Investors in the stock market are in a perpetual state of needing information about the firms in which they invest. Value-relevant information about firms is often geographically dispersed. Finance professor Johan Sulaeman of SMU Cox and co-authors parse the impact of geography on information and performance in their new research. The authors suggest that local information advantages do matter, and institutional investors that play the local advantage angle realize higher returns on their stock portfolio holdings.
In new research, ITOM Professor Sreekumar Bhaskaran of SMU Cox School of Business and co-authors analyze the operational tradeoffs for entrepreneurial, start-up firms launching a first product that lays the foundation for success or failure. Biotech firms, for example, face tradeoffs about when to launch a first breakthrough product or when to wait for the best available version. The threat of bankruptcy often puts pressure about the decision to launch or not. "The conventional wisdom of 'failing forward' is not the best strategy for start ups," says Bhaskaran.
Numerous banks in the U.S. failed during the recent financial crisis and more would have absent governmental intervention, writes Hemang Desai of SMU Cox. In new research, Accounting Professor Desai and co-authors indicate that short sellers were sensitive to the warnings signs of bank distress in the banks’ financials. Short sellers apparently recognized that the banks’ valuation and performance could not be sustained—well before the crisis unfolded. "The notion that everybody missed [the financial crisis] — is just not true, " states Desai. "This is not the first time we have had a wave of overvaluation — or that banks have failed."
Mystique shrouds the activities surrounding the board of directors. Today directors serving on boards are paid quite handsomely. In a first-of-its-kind paper, SMU Cox Distinguished Finance Professor James Linck, with Viktar Fedaseyeu and Hannes Wagner, analyze directors —who they are, what they do and how much they are paid. Many believed that the board of directors was an 'old boys network.' As far back as the early '90s, research indicated the 'appearance' of an old boys network, notes Linck. That has changed.
In the world of finance, quantifying the "soft qualities" of CEOs is a fairly new trend. In this emergent literature, SMU Cox Accounting Professor Ke and co-authors focus on how the executive team and their communications affects corporate disclosure quality. Their study is a first to demonstrate that top executives, other than just the CEO and CFO, also play important roles in the management forecast process. This study also adds to the growing literature in finance on social networks.