., bonus, promotions), and (d) a letter of recommendation. For example, to measure perceptions of personality, participants were asked “Is the cause of Jordan’s reaction something that reflects an aspect of Jordan or reflects an aspect of the situation?” on a scale from (1) reflects an aspect of the situation to (9) reflects an aspect of Jordan. Another question was “Overall, how would you rate this employee’s performance over the past year?” and was rated on a scale from (1) poor to (7) excellent.

We examined our results using univariate statistical analyses (Figure 3). We found that participants were more likely to say that Jordan’s anger was a result of her personality when Jordan was black, but not when she was white. This attribution then led to lower performance evaluations, assessments of leadership capability, and reward recommendations, and meaner letters of recommendation. Interestingly, the results did not change based on the participant’s gender, race, or age, meaning that the same stereotype held for everyone. Thus, our findings indicate that the stereotype of the angry black female is present in our society, and can negatively affect everyone’s behaviors toward her.

What Do These Findings Mean for the Workforce? Our results suggest that black women are evaluated more harshly than white women for displaying the same anger in reaction to negative performance feedback, likely due to the socially reinforced angry black woman stereotype. Prior research has indicated that once individuals are made aware of different biases and stereotypes that

they may hold, they are more likely to recognize them in real situations, and then less likely to succumb to their influence. For instance, Costa, Peroni, Camargo, Pasley, and Nardi (2015) conducted a study on prejudice awareness in a sample of more than 8,000 students in Brazil. They found that most students were unaware of discrimination against LBGT students in the university. The researchers found that students who had attended training sessions on LBGT discrimination (via lectures or extracurricular activities) were significantly less prejudiced than those who had not attended such sessions. As most people want to hold a positive view of themselves, making individuals aware of any potential stereotypes they hold could lead to more careful control of behavior when confronted with those stereotypes. This awareness could thus lead to a reduction in prejudiced responses. By bringing conscious attention to the stereotype of the angry black woman (e.g., through anti-discrimination training sessions), and how individuals are more likely to attribute a black woman’s anger to internal characteristics as opposed to a white

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Figure 3: Cause of Anger

7.75 ____________________________________________________________ 7.5 ____________________________________________________________ 7.25 ____________________________________________________________ 7.0 ____________________________________________________________ 6.75 ____________________________________________________________ 6.5 ____________________________________________________________ 6.25 ____________________________________________________________ Angry Neutral

woman’s anger, it may be possible to mute the impact of this stereotype on individuals’ perceptions and behaviors. In addition, our results suggest that if black women express feelings of anger, they may be inadvertently setting themselves up for disadvantageous observer reactions. One other way to confront this problem is by suppressing or hiding any feelings of anger. Emotion suppression is defined as the conscious attempt to inhibit the expression and experience of emotions, and requires the exertion of selfcontrol. While emotional suppression could prevent certain outcomes in the short term (e.g., lower performance evaluations), it might have negative consequences in the long term. If black women continuously exert more self-control than white women, this could be particularly damaging, since a large body of research has associated the depletion of self-control with negative outcomes such as lower performance (Muraven, Tice, & Baumeister, 1998). Thus, we suggest that the best direction forward is educating employees about the angry 14

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black woman stereotype, the potential biases that we identified, and how its effects can generate harmful consequences for black female coworkers. It is also important to note that we focus on the angry reactions of black women as opposed to black men. Anger is often classified as either verbal or physical, with verbal anger including actions such as swearing and demeaning comments, and physical anger referring to actions such as throwing objects and striking coworkers. While there does exist a stereotype of an angry black male, it often portrays the male as physically dangerous and violent (Shapiro et al., 2009). The type of anger we examine in the present context is verbal. Therefore, the stereotype of the angry black woman as hostile and illtempered is significantly more relevant here than that of the angry black male. We expect that the present situation is not extreme enough to activate the stereotype of the angry black male. If the stereotype of the angry black male is not activated, then it significantly

This graph shows the extent to which participants see the cause of Jordan’s anger as internal or external. The higher the number is on the y-axis, the more participants believe Jordan’s anger is caused internally by her personality. The four groups depicted in the graph refer to the four versions of Jordan in the videos. As you can see, perceptions of internal causality are highest when Jordan is an angry black woman.

t Black t White

limits the amount of variance that gender can account for in perceptions of behavior.

Conclusion Black employees have to overcome myriad hurdles at work based on the color of their skin. For black women, our research indicates that there may be additional considerations when identifying bias at work. Anger is an emotion that employees may display in a variety of work contexts, often stemming from a perceived injustice. Bolstered by cultural reinforcement, the stereotype regarding the angry black woman can affect how individuals view displays of anger at work. In our study, angry black women were seen as lower performers, less capable leaders, deserving of fewer rewards, and warranting a more negative letter of recommendation. The angry black woman stereotype represents another hurdle for black women, and we urge future research to expand upon our understanding of the effects of such perceptions on black women at work.


References Applebaum, B. (2013). Vigilance as a response to white complicity. Educational Theory, 63, 17-34. Ashley, W. (2014). The angry black woman: The impact of pejorative stereotypes on psychotherapy with black women. Social Work in Public Health, 29, 27-34. Cheers, I. M. (2017). The evolution of black women in television: Mammies, matriarchs and mistresses. New York, NY: Routledge. Costa, A. B., Peroni, R. O., de Camargo, E. S., Pasley, A., & Nardi, H. C. (2015). Prejudice toward gender and sexual diversity in a Brazilian public university: Prevalence, awareness, and the effects of education. Sexuality Research and Social Policy, 12, 261-272. Ilies, R., De Pater, I. E., & Judge, T. (2007). Differential affective reactions to negative and positive feedback, and the role of self-esteem. Journal of Managerial Psychology, 22, 590-609.

Jordan-Zachery, J. S. (2017). “I ain’t your darn help”: Black women as the help in intersectionality research in political science. In M. Mitchell & D. Covin (Eds.), Black women in politics: Identity, power, and justice in the new millennium (pp. 19-30). New York, NY: Routledge. Muraven, M., Tice, D. M., & Baumeister, R. F. (1998). Self-control as a limited resource: Regulatory depletion patterns. Journal of Personality and Social Psychology, 74, 774-789. Salerno, J. M., Peter-Hagene, L. C., & Jay, A. C. (2017). Women and African Americans are less influential when they express anger during group decision making. Group Processes & Intergroup Relations, https://doi. org/10.1177/1368430217702967.

Taylor, C. R., & Stern, B. B. (1997). Asian-Americans: Television advertising and the “model minority” stereotype. Journal of Advertising, 26(2), 47-61. Thagard, P., & Verbeurgt, K. (1998). Coherence as constraint satisfaction. Cognitive Science, 22, 1-24. Walley-Jean, J. C. (2009). Debunking the myth of the “angry Black woman”: An exploration of anger in young African American women. Black Women, Gender & Families, 3, 68-86. Weitz, R., & Gordon, L. (1993). Images of Black women among Anglo college students. Sex Roles, 28, 19-34.

Shapiro, J. R., Ackerman, J. M., Neuberg, S. L., Maner, J. K., Vaughn Becker, D., & Kenrick, D. T. (2009). Following in the wake of anger: When not discriminating is discriminating. Personality and Social Psychology Bulletin, 35, 1356-1367.

Daphna Motro is an assistant professor in the Management and Entrepreneurship Department in the Frank G. Zarb School of Business at Hofstra University. She earned a PhD in management & organizations from the University of Arizona Eller College of Management. She graduated from the University of Virginia with a BA in cognitive science with highest distinction. Her research examines how experiencing emotion and expressing emotion affect several organizational outcomes, such as ethics, motivation, cooperation, perceptions of leadership capability, and performance evaluations. She is also interested in how gender and race affect employee perceptions. Her work has been published in many peer-reviewed journals, including the Journal of Applied Psychology, Journal of Business Ethics, Journal of Experimental Social Psychology, Psychonomic Bulletin & Review, Academy of Management Proceedings, Journal of Occupational and Organizational Psychology, and the International Journal of Conflict Management. Her work has been featured in outlets such as UA Now and The Psychonomic Society. Dr. Motro teaches business ethics and organizational behavior at the MBA level. In her classes, she emphasizes how to excel as a manager with integrity, and cultivate advanced leadership skills.

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Watch Out! Your Memories Shared on Social Media May Slip Away From Your Brain Li Huang, PhD, Assistant Professor of Marketing and International Business, Frank G. Zarb School of Business, Hofstra University Abstract Despite consumers increasingly sharing experiences via technology (e.g., Facebook), little is known about how technology characteristics (e.g., anthropomorphism) affect consumer memories. Three studies have shown that sharing identityrelevant (vs. neutral) memories on an anthropomorphized technological platform induces memory decay, because of outsourcing the memories to this humanized partner. You share your meaningful personal lives on social media (e.g., Facebook, Twitter, Instagram, etc.) every day. Do you remember what you shared on these technological platforms? What will happen if you think you 16

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remember something that you actually don’t? This research is about how anthropomorphic perceptions of technology affect consumers’ digitally shared memories. Consumers have experienced an explosion of technology-mediated sharing (Protalinski, 2011), with 40 percent of online conversations composed of sharing identity-relevant experiences that help reinforce consumer identities, for example, watching a university football game (Tamir & Mitchell, 2012). This explosive growth in sharing is predicted to attract increasing investments ($74.9 billion by 2021 – Allen, 2017) by firms battling to attract consumers to their sharing

platforms. Firms have uniformly tended to attribute mostly positive outcomes to anthropomorphism, leading to widespread use of anthropomorphic strategies on social media sites. For example, Facebook’s “On This Day” reminder positioned itself as a familiar, caring friend. Despite this proliferation in sharing via technology, research on technology’s effects on human perceptions and reactions is sparse (Shen, Zhang, & Krishna, 2016). Hence, our research aims to understand how consumer perceptions of technological sharing platforms (humanized vs. objectified) can change memories for the shared information.


Consumers frequently interact with technology systems such as retail websites (Wang et al., 2007), cell phones (Hudson et al., 2016), and tablet computers (Wang & Nelson, 2014) in ways similar to interpersonal interactions, and have been known to develop quasi-interpersonal relationships with nonhuman entities such as brands and products (Aaker, 1997). Since interpersonal relationships in the human realm can lead to cognitive interdependence where partners rely on each other to remember specific cognitions or information, we suggest that similar dependence may occur with humandigital relationships, such that humans rely on technological partners to retain meaningful memories. Recent research shows that sharing experiences with close-relationship partners (e.g., spouses) can lead to a phenomenon known as memory outsourcing, where memories of shared experiences are attenuated since the close partner is expected to remember the information (i.e., “If my friend will remember, I can forget”– Huang & Rajagopal, 2017). We extend these findings to digitally mediated sharing environments and suggest that sharing information with technological partners like Facebook can also attenuate memories of the shared information.

Critically, we also identify two moderators to this effect – the type of information shared (identity relevance) and the degree of anthropomorphism of the technological partner. Thus when sharing identity-relevant (neutral) experiences, consumers are more likely to forget (remember) details as the degree of perceived humanness of the technological partner increases. That is, the more important memory (i.e., identity memory) you share on a technological platform (i.e., Facebook), the more likely you will forget it if the platform is perceived to be humanlike. We conducted three studies to test our propositions. In Study 1, we contrasted human and non-human sharing partners to find that identityrelevant memories attenuate when shared with human partners as compared to non-human partners. In Study 2, this memory advantage for technology is attenuated when the technology is anthropomorphized, and, in Study 3, this attenuation is negated when the anthropomorphized technology is positioned as a servant, rather than a partner. In Study 1, 293 MTurk workers participated in a 2 (identity relevance: high vs. neutral) x 3 sharing partner (best friend, Facebook, no-sharing) between-subjects study for monetary

Best Friend

Best Friend


5 4

5.85 4.87



4.48 3.78



3 2

2 0



6.83 6.08

6 4



Corrected Recognition of the Travel Experience. An analysis of variance revealed a main effect of sharing




After the scenario, participants were provided photos about their experience and asked to share their experience with their best friend (or on Facebook) or asked to write a description of a movie they watched recently (control). After some filler tasks, we measured recognition memory for the travel experience, and identity-linked brand promotions. The experience recognition measure required respondents to select details about the travel experience from a set of 24 statements (12 true and 12 false). Corrected recognition was computed by subtracting false recognition from true recognition (Dalton & Huang, 2014). The corrected hits of identity-linked promotion were computed by correctly identifying old as old – falsely identifying new as old.

Study 1: Corrected Recognition of Identity-Linked Promotions

Study 1: Corrected Recognition of Travel Experience 10

compensation. An American identity was made salient (vs. not) in a travel experience to Hong Kong. All participants were exposed to this travel scenario, recording a one-day detailed travel schedule (e.g. when, where, and what they did) with photos of tourism spots. In the scenario, participants received a visitor’s guidebook containing coupons for 12 brands (6 American and 6 international brands).

1 Identity Relevant P<.001

Control P<.001


Identity Relevant P<.001

Control P<.001

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Study 2: Corrected Recognition of Travel Experience 10

Study 2: Attitude Confidence Best Friend Anthropomorphized Objectified

8 6.23

6 4



5.29 5.25 5.32



2 Identity Relevant p<.001

Control P>.18

partner (F (1,287) = 4.24, p < .02) and a significant interaction between the sharing partner and identity relevance on the corrected recognition of the travel experience (F (2, 287) = 15.6, p < .001). When the experience was identity-neutral, participants remembered more details when sharing with a best friend as compared to sharing on Facebook (p < .10) or control (p < .01) (M best_friend = 6.83, MFacebook = 5.85, Mno-sharing = 4.87; F (2, 287) = 5.99, p < .01). When the travel experience was identity relevant, participants forgot more details of the experience after sharing it with a best friend as compared to Facebook (p < .001) or not sharing (p < .01) (M best_friend = 4.18, MFacebook = 7.15, Mno-sharing = 6.08; F (2, 287) = 14.5, p < .001). Interestingly, after sharing the identityrelevant travel experience on Facebook, participants’ memories were enhanced rather than decayed as compared to no-sharing (p < .06). Corrected Hits of Identity-Linked Promotions. Twenty-four brand coupons (6 old plus 6 new American brand coupons and 6 old plus 6 new international brand coupons) were randomly displayed (one per page), and participants identified all the coupons that they recalled seeing in the travel 18

5.69 4.85 5.15



2 0

Best Friend

6 5

5.78 5.64



Hofstra HORIZONS t Spring 2019


Identity Relevant p<.01

experience (visitor’s guidebook). Corrected hits of identity-linked promotions was computed by subtracting the numbers of new American brand identifications from the numbers of old American brand identifications. There was a significant main effect of sharing partner (F (1,287) = 3.27, p < .05) and an interaction between the sharing partner and identity relevance on corrected hits of identity-linked promotions (F (2, 287) = 16.2, p < .001). The simple main effect of sharing was significant when the brand promotions were identity neutral (Mbest_friend = 4.48, MFacebook = 3.78, Mno-sharing = 3.25; F (2, 287) = 8.03, p < .001). Participants correctly identified more brand coupons after sharing with a best friend as compared to Facebook (p < .03) or not sharing (p < .001); the simple main effect of sharing was significant when the brand promotions were identity-relevant (Mbest_friend = 3.31, MFacebook = 4.78, Mno-sharing = 4.23; F (2, 287) = 12.0, p < .001). Participants identified less correct brand coupons in the best friend condition as compared to Facebook (p < .001) or no-sharing conditions (p < .01). Further, recognition memory for identity-linked promotions was higher in the Facebook condition than the other two conditions (best friend (p < .001) and no-sharing (p < .08)).

Control P>.95

We conducted similar analyses with corrected hits of identity-irrelevant (international) brands (old international brands recall – new international brands recall) but found no significant effects (p > .1), suggesting that the memory effects we found were highly selective, and implying identity-based motivated memory biases. Study 1 shows that while sharing identity-relevant memories with close human friends leads to memory decay, sharing on Facebook induces memory enhancement. And this memory attenuation after sharing occurred not just for the memories of the experience, but also related brand promotions, suggesting that sharing may impair brand memory. Study 2 extends Study 1 in several ways. First, we changed the stimulus to a pure technology brand. Second, we tested the moderating effects of anthropomorphism, and, third, we looked at the downstream consequence of memory outsourcing on attitude strength. When people share their memories and outsource those memories to external storage repositories (e.g., best friend, Google), they need to remember some other information to retrieve these memories (e.g., the label/keywords of the location), hindering the accessibility of the memories per se. Since accessibility is


an important indicator of attitude strength (Fazio, 1995), it is likely that consumers’ attitude strength will be diluted due to this diminished memory accessibility after memory outsourcing. Therefore, we predict that the memory outsourcing will lead to lowered attitude strength toward the object of the shared experience.

enjoyable: α = .97), and attitude confidence (adapted from Krosnick & Petty, 1995; confident, strong, certain, firm, definite; α = .98) on 7-point Likert scales, as well as their willingness to pay for a similar tour to Hong Kong (range from $500-$3,000), were measured.

Three hundred thirty-nine undergraduate students participated in a 2 (identity-relevance: high vs. neutral) x 2 (sharing partner: best friend vs. anthropomorphized technology vs. objectified technology) between-subject design study for course credit. The travel scenario and procedures were similar to Study 1. After returning home from the Hong Kong tour, they were asked to either share the travel experience with a best friend (or write a diary entry and share it through a hypothetical file hosting service platform FlyCloud – a dropboxlike service). Anthropomorphism was manipulated by reading a paragraph describing FlyCloud using first person vs. third person pronouns (procedures adapted from Aggarwal and McGill, 2007).

Corrected Recognition of Travel Experience. An analysis of variance revealed a significant interaction between sharing partner and identityrelevance on the corrected recognition of the travel experience (F (2,333) = 9.00, p < .001). When the travel experience was identity-relevant, participants forgot more details of the experience after sharing it with a best friend and with the anthropomorphized than after sharing it the objectified technology (M best_friend = 4.04, Manthropomorphized = 4.63, Mobjectified = 6.23; F (2,333) = 8.42, p < .001). As predicted, the best friend and anthropomorphized conditions did not differ significantly (p > .27). When the experience was identityneutral, there were no significant differences (Mbest_friend = 5.78, Manthropomorphized = 5.64, Mobjectified = 4.91; F (2, 333) = 1.69, p > .18).

After some filler tasks, their recognition memory, attitude toward the travel experience (favorable, desirable,

Attitude Confidence. An analysis of variance revealed a marginally significant interaction between sharing

Study 3: Corrected Recognition of Travel Experience 10

partner and identity-relevance on attitude confidence (F (2, 333) = 2.80, p < .07). For the identity-relevant travel experience, respondents showed lower confidence in their attitude toward the experience after sharing with the best friend and the anthropomorphized technology as compared to the objectified technology (M best_friend = 5.07, Manthropomorphized = 5.09, Mobjectified = 5.69; F (2, 333) = 4.29, p < .02). For the identity-neutral travel experience, there were no significant differences on attitude confidence (M best_friend = 5.35, Manthropomorphized = 5.41, Mobjectified = 5.31; F (2, 333) = .09, p > .91). Attitude/Willingness to Pay. Similar analyses were conducted, but there were no significant interactions between sharing partners and identity relevance on attitude toward the travel experience and willingness to pay (all p’s > .1), suggesting that memory decay after sharing may not directly affect consumers’ overall attitudes, but may influence attitude strength instead. In Study 3, we tested the mediating role of perceived partner quality as well as added another moderator – the role of anthropomorphized technology (servant vs. partner) – to test whether all kinds of anthropomorphism can equally lead to

Study 3: Perceived Experience Specialness Partner



Servant Objectified

8 6.21 6


6.17 5.47 5.65



6 5




5.57 4.82 4.77



4 3 2 0

2 Identity Relevant p<.04

Control P>.61


Identity Relevant P<.03

Control P<.09

Hofstra HORIZONS t Spring 2019



... we predict that identity memory decay will be attenuated when the interacting technology is perceived as a servant, and this effect is mediated by perceived partner quality.

memory decay. We reasoned that partners should be viewed as higher in quality than servants because partners often proactively take care of partners’ needs and are concerned with their well-being, while servants often work passively for exchanged benefits (Aggarwal, 2004). Hence, meaningful identity-relevant memories are more likely to be outsourced to a partner (rather than a servant), who can provide empathic understanding and emotional support. Thus, we predict that identity memory decay will be attenuated when the interacting technology is perceived as a servant, and this effect is mediated by perceived partner quality. Study 3 was a 2 identity-relevance (high vs. neutral) x 3 sharing partner (servant vs. partner vs. objectified technology) between subject design with 237 undergraduate students. The same travel experience as Studies 1 and 2 was used, and the target technology was a hypothetical blogging platform named Travelgger. To manipulate the different 20

Hofstra HORIZONS t Spring 2019

roles played, respondents were randomly assigned to either servant or partner condition (procedures adopted from Aggarwal & McGill, 2012). We measured recognition memory, perceived partner quality (by a 7-item, 7-point scale (e.g., “Travelgger takes care of me” α = .95; Fournier, 1998), and perceived memory specialness (“If it was real, please evaluate how special this travel experience would be in your life”). Corrected Recognition of Travel Experience. An analysis of variance revealed a marginally significant interaction between sharing partner and identity-relevance on the corrected recognition of the experience (F (2,231) = 2.94, p < .06). When the travel experience was identity-relevant, participants forgot more details of the experience after sharing it with a partner-like technology than the servant-like technology and the objectified technology (Mpartner = 4.94, Mservant = 6.21, Mobjectified = 6.66; F (2,231) = 3.32, p < .04). As predicted, the servant and objectified technology conditions did not differ significantly (p > .49). When the experience was identity-neutral, there were no significant differences (Mpartner = 6.17, Mservant = 5.47, Mobjectified = 5.65; F (2, 231) = .49, p > .61). Mediating Role of Perceived Partner Quality on Recognition Memory. To test whether perceived partner quality mediated the interaction of sharing partner and identity-relevance on recognition memory, 5,000 bootstrap resamples were performed using Hayes’ (2014) SPSS macro for model 8. The model specified Y (i.e., the DV) as corrected recognition of travel experience, X (i.e., the IV) as sharing partner, M (i.e., the mediator) as perceived partner quality, and W (i.e., the moderator) as identity-relevance. The 95 percent confidence interval

(bias-corrected) of the indirect pathway from sharing partner * identityrelevance to the DV via the mediator excluded zero (-.7163 to -.0011; Effect= -.2924; SE= .1816). We therefore conclude that perceived partner quality mediates the interaction of sharing partner and identity-relevance on recognition memory. In the identityrelevance conditions, the 95 percent confidence interval (bias-corrected) for the conditional indirect effect of sharing partner on recognition memory via the mediator excluded zero (-6301 to -.0663; Effect= -.2903; SE= .1397); in identityneutral conditions, it included zero (-2145 to .2288; Effect= .0021; SE= 1087). We therefore conclude that perceived partner quality mediated the effect of sharing partner on recognition memory in identity-relevant but not identity-neutral conditions. Perceived Experience Specialness. An analysis of variance revealed a significant interaction between identity-relevance and sharing partner on perceived experience specialness (F (2, 231) = 5.92, p < .01). For the identity-relevant experience, respondents perceived their experience as less special after sharing with the partner-like technology than the other two conditions (Mpartner = 4.50, Mservant = 5.56, Mobjectified = 5.22; F (2,231) = 3.76, p < .03). For the identity-neutral experience, participants perceived their experience more special after sharing with the partner-like technology than the other two conditions (Mpartner = 5.57, Mservant = 4.82, Mobjectified = 4.77; F (2,231) = 2.51, p < .09). Across three studies, our findings suggest that human-like technology can lead to cognitive dependence and memory outsourcing. Consumers are more likely to outsource/offload meaningful (identity) memories to a humanlike technological partner, which can ironically attenuate such memories.


We also fill an important gap on how anthropomorphism can affect consumer memory. Technology (social media, cloud storage, and robots) with information storage function may be better designed in a servant-role to balance profits with consumer wellbeing. Marketers can increase the effectiveness of their identity-related campaigns by selecting the right digital platforms (objectified/servant type). Technological platforms should be cautious when adopting an anthropomorphism strategy.

References Aaker, Jennifer L. (1997). Dimensions of brand personality. Journal of Marketing Research, 34 (August), 347-56. Aggarwal, Pankaj. (2004). The effects of brand relationship norms on consumer attitudes and behavior. Journal of Consumer Research, 31(1), 87-101. Aggarwal, Pankaj, & Ann L. McGill. (2007). Is that car smiling at me? Schema congruity as a basis for the evaluation of anthropomorphized products. Journal of Consumer Research, 34(4), 468-79. Aggarwal, Pankaj, & Ann L. McGill. (2012). When brands seem human, do humans act like brands? Automatic behavioral priming effects of brand anthropomorphism. Journal of Consumer Research, 39(2), 307-23.

Allen, Robert. (2017). Does social media marketing actually generate ROI? Retrieved from https://www. smartinsights.com/social-mediamarketing/social-media-analytics/ social-media-marketing-actuallygenerate-roi/ Dalton, Amy N., & Li Huang. (2014). Motivated forgetting in response to social identity threat. Journal of Consumer Research, 40(6), 1017-38. Fazio, Russell H. (1995). Attitudes as object-evaluation associations: Determinants, consequences, and correlates of attitude accessibility. In Petty, Richard E., and Jon A. Krosnick (Eds.), Attitude Strength: Antecedents and Consequences, 4, 247-82, Psychology Press, New York and London. Fournier, Susan. (1998). Consumers and their brands: Developing relationship theory in consumer research. Journal of Consumer Research, 24(4), 343-73. Hayes, Andrew F. (2014). Introduction to Mediation, Moderation, and Conditional Process Analysis: A Regression-Based Approach. New York, NY: The Guilford Press. Huang, Li, & Priyali Rajagopal. (2017). Forgetting-after-sharing: How social sharing affects consumer memories. Hofstra University, working paper. Hudson, Simon, Li Huang, Martin S. Roth, & Thomas J. Madden. (2016). The influence of social media interactions on consumer-brand relationships: A

three-country study of brand perceptions and marketing behaviors. International Journal of Research in Marketing, 33(1), 27-41. Krosnick, Jon A., & Richard E. Petty. (1995). Attitude strength: An overview. Attitude Strength: Antecedents and Consequences, 1, 1-24. Protalinski, Emil. (2011). Zuckerberg: 4 billion “things” are shared on Facebook every day. Retrieved on June 30, 2017, from http://www.zdnet.com/article/ zuckerberg-4-billion-things-are-sharedon- facebook-every-day/ Shen, Hao, Meng Zhang, & Aradhna Krishna. (2016). Computer interfaces and the effect of “direct touch” on consumer choice: Can iPads make us unhealthy? Journal of Marketing Research, 53( 5), 745-58. Tamir, Diana I., & Jason P. Mitchell. (2012). Disclosing information about the self is intrinsically rewarding. Proceedings of the National Academy of Sciences, 109(21), 8038-43. Wang, Lisa C., Julie Baker, Judy A. Wagner, & Kirk Wakefield. (2007). Can a retail web site be social? Journal of Marketing, 71(3), 143-57. Wang, Zongyuan, & Michelle R. Nelson. (2014). Tablet as human: How intensity and stability of the user-tablet relationship influences users’ impression formation of tablet computers. Computers in Human Behavior, 37, 81-93.

Li Huang is an assistant professor in the Marketing and International Business Department in the Frank G. Zarb School of Business at Hofstra University. She earned a PhD in business administration from the Darla Moore School of Business, University of South Carolina, in 2017. Dr. Huang’s research examines how technology influences consumer cognitions and decisions. Her research has been published in such top-tier marketing journals as Journal of Consumer Research and International Journal of Research in Marketing. She has taught undergraduate courses at City University of Hong Kong and the University of South Carolina, where she was nominated for the Excellence in Teaching Award. These accomplishments earned her the 2017 Rising Star Award and 2017 Mathew Joseph Emerging Scholar Award from the American Marketing Association. Her ongoing projects include social media psychology, AI applications in health care, and human-technology interactions.

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Family Involvement, Environmental Turbulence, and R&D Investment: Evidence From Chinese Listed SMEs Jieqiong Ma, PhD, Assistant Professor of Marketing and International Business, Frank G. Zarb School of Business, Hofstra University Do Chinese family firms invest less in research and development (R&D) than their non-family counterparts? How does business environment affect Chinese family firms’ decisions on R&D investment? The impact of family involvement on firms’ R&D investment has received an increasing amount of attention from scholars in recent years. However, existing research is characterized by a heavy focus on the experiences of family firms in the United States, Western Europe, or, more broadly, those who reside in developed economies (BenavidesVelasco et al., 2013). Little is known about the distinctiveness of family 22

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firm leaders’ attitudes toward R&D investment in developing economies, which are undergoing dynamic industrial and institutional changes. I intend to fill this gap by examining the business relationship between family involvement and R&D investment in China, the world’s current largest emerging economy. Chinese family firms face significantly different internal and external business environments than their Western counterparts. Figure 1 shows the research model of family involvement in R&D investment. Drawing upon institutional theory (Dimaggio & Powell, 1983; Leaptrott, 2005), I propose that

family firms may invest less in R&D than non-family firms in China for two reasons. First, China is home to a unique cultural legacy that guides the way families think and act. Chinese culture is characterized by collectivism, an orientation that prioritizes the group over the individual (Brewer & Chen, 2007; Triandis, 2001). Guided by the social philosophy of Confucianism, the Chinese tend to hold that human beings are fundamentally relationship-oriented, and that building a strong and orderly hierarchy of relations is necessary to establish harmony in society (Luo et al., 2012). When Chinese family firms consider R&D investment, they therefore, as in other matters,


Technology Turbulence Family Involvement

R&D Investment Policy Turbulence

Figure 1: Model of Family Involvement in R&D Investment

tend to place a stronger emphasis than non-family firms on social cohesion and deference to senior family members’ decisions. Second, Chinese society’s understanding of what constitutes the family differs from what is typical among developed economies. While there is a strong emphasis on the nuclear family in Western societies, Chinese society also places heavy significance on the extended family (Chua et al., 2009; Leaptrott, 2005; Tsang, 2001). Operating under the normative pressures of reciprocal altruism, family firms are more likely to fill key business positions with extended family members rather than outsiders evaluated by their qualifications (Stewart, 2003). Existing literature suggests that limiting participation in managerial roles to a restricted group of family members likely inhibits a firm’s ability to accumulate intangible skills and human capital (Carney, 2005). Because R&D investment normally requires advanced human capital, China’s emphasis on the extended family structure reduces firms’ incentives to recruit external experts, which are critical when pursuing R&D investments. Based on the aforementioned arguments, I propose the following: Proposition 1: Family firms tend to invest less in R&D than non-family firms in China. From the perspective of environmental contingency theory, technological

turbulence may moderate the strength of the relationship between family involvement and firms’ R&D investment for two reasons. First, the turbulent technological environment is characterized by unpredictable timing: No one can be certain when the next technological advance is going to arrive (Augusto & Coelho, 2009). Such an environment rapidly cycles through advancement and obsolescence (Song et al., 2005). Consequently, R&D investment may be viewed as an uncertain and risky investment that might lead to enormous sunk costs with no tangible return. Research suggests that non-family firms have an advantage in turbulent environments due to their heavier emphasis on efficiency and profit maximization, rather than family-specific interests like family relationship cohesion (Banalieva et al., 2015). Freed from such considerations, they are more likely to invest in R&D and adapt new technology in their products than family firms. Moreover, family firms are less likely to pursue high-risk strategies under such hightechnology turbulence because concentrated family shareholdings frequently lack the financial-portfolio diversity of non-family firms, and operate under far more limited liquidity (Liu et al., 2017). On top of this, the typical Chinese family firms have invested a majority of their family’s wealth in that firm (Carney & Gedajlovic, 2003), dramatically increasing the importance of

Chinese family firms face significantly different internal and external business environments than their Western counterparts.

maintaining financial security and stability. As such, when Chinese family firms are facing high-technology turbulence, they tend to invest less in R&D to avoid unnecessary risk. Second, when technology turbulence is high, firms face greater pressures to upgrade their skills and expand their industry-related knowledge in order to survive. Therefore, need for qualified technical specialists becomes more urgent. However, compared with non-family firms, Chinese family firms usually suffer from a lack of qualified professional management. Family firms are reluctant to trust non-family experts, and are hesitant to share their technological knowledge and skills with outsiders (Zhang and Ma, 2009). This makes it even more difficult to attract external technological experts. Thus, when family firms encounter hightechnology turbulence, they often lack Hofstra HORIZONS t Spring 2019



Non Family Firm

Family Firm

qualified technical specialists or the professional knowledge to invest in R&D. Therefore, I propose the following: Proposition 2: The negative relationship between family involvement and a firm’s R&D intensity is stronger for firms operating under high-technology turbulence in China. The relationship is better visualized in Figure 2. The negative impact of family involvement on R&D investment grows stronger under conditions of high-technological turbulence. Previous studies suggest that government policy plays a critical role for firms, particularly for private firms operating in China, because the government still continues to extensively exercise its redistributive power over all types of scarce resources through tax policies, land exploitation laws, and labor-market regulations (Li & Zhang, 2007; Luo et al., 2012). Since R&D investments normally require long-term commitment and investors frequently incur large sunk costs, consistent government policy is even more vital for family firms. When 24

Hofstra HORIZONS t Spring 2019

Figure 3: Moderating Effects of Governmental Policy Turbulence on the Relationship Between Family Involvement and R&D Intensity


Low Tech Turbulence


High Tech Turbulence

R&D Intensity

R&D Intensity

Figure 2: Moderating Effects of Technological Turbulence on the Relationship Between Family Involvement and R&D Intensity

Non Family Firm

governmental policy turbulence is high, family firms will face frequent and intensive change in investing, financing, and operating policies. Operating in an environment of such uncertainty, family firms’ higher risk-aversion and costsensitive attributes will make them even more cautious to invest in R&D. In contrast, when government policy turbulence is low, institutional change is more predictable, and consistency and transparency reign. In such an investment environment, family firms tend to have more confidence in all types of entrepreneurial activities, including R&D investment. This relationship is captured in Figure 3. The negative impact of family involvement on R&D investment grows stronger under conditions of high government policy turbulence. Proposition 3: The negative relationship between family involvement and a firm’s R&D investment is stronger for firms operating under high government policy turbulence in China. Family firms are a worldwide phenomenon, and they are a prevalent and substantial market force in many major developing economies, such as


Low Governmental Policy Turbulence


High Governmental Policy Turbulence

Family Firm

India, Brazil, and China. Viewed in this way, this study represents one of the first attempts to explore this relationship in the specific context of an emerging economy. Second, in this study, I applied institutional theory and the contingent environment perspective to explore the moderating roles of firms’ industrial and institutional contingencies. Due to rapid economic transition and dynamic institutional reforms, the external environment has become more critical and salient for firms operating in developing economies. Chinese family firms’ decisions are influenced, relative to their Western counterparts, by an extended family structure and collectivistic culture (Banalieva et al., 2015; Hofstede, 2007). When Chinese family firm leaders make R&D investments, they tend to place a heavier emphasis on maintaining family harmony, attend more to the specific needs or wants of family members that may not necessarily be best for the business’s profitability, and defer to senior family members’ decisions. For the same reasons, compared to nonfamily firms, they are also short of professional managerial skills and advanced technological knowledge. Thus, Chinese family firm leaders tend


to manage their businesses with an eye toward maintaining what already exists, rather than investing in R&D in an environment with rapid technological change, which may render older ways of doing business obsolete. In addition, turbulent government policy and inconsistent institutional reform increase the perceived risks and costs, which are responsible for constraining family firms’ willingness to invest in R&D, which does require a degree of risktaking and normally requires long-term commitment and large sunk costs.

References Augusto, M., & Coelho, F. (2009). Market orientation and new-to-the-world products: Exploring the moderating effects of innovativeness, competitive strength, and environmental forces. Industrial Marketing Management, Vol. 38, No. 1, pp. 94-108. Banalieva, E. R., Eddleston, K. A., & Zellweger, T. M. (2015). When do family firms have an advantage in transitioning economies? Toward a dynamic institution-based view. Strategic Management Journal, Vol. 36, No. 9, pp. 1358-1377. Benavides-Velasco, C. A., QuintanaGarcía, C. & Guzmán-Parra, V. F. (2013). Trends in family business research. Small Business Economics, Vol. 40, No. 1, pp. 41-57. Brewer, M. B., & Chen, Y.-R. (2007). Where (who) are collectives in collectivism? Toward conceptual

clarification of individualism and collectivism. Psychological Review, Vol. 114, No. 1, pp. 133.

China’s transition economy. Strategic Management Journal, Vol. 28, No. 8, pp. 791-804.

Carney, M. (2005). Corporate governance and competitive advantage in familycontrolled firms. Entrepreneurship Theory and Practice, Vol. 29, No. 3, pp. 249-265.

Liu, Y., Chen, Y.-J. & Wang, L. C. (2017). Family business, innovation and organizational slack in Taiwan. Asia Pacific Journal of Management, Vol. 34, No. 1, pp. 193-213.

Carney, M. & Gedajlovic, E. (2003). Strategic innovation and the administrative heritage of East Asian family business groups. Asia Pacific Journal of Management, Vol. 20, No. 1, pp. 5-26.

Luo, Y., Huang, Y. & Wang, S. L. (2012). Guanxi and organizational performance: A meta-analysis. Management and Organization Review, Vol. 8, No. 1, pp. 139-172.

Chua, R. Y., Morris, M. W. & Ingram, P. (2009). Guanxi vs networking: Distinctive configurations of affectand cognition-based trust in the networks of Chinese vs American managers. Journal of International Business Studies, Vol. 40, No. 3, pp. 490-508. Dimaggio, P., & Powell, W. W. (1983). The iron cage revisited: Collective rationality and institutional isomorphism in organizational fields. American Sociological Review, Vol. 48, No. 2, pp. 147-160. Hofstede, G. (2007). Asian management in the 21st century. Asia Pacific Journal of Management, Vol. 24, No. 4, pp. 411-420. Leaptrott, J. (2005). An institutional theory view of the family business. Family Business Review, Vol. 18, No. 3, pp. 215-228. Li, H., & Zhang, Y. (2007). The role of managers’ political networking and functional experience in new venture performance: Evidence from

Song, M., Droge, C., Hanvanich, S., & Calantone, R. (2005). Marketing and technology resource complementarity: An analysis of their interaction effect in two environmental contexts. Strategic Management Journal, Vol. 26, No. 3, pp. 259-276. Stewart, A. (2003). Help one another, use one another: Toward an anthropology of family business. Entrepreneurship Theory and Practice, Vol. 27, No. 4, pp. 383-396. Triandis, H. C. (2001). Individualismcollectivism and personality. Journal of Personality, Vol. 69, No. 6, pp. 907-924. Tsang, E. W. (2001). Internationalizing the family firm: A case study of a Chinese family business. Journal of Small Business Management, Vol. 39, No. 1, pp. 88-93. Zhang, J., & Ma, H. (2009). Adoption of professional management in Chinese family business: A multilevel analysis of impetuses and impediments. Asia Pacific Journal of Management, Vol. 26, No. 1, pp. 119-139.

Jieqiong Ma is an assistant professor in the Marketing and International Business Department in the Frank G. Zarb School of Business at Hofstra University. She teaches graduate and undergraduate classes in the area of international business and international marketing. She also conducts research in multinational enterprise entry mode strategy, ownership strategy, political strategy, global marketing strategy, and emerging market multinationals. Dr. Ma earned a doctoral degree in international business and marketing from Saint Louis University in 2016. She completed her undergraduate and graduate studies in international business and economics at Northeastern University of China.

Hofstra HORIZONS t Spring 2019


Short Sellers: Harmful or Helpful to the Financial Markets? Dominique Outlaw, PhD, Assistant Professor of Finance, Frank G. Zarb School of Business, Hofstra University “What’s happening out there? It’s very clear to me – we’re in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down ...” – In a memo to Morgan Stanley employees from John Mack, CEO 1 Introduction Imagine investing in stocks that you expect to go down in price. This seems contradictory to making profits for the typical investor. The traditional investor aims to buy at a low price and sell at a high price, typically referred to as “buy low, sell high.” Short sellers take the opposite approach. They first sell high, and then buy low. Specifically, short 1 See


sellers borrow a stock, sell it at a higher price, and then buy it back at a lower price. They engage in these transactions because they have a pessimistic outlook on the stock and expect the stock price to drop. Some argue that short sellers manipulatively engage in trades that drive down share prices so they can increase their profits. If this is true, short sellers are harmful to the capital markets because their actions get in the way of firms raising capital and shake investors’ trust in the markets – both of which go against the mission of the U.S. Securities and Exchange Commission (SEC). Short sellers gained a lot of media attention and blame during the 2008

2008 Times article – http://content.time.com/time/business/article/0,8599,1842499,00.html.

Hofstra HORIZONS t Spring 2019

financial crisis. It was said that short sellers caused stock prices to plummet for some major banks, such as Bear Stearns and Lehman Brothers. In response, policymakers issued a ban on short selling certain stocks, and soon after there were other regulations passed to limit short sellers’ trades. However, recent research finds that short sellers are a sophisticated group of investors that promote market efficiency. There is empirical evidence supporting the idea that short sellers are better able to predict future bad news, negative earnings surprises, and downward revisions in analysts’ earnings forecasts (Akbas, Boehmer, Erturk, & Sorescu, 2017). Thus, unlike what


the CEO of Morgan Stanley suggested, perhaps short sellers were not the cause of several firms’ failure, but were able to recognize the impending financial crisis before most investors. My 2018 research findings contribute to the debate. In “Short Interest as a Signal to Issue Equity,” we find that even company executives pay attention to short sellers’ trading activities and incorporate this information in their corporate decision-making. Another study, “The Information Content of Short Selling Around Close Supply Chain Relationships,” finds that short sellers pay close attention to the supply chain relationships between firms, and recognize looming bankruptcies before the rest of the market. Thus, there is a lot of information available to different market participants by following the activities of short sellers. Short Selling Information for Corporate Decision-Making The aggregate trading activity of sophisticated outside investors can channel information about firm misvaluation to corporate executives, and, hence, influence managerial decisions. In our study, we specifically focus on the predictability of short selling for future seasoned equity offer (SEO) announcements. SEOs are new stock issues of already publicly traded

firms that want to raise more capital. There are several well-documented reasons for SEO issuance, but perhaps the most provocative and controversial in the literature is the idea that corporate managers can time their SEOs to periods of stock overvaluation by exploiting “windows of opportunity” characterized by temporarily high stock prices. Prior studies often identify SEO market timing by focusing on variables such as stock prices or valuation ratios (e.g., Asquith & Mullins, 1986; Baker & Wurgler, 2002; Jung, Kim, & Stulz, 1996; Hertzel & Li, 2010). Thus, our analysis can identify whether managers respond to the aggregate trading activities of sophisticated investors reflected by the degree of short selling in the stock. The SEO setting is an ideal starting point for this identification because of the well-known preference and attempts of managers to time SEOs to periods of share overpricing. Our central empirical result is that the likelihood of a future SEO announcement increases along with the level of short selling in a firm’s stock. Using a comprehensive sample of SEOs between 1990 and 2015, we find that a higher short interest ratio (measured as the number of shares shorted divided by the total number of shares outstanding) is an important predictor of subsequent SEO announcements. Furthermore, in

Likelihood (%) of an SEO Announcement


... policymakers issued a ban on short selling certain stocks, and soon after there were other regulations passed to limit short sellers’ trades.

multivariate estimations that control for a host of publicly observable measures of firm characteristics, stock valuation, earnings management, and insiders’ personal trades, the results hold. We find that short interest significantly affects the likelihood of SEOs. The mean quarterly probability of an SEO announcement in the highest quintile of short interest is 2.22 percent, compared to only 0.84 percent in the lowest quintile. The probability of an SEO increases by 34 percent for firms in the highest quintile of short interest and decreases by 49 percent for firms in the lowest quintile (in relation to the unconditional quarterly probability of an SEO announcement of 1.66 percent).

Figure 1: The quarterly likelihood of SEO announcements partitioned by high versus low short interest





01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

____ High SIR - - - Low SIR

This figure plots the likelihood of an SEO announcement during each quarter from January 1990 to December 2015 for firms with high short interest (solid line) and firms with low short interest (dashed line). The quarterly likelihood of an SEO announcement is measured as the percentage of firms that announce an SEO during the quarter. For a given quarter, the high short interest ratio group (High SIR) includes firms with a short interest ratio two quarters ago (q-2) in the top 20% among all sample firms. The low short interest ratio group (Low SIR) includes firms with a short interest ratio two quarters ago (q-2) in the bottom 20% among all sample firms. The short interest ratio (SIR) is the number of shares shorted divided by the number of shares outstanding.

Hofstra HORIZONS t Spring 2019



Linked to Ford

Figure 2: The stock price of Hayes Lemmerz International before and during their supply chain relationship with Ford Filed for Bankruptcy

Hayes Lemmerz International 35 30 Price

25 20 15 10 5 0 02 04 02 04 02 04 02 04 02 04 02 02 04 02 04 02 04 95 995 996 996 999 999 000 000 001 001 002 006 006 007 007 008 008 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 Quarter


Figure 1 plots the likelihood of an SEO announcement in our sample for firms with the top 20 percent of short interest and the bottom 20 percent of short interest for each quarter from 1990 to 2015. On average, firms with the highest short interest ratio (SIR) have a greater likelihood of announcing an SEO than firms with the lowest SIR. This figure plots the likelihood of an SEO announcement during each quarter from January 1990 to December 2015 for firms with high short interest (solid line) and firms with low short interest (dashed line). The quarterly likelihood of an SEO announcement is measured as the percentage of firms that announce an SEO during the quarter. For a given quarter, the high short interest ratio group (High SIR) includes firms with a short interest ratio two quarters ago (q-2) in the top 20 percent among all sample firms. The low short interest ratio group (Low SIR) includes firms with a short interest ratio two quarters ago (q-2) in the bottom 20 percent among all sample firms. The short interest ratio (SIR) is the number of shares shorted divided by the number of shares outstanding. Our findings also contribute to a growing literature promoting the idea that secondary market activity has a real 28

Hofstra HORIZONS t Spring 2019

This figure plots the stock price each quarter from 1995 to 2009 for Hayes Lemmerz International, one of the world’s largest manufacturers of automotive and commercial highway steel and aluminum wheels. They filed for bankruptcy after a decade-long relationship with Ford.

effect on corporate decisions (market feedback literature). Observable, aggregate trading by short sellers can influence corporate decisions. In addition to its contribution to the market feedback literature, our study contributes to the SEO literature by showing that short interest is a reliable predictor of stock issuance. We view short interest as a signal of sophisticated investors’ price discovery that managers can use to assess SEO timing opportunities. Short Selling Around Close Supply Chain Relationships Negative information may not be readily revealed to capital markets when major customers and suppliers have close supply chain relationships. When operating conditions decline for one firm in the supply chain, all the other firms are also at risk. For example, in 2002, the second-largest discount retailer in the U.S., Kmart, filed for Chapter 11 bankruptcy protection a day after its biggest food distributor, Fleming Companies Inc., halted inventory shipments when it did not receive its weekly payment. Immediately afterward, Kmart was removed from the Standard & Poor’s 500 benchmark index and delisted from the New York Stock Exchange. They were eventually acquired by Sears.

Another example is Hayes Lemmerz International Inc., one of the world’s largest manufacturers of automotive and commercial highway steel and aluminum wheels. Hayes Lemmerz International was one of Ford’s 183 suppliers that eventually faced demise following the formation of the customer-supplier relationship. They were announced as one of Ford’s major suppliers (meaning Ford made up over 10 percent of their sales) in 2000 and remained so through 2009. In 2009, Hayes Lemmerz International filed for bankruptcy when Ford still represented at least 10 percent of its sales. Figure 2 plots the stock price of Hayes Lemmerz International during this decade-long relationship. This figure plots the stock price each quarter from 1995 to 2009 for Hayes Lemmerz International, one of the world’s largest manufacturers of automotive and commercial highway steel and aluminum wheels. They filed for bankruptcy after a decade-long relationship with Ford. This trend in stock price performance following the disclosure of an economically important customer is not anomalous in our sample. Thus, we study whether short sellers target supply chain alliances and inefficiencies. This is important especially in cases like Kmart’s and Hayes Lemmerz International’s bankruptcies, which can have ripple effects in the capital markets. We examine whether outstanding short interest predicts unfavorable information related to the existence or absence of close supply chain relationships between a customer and a supplier. This leads us to the following research question: For firms in linked supply chain relationships, do sophisticated investors’ trades act as an early warning signal of bad news? The bad news could be related to the


announcement of negative earnings surprises or to the firm being delisted from a stock exchange due to financial distress reasons. In our analysis, a linked relationship is defined as a large customer that represents at least 10 percent of its suppliers’ revenue, whereas an unlinked customer is not as economically important. The results are consistent with short sellers focusing on supply-chain-related information asymmetries for poorly performing customers or suppliers. Using a difference-in-difference test that compares linked firms to nonlinked firm’s based on a robust matching procedure, we find that short interest is higher in the period prior to the initial disclosure that a large customer or a supplier has formed a linked supply chain relationship. The unique result is that sophisticated investors can time their trades prior to changes in supply chain relationships – revealing a firm’s financial performance issues. The combined results are consistent with close supply chain relationships facilitating opaqueness and earnings problems that go unnoticed by less-informed investors. Short selling, however, mitigates the information asymmetry inherent in close supply chain relationships. Higher short interest leads to greater incidences of

negative earnings surprises for all suppliers and for large, economically important customers. Hence, it appears that high short interest occurs because of supply chain-related information asymmetries about lower-than-expected earnings, which should be of concern to investors in the capital market. The finding that short sellers target economically important customers and dependent suppliers is consistent with supply chain relationships sometimes having illusionary benefits. Interestingly, at the end of 2016, there were reports that suppliers were not sending their typical shipments to Sears (who acquired Kmart during their debacle) because of fears that Sears would be unable to meet their payments during the holiday season, and the suppliers did not want to be stuck with the bill. In October 2018, Sears filed for Chapter 11 bankruptcy. Summary In summary, the role of short sellers is an evolving question posed by academics, practitioners, and policymakers. It seems that some regulations will soon have to be revisited. While curbing short sellers’ activities was expected to be helpful to the markets, it seems that it ends up hurting market efficiency. My two recent studies suggest that investors, corporate executives, and policymakers can gain a

wealth of information from this sophisticated group of investors. References Akbas, Ferhat, Ekkehart Boehmer, Bilal Erturk, & Sorin Sorescu. (2017). Short interest, returns, and unfavorable fundamental information. Financial Management, 46, 455-486. Asquith, Paul, & David Mullins Jr. (1986). Equity issues and offering dilution. Journal of Financial Economics,15, 61-89. Autore, Don M., Irena Hutton, Danling Jiang, & Dominique G. Outlaw. (2018). Arbitrage with arbitrageurs: Short interest as a signal to issue equity. Journal of Corporate Finance, 48, 797-815. Baker, Malcolm, & Jeffrey Wurgler. (2002). Market timing and capital structure. Journal of Finance, 57, 1-30. Evans, Jocelyn D., & Dominique G. Outlaw. (2018). The information content of short selling around close supply chain relationships. The Financial Review, 53, 627-655. Hertzel, Michael G., & Zhi Li. (2010). Behavioral and rational explanations of stock price performance around SEOs: Evidence from a decomposition of market-to-book. Journal of Quantitative Analysis, 45, 935-958. Jung, Kooyal, Wong-Cheol Kim, & Rene Stulz. (1996). Timing, investment opportunities, managerial discretion, and the security issue decision. Journal of Financial Economics, 42, 159-185.

Dominique Outlaw is an assistant professor in the Finance Department in the Frank G.

Zarb School of Business at Hofstra University. She earned a PhD from Florida State University in 2013 and a BS in secondary mathematics education in 2008. Her research interests include short selling, equity offerings, and individual investors’ trading behavior. She has published in various journals, including the Journal of Banking and Finance, Financial Review, and Journal of Corporate Finance, and has presented her research at numerous conferences. She is a recipient of the 2014 Frank G. Zarb Dean’s Research Award, 2012 AFA Student Travel Grant, and the McKnight Doctoral Fellowship. As a passionate educator and mentor, she teaches several undergraduate and master’s courses, and has served as the faculty advisor for the Hofstra Investment Banking Association (HIBA) since 2013 and the Hofstra Student Affairs Committee (SAC) since 2016, among other organizations. She is heavily involved as a member and mentor in the KPMG PhD Project Finance Doctoral Student Association. Outside of finance, she enjoys reading, running along scenic routes, and spending quality time with her family. Hofstra HORIZONS t Spring 2019



ZARB SCHOOL OF BUSINESS FACULTY RESEARCH We hope you enjoyed reading this issue of Hofstra Horizons. The faculty in the Zarb School of Business are actively engaged in research in many diverse fields. Below is a sample of some of our faculty’s exciting research interests.

ACCOUNTING, TAXATION AND LEGAL STUDIES IN BUSINESS Kathleen Bakarich International accounting issues; emerging technology trends Rina Hirsch Judgment and decision-making in accounting; social biases in auditing; behavioral research in accounting information systems; managerial accounting decision-making Richard Jones International accounting and reporting; sustainability/environmental, social and governance (ESG) reporting Victor Lopez Constitutional law; comparative law; legislation; intellectual property law; immigration law Nathan Slavin Goodwill valuation and impairment; simplification of accounting standards; comparison of business ethics in Eastern and Western societies

FINANCE Robert Campbell Real estate markets; real estate finance; monetary economics Ehsan Nikbakht Managing risk and portfolio; volatility transmission across financial and real estate markets; blockchain applications in finance Dominique Outlaw Short selling; short interest; seasoned equity offerings (SEO); market feedback effect; supply chain; financial distress Andrew Spieler Real estate; real estate investment trusts; corporate governance; risk management; alternative investments K.G. Viswanathan Sustainability investing; geographic and industry diversification in emerging market firms Na (Nina) Wang Investment; empirical asset pricing; behavioral finance; financial econometrics Tianpeng Zhou Empirical asset pricing; mergers and acquisitions; political economy; political risks

INFORMATION SYSTEMS AND BUSINESS ANALYTICS Amir Gandomi Sereshki Machine learning; natural language processing; reinforcement learning; medical informatics; operations research/marketing interface Yi-Chin Lin Health information systems; mobile health; health care management; consumer behavior in health care sector

MANAGEMENT AND ENTREPRENEURSHIP Debra Comer Character development in management education; ethical behavior in organizations; neurodiversity in the workplace Li-Lian Gao Supply chain distribution network design; coordinated inventory replenishment; optimization; heuristics Charles Smith Sustainability and holistic thinking/perception; meditation/mindfulness for leaders and the workplace Matthew Sonfield Family business; minority business Lutisha Vickerie Scalability of social innovation; drivers of formal and informal venture formation in urban contexts; institutional logics supporting policy initiatives and entrepreneur responses; business education in Africa Shu Yang Social entrepreneurship; gender entrepreneurship; startup accelerator; entrepreneurship ecosystem

MARKETING AND INTERNATIONAL BUSINESS Anne Hamby Consumer psychology; social marketing; narrative persuasion Veronika Ilyuk-Morace Product efficacy expectations and judgments; food decision-making; online consumer behavior; consumer health and well-being Shawn Thelen Health care marketing; cross-cultural services; digital marketing Boonghee Yoo Brand equity; marketing scale development; offshoring services; consumer animosity; online and offline retail productivity; medical tourism; quantitative approaches to marketing 30

Hofstra HORIZONS t Spring 2019


Hofstra at a Glance LOCATION Hempstead, Long Island, 25 miles east of New York City. Telephone: 516-463-6600

Trustees of Hofstra University

CHARACTER A private, nonsectarian, coeducational university.

OFFICERS Alan J. Bernon,* Chair David S. Mack,* Vice Chair Robert D. Rosenthal,* Vice Chair Donald M. Schaeffer, Vice Chair Martha S. Pope, Secretary Stuart Rabinowitz, President

PRESIDENT Stuart Rabinowitz, JD COLLEGES AND SCHOOLS Academic Health Sciences Center (Donald and Barbara Zucker School of Medicine at Hofstra/Northwell; Hofstra Northwell School of Graduate Nursing and Physician Assistant Studies at Hofstra University; School of Health Professions and Human Services); Frank G. Zarb School of Business; Fred DeMatteis School of Engineering and Applied Science; Hofstra College of Liberal Arts and Sciences (Peter S. Kalikow School of Government, Public Policy and International Affairs; School of Education; School of Humanities, Fine and Performing Arts; School of Natural Sciences and Mathematics); Honors College; Lawrence Herbert School of Communication; Maurice A. Deane School of Law; Hofstra University Continuing Education FACULTY There are 1,236 faculty members, of whom 483 are full-time. Ninety-three percent of full-time faculty hold the highest degree in their fields. STUDENT BODY Undergraduate enrollment of 6,701. Total University enrollment, including graduate, School of Law, and School of Medicine, is 10,871. Undergraduate male-female ratio is 45-to-55. PROGRAM OPTIONS Bachelor’s degrees are offered in about 160 program options. Graduate degrees, including PhD, EdD, PsyD, AuD, JD, and MD, advanced certificates and professional diplomas, are offered in about 170 program options. THE HOFSTRA CAMPUS With 117 buildings and 244 acres, Hofstra is a member of the American Public Gardens Association. LIBRARIES The Hofstra libraries contain 1 million+ volumes and provide 24/7 online access to more than 100,000 full-text journals and 200,000 electronic books. ACCESSIBILITY Hofstra is 100 percent program accessible to persons with disabilities. JANUARY AND SUMMER SESSIONS Hofstra offers a January session and three summer sessions between May and August. Hofstra University is committed to extending equal opportunity to all qualified individuals without regard to race, color, religion, sex, sexual orientation, gender identity or expression, age, national or ethnic origin, physical or mental disability, marital or veteran status in employment and in the conduct and operation of Hofstra University’s educational programs and activities, including admissions, scholarship and loan programs, and athletic and other school-administered programs. For more information, visit hofstra.edu/eoe.

As of March 2019

MEMBERS Kenneth Brodlieb Susan Catalano Arno H. Fried Leo A. Guthart Peter S. Kalikow* Arthur J. Kremer Diana E. Lake* Randy Levine* Elizabeth McCaul Stella Mendes* Janis M. Meyer* John D. Miller* Marilyn B. Monter* Julio A. Portalatin* Michael Roberge* Debra A. Sandler* Thomas J. Sanzone* Michael Seiman* Leonard H. Shapiro Joseph Sparacio* George J. Tsunis Steven C. Witkoff* Frank G. Zarb*

DELEGATES Stuart L. Bass,* Speaker of the Faculty George A. Giuliani, Chair, University Senate Executive Committee William Caniano, Chair, University Senate Planning and Budget Committee Kathleen Stanley,* President, Alumni Organization Abby Normandin, President, Student Government Association Deandra Denton, Vice President, Student Government Association

Wilbur Breslin, Trustee Emeritus Emil V. Cianciulli,* Chair Emeritus John J. Conefry, Jr., Chair Emeritus Maurice A. Deane,* Chair Emeritus George G. Dempster,* Chair Emeritus Helene Fortunoff, Chair Emerita Joseph L. Dionne,* Trustee Emeritus Lawrence Herbert,* Trustee Emeritus Florence Kaufman, Trustee Emerita Walter B. Kissinger, Trustee Emeritus Ann M. Mallouk,* Chair Emerita *Hofstra alumni

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