Research Bulletins

REIT Relationships

Using hand-collected data from offering prospectuses and other corporate filings, Nandu Nayar, department chair, Perella department of finance and McKay Price, finance professor, et al, examine the market response to real estate investment trust (REIT) follow-on stock offerings’ stated uses of proceeds. Consistent with the idea of bank certification, they showed that markets react relatively favorably to REIT equity offers when issuers have lending relationships with affiliates of the underwriters. However, they also found that reactions are most favorable when REIT issuers intend to repay their bank’s line of credit, regardless of the bank’s affiliation with the underwriters. This pattern is particularly strong among smaller firms with lower institutional ownership. Their findings suggest that credit line repayments preserve benefits of bank monitoring while enhancing financial flexibility. Further examination reveals monitored financial flexibility is the dominant effect.

Transfer Express

How does the busyness of a hospital’s emergency department (ED) and inpatient wards (IP) affect inter-hospital patient transfers? Are patients transferred selectively based on their insurance status at busy hospitals? Han Ye, associate professor, David Rea, assistant professor, and Professor David Peng at the DATA department, together with their coauthors, studied multi-million patient encounters at ED and IP in the state of Florida in 2017. Their study uncovered contrasting effects of ED and IP busyness: patients who arrived when the ED (IP) was busy were less (more) likely to be transferred. Furthermore, they found evidence of potentially strategic profit-seeking behavior by hospitals based on patients’ insurance in these transfer decisions. These findings imply that insurance status perhaps causes individuals to be disadvantaged in terms of accessing healthcare resources.

Easy A?

Associate Professor of Economics, Ahmed Rahman, and his coauthors explore the tradeoffs associated with teaching content, developing non-cognitive skills and keeping student satisfaction high. They looked at how instructors teaching first semester courses at the U.S. Naval Academy provided value-add for students. They discovered that first-course instructors who tended to give out generous grades dramatically hurt subsequent student performance. Instructors harm students not by “teaching to the test,” but rather by producing misleading signals regarding the difficulty of the subject and the soft skills needed for college success. Faculty well-liked by students and considered easier have particularly pernicious effects on subsequent student performance.

I See You

Humans have an inherent desire to feel appreciated. Practitioners stress that ensuring employees feel appreciation is integral to sustaining motivation and retaining employees. Why, then, despite the fact that supervisors are trying to express gratitude, do many employees report not feeling appreciated? Liuba Belkin, associate professor of management and her colleagues argue that in order to understand whether gratitude expression evokes felt appreciation among employees, we need to understand employee preferences for different types of expression. The research team found that a fit between supervisor’s gratitude expression and the subordinate preference for that category of expression leads to increased felt appreciation and encourages employee engagement, while a misfit has the opposite effect. Making a concerted effort to demonstrate responsiveness, supervisors will help their gratitude expressions count.

What, Me Worry?

The public and policymakers are interested in ways to reduce auditors’ reluctance to issue going concern opinions (which express substantial doubt about a company’s viability) on financially distressed companies. In an experiment conducted by Tamara Lambert and Marietta Peytcheva, Lehigh Business accounting professors and Lindsay Andiola, Virginia Commonwealth University, when using a task with going concern risk, experienced auditors made a preliminary going concern judgment after examining management’s quarterly going concern evaluation. Auditors then made a year-end going concern judgment. Findings indicated that auditors’ communicating informally to client management, and/or documenting in the workpapers their preliminary going concern judgment, increased the year-end likelihood of their issuing a going concern opinion in different, theory-consistent ways. Their results can guide audit firms and policymakers on best practices.

Sustainable Luxury?

Luxury (based on logics of excess, extravagance and conspicuousness) and sustainability (based on logics of paucity, conservation and self-restraint) seem incompatible and contradictory, yet, luxury brand managers are regularly challenged with how to successfully marry the two. Ludovica Cesareo, assistant professor of marketing, and her coauthor, discover that the embeddedness of sustainable innovation is one factor underlying effective sustainable luxury. They demonstrate that embedded (unique high-end innovations), but not peripheral (mainstream activities that are commonplace) sustainability aligns with luxury brands. First, it safeguards the hedonic potential of luxury brands, and increases purchase intent and status-signaling behaviors. This asymmetry is unique to luxury. Consumers respond favorably to embedded and peripheral sustainability for non-luxury brands.