http://hdl.handle.net/1721.1/7618 Wed, 19 Jun 2013 07:14:21 GMT 2013-06-19T07:14:21Z http://hdl.handle.net/1721.1/79202 Three essays in financial economics Lee, Eung Jun Brandon Chapter 1 studies endogenous medium term cycles in a Schumpterian growth model. New firms are created by imitating existing firms and they drive the least productive firms out of business. In this manner, firm entry speeds up the process of creative destruction, reallocating economic resources from less to more productive firms. Furthermore, the rate of firm entry and intensity of reallocation are procyclical in this model, and therefore transient business cycle shocks are propagated into persistent medium term swings in productivity. While the model generates substantial amount of medium term cycles, their magnitudes are not as large as those found in the data. This is due to an endogenous tension arising from business stealing effect of Schumpeterian models that weakens the basic transmission mechanisms in this model. Chapter 2 develops a model of explicit marketplace competition between firms. Firms compete through technological innovation; a firm with superior technology captures larger market share and earns higher profits than its rival. Arrow's replacement effect in this model implies that industry followers have more to gain from innovations than leaders, and consequently followers invest more heavily than leaders. Therefore, followers derive higher proportions of their firm values from present value of growth opportunities, and this implies that technological leaders and laggards are value and growth firms, respectively. A novel, central empirical prediction of the model is that when realized return on the value-minus-growth portfolio is positive, value firms decrease their investments relative to growth firms, and vice versa. This prediction holds for capital expenditures, but not for R&D expenses in the data. Chapter 3 (joint with Yichuan Liu) presents three sets of empirical results pertaining to cross-sectional patterns in stock returns associated with various accounting ratios such as return on assets, return on equity, gross and net profit margins, and turnover ratios of accounts receivable and payable. First, we show that recent changes in these accounting ratios, rather than their levels, are responsible for large returns spreads. Second, we document fundamental momentum; long-short portfolios formed by sorting on recent changes in these accounting ratios have significant alphas after controlling for Fama-French three-factor and Carhart four-factor models. Third, we examine the findings of Chordia and Shivakumar (2006) who conclude that the well-known price momentum effect is a manifestation of earnings momentum. We find, on the contrary, that price momentum is not fully explained nor subsumed by earnings momentum. Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2013.; Cataloged from PDF version of thesis.; Includes bibliographical references (p. 105-110). Tue, 01 Jan 2013 00:00:00 GMT http://hdl.handle.net/1721.1/79202 2013-01-01T00:00:00Z http://hdl.handle.net/1721.1/79030 Resistance from top to bottom : the dynamics of risk management in complex organizations Lyneis, John Landry Organizations today devote substantial resources towards the development of governance systems to increase transparency and accountability in areas such as quality, safety, financial accounting, and environmental performance. In this dissertation, I combine ethnographic and simulation methods to understand the implementation and performance of such systems. In the first essay, I compare the implementation of a safety management system in two industrial plants following accidents. Despite a common process, workers at one plant resist portions of the new system, while at the other plant the system is a relative success. My argument has two parts. First, I argue that resistance to bureaucratic rules is rooted in the lack of involvement that front line actors are afforded in managing anomalies that occur in the application of rules. Second, lack of involvement is more likely to result in active resistance to rules when actors are familiar with one another and with work tasks. While much research emphasizes the benefits of familiarity for performance, I find that actors who are familiar have both the motivation and the ability to resist bureaucratic control, even when rules are designed to serve their own interests. In the second essay, I extend the findings in the first essay to develop a dynamic theory of the success and failure of governance systems in organizations. Consistent with existing literature, I find that pressure to conform to externally imposed norms of bureaucratic rationality can cause dynamics of gradual decoupling between rules and practice. However, I find that the mechanism by which such pressures operate can be different than previously described. Rather than compelling organizations to adopt practices that are inefficient or opposed to the interests of managers or workers, external pressure creates a conflict that is temporal: necessary efforts to demonstrate compliance in the short run directly undermine efforts to make rules effective in the longer term. When organizational actors have the flexibility to build organizational capabilities absent imperatives to demonstrate strict compliance at all times, formal structure can evolve to become a highly effective means of organizing. Absent such flexibility, rules can become a source of conflict characterized by worker resistance, tighter control, and decoupling. In the third essay, I develop and calibrate a detailed simulation model to illustrate why management efforts to develop capabilities that support governance systems so often fall short. For this essay, I study the case of energy efficiency and maintenance reliability in the built environment. Even where proactive investments would improve both regulated outcomes and the bottom line, I show that managers might easily abandon investments early, before crossing a tipping threshold that allows for the realization of full benefits. Thus, successful self-regulation depends not only on managers recognizing and acting on opportunities, but also on managers understanding tipping dynamics and sustaining investments beyond levels that might initially appear sufficient.; (cont'd) Essay 2 - The phenomenon of decoupling between formal organization and work practice has been a central theme in organization studies for decades. How do we account for the prevalence of formal structure if it is so often ineffective? Existing theories of decoupling emphasize the inherent conflict that formal structure produces, between external legitimacy and efficiency on the one hand, and between worker consent and management control on the other. Yet, such theories fail to fully explain how formal structure is occasionally highly effective as a means of achieving reliable outcomes. Based on a comparative ethnography of the implementation of a safety management system in two industrial plants, I develop a dynamic theory of the success and failure of rule systems in organizations. Consistent with literature in the institutional tradition, I find that pressure to conform to externally imposed norms of bureaucratic rationality is an important source of decoupling. However, rather than compelling organizations to adopt practices that are inefficient or opposed to the interests of managers or workers, external pressure creates a conflict that is temporal: necessary efforts to demonstrate compliance in the short run directly undermine efforts to make rules effective in the longer term. When organizational actors have the flexibility to build organizational capabilities absent imperatives to demonstrate strict compliance at all times, formal structure can evolve to become a highly effective means of organizing. Absent such flexibility, rules can become a source of conflict characterized by worker resistance, tighter control, and decoupling. These results have important implications for modern efforts to manage risk in areas such as quality, safety, and environmental performance through governance systems based on transparency, accountability and standard rules.; (cont'd) Essay 3 - In recent years a growing stream of research has sought to identify how the actions of managers can influence compliance with regulation and corporate social responsibility in areas such as environmental performance, workplace safety, and financial accounting. One such strategy that has received widespread attention is the search for proactive "winwin" investments that improve both regulated outcomes and the bottom line. Yet, the prevalence of win-win investments raises an important question: if proactive investments are really profitable, why are they so often not performed, especially when their existence is so widely acknowledged? To develop insight into this question, we develop a detailed simulation model of a proactive investment in building maintenance and energy use. While a proactive investment can produce substantial positive returns, we illustrate why achieving full returns can be so difficult. Specifically, even when managers make substantial proactive investments, investments may not be large enough or long enough to cross a tipping threshold. In such cases, despite the appearance of success in the shortterm, performance gradually erodes to its original state, wiping out gains. Thus, successful self-regulation and process improvement depends not only on managers recognizing and acting on opportunities, but also on managers understanding tipping dynamics and sustaining investments beyond levels that might initially appear sufficient. Thesis (Ph. D. in Management)--Massachusetts Institute of Technology, Sloan School of Management, 2012.; Cataloged from PDF version of thesis.; Includes bibliographical references. Sun, 01 Jan 2012 00:00:00 GMT http://hdl.handle.net/1721.1/79030 2012-01-01T00:00:00Z http://hdl.handle.net/1721.1/79027 Organization-bound professionalism : essays on contemporary expert work Galperin, Roman V The three essays of the thesis explore the role of organizations in professional work and the role of professionalism in organizations, by analyzing novel data from three distinct empirical cases. The first essay uses the case of retail clinics firms in the U.S. market for primary care, to investigate how firms can penetrate the barriers of exclusive professional licenses and enter markets for professional work. The second essay uses the case of tax preparation work in the U.S., to study effects of (pseudo-) professional identity on firm performance in the context of non-professional work. The third essay uses the case of pro bono accounting work, to examine the process by which moral motivation of professional work translates into efficient, but morally contradictory outcomes. Together, the essays show that professionalism is a powerful cultural and sociological concept that has effects across a wide range of organizational phenomena. Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2012.; Cataloged from PDF version of thesis. "September 2012."; Includes bibliographical references. Sun, 01 Jan 2012 00:00:00 GMT http://hdl.handle.net/1721.1/79027 2012-01-01T00:00:00Z http://hdl.handle.net/1721.1/78490 Operational efficiency through resource planning optimization and work process improvement Balwani, Siddharth (Siddharth Vashdev) This thesis covers work done at National Grid to improve resource planning and the execution of pipeline construction and maintenance work carried out at the yards. Resource Planning, the art of picking the right jobs for the right days and assigning the right crews to them while meeting constraints of regulation, customer service, and safety at the minimum cost is an extremely difficult problem. This is exacerbated by the fact that there needs to be enough slack in the system to deal with one or more pipeline leaks that may be called in. At the execution stage, when the jobs are carried out by crews, the lack of standardization in work processes dealing with granting and approval of overtime, productivity tracking, data collection, and imperfect alignment of incentives make it difficult to get the best work from the crews. These issues lead to high levels of overtime at yards, which are the major source of costs for gas operations for the company. We propose the Resource Allocation and Planning Tool (RAPT) accompanied by yard level process management to improve operations performance. To automate short term planning, RAPT includes a two stage stochastic optimization model to perform job scheduling and crew assignment in the presence of a variable number of emergency leaks, thus creating optimal daily and weekly plans with minimal overtime costs. The tool also serves as a business intelligence platform, providing a companywide view of gas operations efficiency and as a decision aid, enabling management to predict the impact of management policies on field operations. The execution of work was improved by the creation of new processes for scheduling, crew data entry, overtime approval, incorporating accountability and oversight at multiple levels. This work has enabled more consistent processes, better overtime and productivity management, and the ability to understand and track deviations. These changes are currently being piloted at yards across the company and the initial results are very encouraging. As a direct result of this work, National Grid has the potential to achieve up to 65% reduction in overtime, saving the company a substantial amount of money. Thesis (S.M.)--Massachusetts Institute of Technology, Engineering Systems Division; and, (M.B.A.)--Massachusetts Institute of Technology, Sloan School of Management; in conjunction with the Leaders for Global Operations Program at MIT, 2012.; Cataloged from PDF version of thesis.; Includes bibliographical references (p. 84-85). Sun, 01 Jan 2012 00:00:00 GMT http://hdl.handle.net/1721.1/78490 2012-01-01T00:00:00Z