Originally published in the inaugural edition of Carroll Capital, the print publication of the Carroll School of Management at Boston College. Read the full issue here.
“Does Tax Enforcement Deter Managers’ Self-Dealing?”
More Faculty Research
See a sampling of faculty research, media highlights, and awards from the spring 2023 semester.
IRS audits scare even CEOs. And those audits don’t have to be personal—executives reduce their personal tax shenanigans when their companies are audited. That’s according to research by Accounting Professors Benjamin Yost and Susan Shu, published in the Journal of Accounting and Economics.
The professors examined whether executives change their own gifts of stock when their companies are audited. These gifts often end up benefiting the executives, either because their timing is suspicious—they happen right before big stock drops—or they go to a family foundation the executive controls.
The IRS doesn’t announce audits, but the professors figured out how to identify them—and then match this information with stock gifts, which are reported. Their conclusion: “Heightened scrutiny from tax enforcement serves as an effective monitoring mechanism and reduces managers’ self-dealing behavior.”
Marketing Professors Gergana Nenkov and Linda Salisbury
“Consumer Financial Vulnerability: Novel Insights for Theory, Practice, and Public Policy”
When you hear “financial vulnerability,” you probably think of poverty. If so, you’re typical—and wrong, according to Marketing Professors Linda Salisbury and Gergana Nenkov. They and their collaborators have reconceived the idea of consumer financial vulnerability in a Journal of Marketing article. They argue this sort of vulnerability entails exposure to potential harm, often rooted in risks beyond just low income or wealth.
A business owner, for example, might’ve been wealthy but exposed as financially vulnerable by the pandemic. The professors’ new definition helps marketers identify vulnerable consumers and create products and services that “meet their needs while also preventing (or reducing the risk of) realized harm.”
“Launching with a Parachute: The Gig Economy and New Business Formation”
Ride-hailing companies seem a straightforward proposition—with a smartphone, you can hire a car more cheaply and easily than you could an old-fashioned cab. Now, research by Finance Professor Livia Yi shows that gig-economy companies like Lyft and Uber may have less obvious benefits: They may encourage entrepreneurship.
Writing in the Journal of Financial Economics, Yi and colleagues discuss the introduction of Uber and Lyft nationwide, which they found was associated with upticks in business registrations and small business lending. The gig economy, they suggest, may be serving as a form of insurance for entrepreneurs, giving them the financial and schedule flexibility to start businesses.
Finance Professor Nathan Dong
“Determinants of LGBTQ+ Corporate Policies”
LGBTQ+ policies remain divisive in corporate America. Some companies, like Starbucks, strongly support them; others, like Chick-fil-A, condemn them. Finance Professor Nathan Dong and coauthors say the education level of a firm’s employees and the political leanings of the county of its headquarters determine whether it will be more like Starbucks than Chick-fil-A. More college-educated employees and liberal neighbors lead to more LGBTQ+ friendly workplaces.
Published in The Review of Corporate Finance Studies, the researchers also concluded that shareholder pressure induces companies to change their LGBTQ+ policies.
“Learning to Successfully Hire in Online Labor Markets”
Everyone is tempted by a bargain. And everyone knows it’s sometimes smart to pass on what’s cheap because it’ll cost you in the long run.
Companies, it turns out, are no different, at least in their online hiring practices. According to Business Analytics Professor Sam Ransbotham and former Carroll School Professor Marios Kokkodis, firms often experiment with their hiring in online labor markets, like Upwork and Freelancer. They start out by hiring the cheapest contractors, even when those folks have so-so reputations. They can’t resist a bargain.
But then—surprise!—they get burned and opt to change their approach, paying up for better workers and seeing better results. Employers are likely to do this because they’re overconfident, the researchers write in Management Science. They “try to beat the market by hiring cheaper contractors that they consider as good deals.” A few of these hires work out. But most don’t, so they change their approach.
