ABSTRACT We offer the first empirical evidence on the adverse effect of credit default swap (CDS) coverage on subprime mortgage defaults. Using a large database of privately securitized mortgages, we find that higher defaults concentrate in mortgage pools with concurrent CDS coverage, and within these pools the loans originated after or shortly before the start of CDS coverage have an even higher delinquency rate. The results are robust across zip code and origination quarter cohorts. Overall, we show that CDS coverage helped drive higher mortgage defaults during the financial crisis.

This research explores whether the foreign professional experiences of influential execu-tives predict firm-level creative output. We introduce a new theoretical model, the foreign experience model of creative innovations, to explain how three dimensions of executives’ foreign work experiences—breadth, depth, and cultural distance—predict an organiza-tion’s “creative innovations, ” which we define as the extent to which final, implemented products or services are novel and useful from the standpoint of external audiences. We examined 11 years (21 seasons) of fashion collections of theworld’s top fashion houses and found that the foreign professional experiences of creative directors predicted the creativ-ity ratings of their collections. The results revealed individual curvilinear effects for all three dimensions: moderate levels of breadth and cultural distance were associated with the highest levels of creative innovations, whereas depth showed a decreasing positive effect that never turned negative. A significant three-way interaction shows that depth is the most critical dimension for achieving creative innovations, with breadth and cultural distance important at low but not high levels of depth. Our results show how and why leaders ’ foreign professional experiences can be a critical catalyst for creativity and

Abstract When buying durable goods, consumers must forecast how much utility they will derive from future consumption, including consumption in different states of the world. This can be complicated for consumers because making intertemporal evaluations may expose them to a variety of psychological biases such as present bias, projection bias, and salience effects. We investigate whether consumers are affected by such intertemporal biases when they purchase automobiles. Using data for more than 40 million vehicle transactions, we explore the impact of weather on purchasing decisions. We find that the choice to purchase a convertible or a four-wheel-drive is highly dependent on the weather at the time of purchase in a way that is inconsistent with classical utility theory. We consider a range of rational explanations for the empirical effects we find, but none can explain fully the effects we estimate. We then discuss and explore projection bias and salience as two primary psychological mechanisms that are consistent with our results.

A series of Strategic Management Journal studies have debated the extent to which business‐unit, corporate parent, and industry effects explain variance in firm performance. Despite evidence that the industry life cycle impacts competition and performance, the life cycle concept has yet to be incorporated into the firm vs. industry debate. Building on ideas from systems theory, we use longitudinal data from 1,957 firms in 49 industries to examine the relative importance of business‐unit, corporate parent, and industry effects during the growth, maturity, and decline stages of the industry life cycle. We find that corporate parent and industry effects increase as industries move through the life cycle while business‐unit effects decrease between maturity and decline. Thus, the life cycle concept should be incorporated within the firm vs. industry debate . Copyright © 2013 John Wiley & Sons, Ltd

Along with other affective and emotional dimensions, passion is at the heart of entrepreneurship. Yet past research on entrepreneurial passion (EP) has been hindered by the lack of a sound measurement instrument. Through a series of empirical studies conducted with samples from relevant populations, we develop and validate an instrument to capture EP and its inherent dimensions. We show that the task-specific dimensions of EP (intense positive feelings toward the domains of inventing, founding and developing, and the centrality of these domains to entrepreneurs' self-identity) are conceptually and empirically distinct from one another, and from other emotions and cognitions known to play a role in entrepreneurship. Our theory and results indicate that proper measurement of entrepreneurial passion incorporates the interaction between entrepreneurs' feelings and identity centrality for each domain. We discuss the implications of our model, instrument and findings for future research on the affective components of innovation and entrepreneurship. We also develop specific guidelines for using our validated instrument in future research.

While firm-initiated compensation recovery (or clawback) provisions are gaining popularity and the recently enacted Dodd-Frank Act seeks to make the clawback of erroneously awarded compensation mandatory for all listed companies, little is known about their effectiveness. We find that the incidence of accounting restatements declines after firms initiate such provisions. In addition, we show that investors and auditors view such provisions as associated with increased accounting quality and lower audit risk. Specifically, we find that firms' earnings response coefficients increase after the adoption of clawback provisions. Further, for firms that adopt clawbacks, auditors are less likely to report material internal control weaknesses, charge lower audit fees, and issue audit reports with a shorter lag.

This research investigated the role of contemplation, conversation (conceptualized as social contemplation), and explanation in right-wrong decisions. Several theories suggest that contemplation or morally oriented conversation will promote ethical decisions and that immediate choice or self-interested conversation will not; other theories suggest that individuals' explanations will reinforce their decisions. An experimental task tempting people to lie supported all of these predictions. In addition, truth tellers viewed the situation as morally oriented, and non–truth tellers viewed it as oriented around self-interest, both before and after their decisions. These findings provided the basis for a new process model of moral decision making.

We examine the effect of corporate social responsibility (CSR) on the cost of equity capital for a large sample of US firms. Using several approaches to estimate firms’ ex ante cost of equity, we find that firms with better CSR scores exhibit cheaper equity financing. In particular, our findings suggest that investment in improving responsible employee relations, environmental policies, and product strategies contributes substantially to reducing firms’ cost of equity. Our results also show that participation in two “sin” industries, namely, tobacco and nuclear power, increases firms’ cost of equity. These findings support arguments in the literature that firms with socially responsible practices have higher valuation and lower risk.

Although models of alliance network dynamics have focused primarily on alliance formation, this study advances research by investigating member withdrawal from alliances. We develop a model of cohesion and friction at the relationship, network, and market levels and propose cross-level cohesion and time-varying effects on member withdrawal, giving predictions that are distinct from those of alliance formation studies. Our analysis of alliances in the global liner shipping industry showed greater withdrawal rates as a result of market competition and time-dependent effects of prior direct and third-party ties, suggesting that member withdrawal has both social and task-related causes.

In order to adjust, expatriates working abroad must form network ties in the host country to obtain critical informational and emotional support resources. We present a five-stage process model that delineates how expatriates form adjustment-facilitating support ties in a culturally unfamiliar context. We then provide propositions about how the progression of each stage is influenced by various expatriate-, actor-, and context-related factors. We conclude by discussing our model's implications for future research and managerial action.