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Lubin Business Review

Lubin Business Review Spring 2024 Issue

Spring 2024 Issue No. 4

View the Spring 2024 Issue (PDF)

Table of Contents

In The Journals

On the Bookshelf

Editors' Introduction (PDF)
Drs. Eric Kessler and Ping Wang

In this fourth issue of Lubin Business Review (LBR), we continue our pre-pandemic mission of translating cutting-edge research for practical use by today鈥檚 business professionals. This involves providing you鈥攐ur valued university members and alumni, business community colleagues, and global education partners鈥攚ith one-page abstracts of recently published academic journal articles and scholarly books, written by our faculty, that have been condensed and re-oriented toward an applied practitioner audience.

In the Journals

Audit Fee Lowballing: Determinants, Recovery, and Future Audit Quality (PDF)
Dr. Myojung Cho

Lowballing is the practice of setting audit fees lower than audit costs during the initial year of an audit engagement to better compete for large and prestigious clients. Regulators and practitioners have long been concerned about the potential impact of lowballing on auditor independence and audit quality. Regulators are particularly concerned about the cozy client-auditor relationship growing stronger with more profitable non-audit services such as advisory or consulting services, and/or the influence of large and important clients on auditors.

Powerful CEOs and Their Legacy: Evidence from Credit Risk Around CEO Turnovers (PDF)
Drs. Marcus Braga Alves, Iuliana Ismailescu, and Kaustav Sen

CEO turnover is a major corporate event that can create new opportunities for a firm, but can also raise uncertainty for various stakeholders. Prior literature has focused on the uncertainty due to either a forced turnover or the appointment of a new CEO. We look at it more comprehensively, capturing the impact of both outgoing and incoming CEOs on credit risk and how forced turnovers moderate these effects. Our findings provide new insights into sources of uncertainty around CEO turnovers, especially due to outgoing CEO characteristics, and extend the literature on the determinants of credit default swap spreads (our measure of credit risk) around this corporate event.

How Does Information Processing Efficiency Relate to Investment Efficiency? Evidence from XBRL Adoption (PDF)
Dr. Feiqi (Freddy) Huang

High-quality financial reporting can improve capital investment efficiency. However, successful communication between managers and investors through financial reports is determined by both the quality of information content and the cost of information processing. This research suggests that the cost of processing financial information is an important factor that may affect the degree of information asymmetry and managers鈥 investment decisions. Using the adoption of the eXtensible Business Reporting Language (XBRL) as an exogenous shock that decreases information processing cost, this research examines whether the information processing cost affects corporate investment efficiency.

Heartland Payment Systems: Cybersecurity Impact on Audits and Financial Statement Contingencies (PDF)
Dr. Ping Wang

Cybersecurity is among the leading risks faced by companies. Given that sensitive information is increasingly hosted on either accessible company-controlled physical servers or in the cloud, companies run the risk that this data may be compromised by outside parties. As a result, external auditors must be extremely careful in assessing both business process and financial accounting systems after a data breach.

Financial Efficiency and Accounting Quality: The Impact of Institutional Micro-Factors on FDI (PDF)
Drs. Jouahn Nam and Kevin J. Wynne

In this paper, we explore whether financial markets and accounting qualities have an impact on foreign direct investment (FDI). We use unique survey data from the World Economic Forum to quantitatively measure the efficiency of financial markets and the quality of accounting standards. This paper makes further contributions by exploring the impact of financial markets and accounting qualities on FDI for developing vs. developed countries.

The Role of Corporate Governance for Acquisitions by the Emerging Market Multinationals: Evidence from India (PDF)
Drs. Burcin Col and Kaustav Sen

With rapid increases in globalization, multinational enterprises are no longer restricted to those founded in developed nations. Acquisitions by emerging market multinational enterprises (EMNEs) of targets located in developed markets have increased drastically over recent years. Studying cross-border mergers and acquisitions (M&As) of emerging market (EM) firms where the target is in a developed market (DM) offers an excellent setting to investigate whether stronger country-level investor protection is associated with changes in firm-level corporate governance and higher valuation of EMNEs. We contribute to the literature that explores the relation between firm-level and country-level governance, as well as the literature regarding convergence in corporate governance practices following cross-border deals.

How Creditor Rights Affect the Issuance of Public Debt: The Role of Credit Ratings (PDF)
Dr. Padma Kadiyala

Firm-level credit ratings act as an information channel that translates country-level changes in the strength of creditor rights to a firm鈥檚 decision to issue public debt. These results are predicted by a combination of two theories of credit: (1) the power theory, which predicts that creditors are more willing to extend credit when bankruptcy laws strengthen their power, and (2) the information theory, which predicts a greater willingness to lend when lenders have more information on borrowers.

What Do Capture Ratios Really Capture in Mutual Fund Performance? (PDF)
Drs. Aron Gottesman and Matthew R. Morey

Many well-known mutual fund companies, as well as mutual fund rating services such as Morningstar, have recently reported capture ratios to help investors evaluate mutual fund performance. These ratios give investors a sense of how a fund has performed in certain market conditions. For example, there is an upside market capture ratio that shows a mutual fund鈥檚 past performance in up-markets. Similarly, there is a downside market capture ratio, which provides the fund鈥檚 past performance in down-markets.

Structural Decisions About Configuration, Assignments, and Geographical Distribution in Teams: Influences on Team Communications and Trust (PDF)
Dr. Julia Eisenberg

The latest industry trends, such as advances in technology and increased flexibility related to remote work, have resulted in a greater variety of team structures. These different structures introduce challenges to how team members interact and collaborate. Thus, to facilitate an understanding of the challenges and ways to address them, we explore the effects of configuration, assignment, and geographical elements of a team structure on team dynamics. Additionally, we also consider the effects of a team member鈥檚 perceived psychological distance from others on their team, the richness of available social cues, and the psychological safety one experiences as a member of their team, together with the type of team structure, to highlight areas of focus for organizations to facilitate employees鈥 team communication and trust.

Multi-Tiered Blood Supply Chain Network Competition: Linking Blood Service Organizations, Hospitals, and Payers (PDF)
Dr. Pritha Dutta

While blood, a critical component in healthcare, is supplied by voluntary donors at no cost, there are several operational and logistical costs incurred by blood banks. In practice, there is a disconnect between costs incurred by blood banks and hospitals, and the reimbursements received from payers, which can adversely affect the economic stability of this crucial supply chain.

Predictive Machine Learning for Prescriptive Applications: A Coupled Training鈥揤alidating Approach (PDF)
Dr. Ebrahim Mortaz

Several existing algorithms have been proposed to adjust the training of machine learning (ML) methods so that they can be used in decision making. Most either propose model-specific methodologies, rely on modeling properties, or involve significant custom implementation challenges. Consequently, we argue that there is room for an approach that attempts to circumvent these issues. Most importantly, we offer a methodology for training ML models for optimization that organically builds on standard ML training frameworks. We are able, on one hand, to ensure that the resulting approach is model-independent, and on the other hand, to leverage the existing ML implementation infrastructure.

Modeling Landscape Sustainability in the Oil Producing Niger Delta Area of Nigeria (PDF)
Dr. Christian N. Madu

Nigeria is one of the major oil-producing countries in the world. Most of Nigeria鈥檚 crude oil is derived from the Niger Delta area. The area is heavily polluted from oil activities coupled with oil pipeline vandalism. The government allocates only 13% of the revenue from the oil to the Niger Delta area. The citizens of Niger Delta are demanding an allocation of 25%. The aim of this study is to look into these problems to identify how to reverse the loss of environmental resources and restore the pride and functions of landscape sustainability and/or ecosystem services in the Niger Delta area.

Deconstructing the Statutory Landscape of 鈥淩evenge Porn鈥: An Evaluation of the Elements that Make an Effective Nonconsensual Pornography Statute (PDF)
Dr. Jessica A. Magaldi

Image-based sexual abuse, also called nonconsensual pornography (NCP), is the distribution or dissemination of intimate images without the consent of the subject, which causes victims to suffer substantial harm. Since 2013, forty-eight jurisdictions (forty-six states, the District of Columbia, and Guam) have enacted statutes criminalizing NCP. The difference in the construction of such criminal statutes, however, and particularly regarding essential elements, suggests a lack of consensus over how NCP is viewed as a criminal act. The issue researched is whether these statutes are successfully punishing and deterring perpetrators of NCP, and whether the U.S. legal system, including the U.S. Constitution, is equipped to adapt to this new intersection of society and technology.

Zarin v. Commissioner Revisited and Some Methodologies for Determining COD Income (PDF)
Dr. Philip G. Cohen

The focus of this article is a revisit of a very well-known and much written about Third Circuit Court of Appeals decision, Zarin v. Commissioner, concerning whether the taxpayer had cancellation of indebtedness (COD) income. Zarin dealt with whether a compulsive and unlucky gambler could avoid COD income when he settled with the casino for substantially less than what he owed. Besides a plethora of diverse third-party assessments of the case, the judges who heard the case and its appeal were also divided.

The New and Decidedly Improved IRS 鈥淔act Sheet鈥 Frequently Asked Questions (PDF)
Dr. Frank G. Colella

As a result of the pandemic, the IRS significantly increased the use of Frequently Asked Questions (FAQ) to communicate information to taxpayers. FAQ posted on the IRS.gov website, however, were not formal guidance that taxpayers could rely upon for penalty relief, should the FAQ be incorrect. FAQ bypass the more rigorous process employed to promulgate formal guidance, which taxpayers may rely upon. On October 15, 2021, the IRS updated its FAQ process for, inter alia, FAQ associated with new tax legislation. This change was significant because it recognized that the sheer number of new FAQ would generate increased taxpayer reliance on the information they contained鈥 and it would be inequitable to penalize taxpayers if FAQ content was incorrect.

Towards a Macromarketing and Consumer Culture Theory Intersection: Participatory and Deliberative Methodologies (PDF)
Dr. Canan Corus

This research provides discussion on the use of an alternative paradigm (i.e., participatory and deliberative approaches methods) in order to allow a cross-fertilization of consumer culture theory (CCT) and macromarketing. CCT work studies consumer identity projects, marketplace cultures, and marketplace ideologies focusing on individuals鈥 cultural and experiential consumption. Macromarketing deals with the interactions across firms and consumers, governments, regulatory bodies, etc., that derive meaning from some larger marketing system. Additionally, macromarketing involves topics such as the quality of life, sustainable development, and distributive justice.

A Customer-Focused Approach to Improve Celebrity Endorser Effectiveness (PDF)
Dr. Vishal Lala

Celebrity endorsements are ubiquitous in the advertising landscape, appearing in roughly one-fifth of all advertisements. This research examines the extent to which consumers identify with an endorser and the resulting influence of consumer identification on consumer evaluation of the endorser and the endorsed product.

Professional Athletes鈥 Social Media Use and Player Performance: Evidence from The National Football League (PDF)
Dr. Leigh Anne Donovan

The number of professional athletes who participate on social media has increased dramatically over the past decade. This comes with positive opportunities: the ability to engage with fans, share personal stories, and build/enhance their brand. However, there are also concerns about the negative implications of social media use from simple distraction to possibly having a negative impact on athletic performance. We examine individual level social media activity to empirically investigate how athletes鈥 expressions of humility on social media and volume of social media are associated with in-game performance.

Rounded or Angular? How The Physical Work Environment Influences Makers鈥 Creativity (PDF)
Dr. Chongyu Lu

Over the last decade, makerspaces have exploded in popularity around the world. Governments and large companies (e.g., Google and Microsoft) have adopted makerspaces because they have become one of the most important environments for nurturing creativity in the 21st century. Although attention has been paid to makerspaces, little is known about the influence of physical work environment on creativity. This study examines the effect of rounded and angular physical work environment cues on makers鈥 creativity.

On the Bookshelf

Regulation of Innovative Technologies: Blockchain, Artificial Intelligence and Quantum Computing (PDF)
Dr. Rosario (Roy) Girasa

The latest technological developments concerning blockchain, including cryptocurrencies and their substantial increases and decreases in valuation, artificial intelligence, and the latest improvements in quantum computing, inevitably lead to fraudulent and other criminal behaviors. This text examines the legal and regulatory enactments that have occurred or have been proposed to curb harmful risks and dangers, especially to individual freedoms resulting from biases, facial recognition, automatic license plate recognition, and other evolving applications of the technologies.

Regulation of Innovative Technologies: Blockchain, Artificial Intelligence and Quantum Computing - Commentary (PDF)
Dr. Robert S. Wiener

This accessible, well-written, well-sourced book by Dr. Rosario (Roy) Girasa, and his former student Gino J. Scalabrini, is of general importance. It equips the reader to apply its theories to state, federal, and international regulation of innovative technologies such as blockchain, artificial intelligence, and quantum computing. The cases discussed help us understand the issues of Sam Bankman-Fried, ChatGPT, and the case U.S. v. Google. The diverse perspectives of the authors combine to broaden and deepen discussion of the challenges of under-regulation if society is not protected from abuses by users of these technologies, and over-regulation if basic individual freedoms, such as privacy, are abused.

Wise Leadership: A Toolbox for Sustainable Success (PDF)
Dr. Eric H. Kessler

We are drowning in data. Overflowing in information. Awash in knowledge. But we are starving for wisdom. Though much has been pontificated about leadership, these efforts are so varied that they tend to obscure more than they elucidate. Wise Leadership: A Toolbox for Sustainable Success provides current and emerging leaders with a grounded, integrated, and intuitive framework to help them adapt seamlessly to the gauntlet of fundamental leadership challenges. Incorporating diverse examples and practical guidelines, this book offers a dynamic repertoire of flexible leadership capabilities to help readers become, and remain, successful.

Wise Leadership: A Toolbox for Sustainable Success - Commentary (PDF)
Dr. Katherine Richardson

Wise Leadership: A Toolbox for Sustainable Success provides for 21st century leaders a roadmap that鈥檚 both meaningful and practical. In writing that is direct and easy to understand, Kessler presents a holistic framework of leadership drawn from his many years studying organizations across the globe. This book encourages readers to reflect on their leadership styles and move beyond their comfort zones to acquire new skills to lead with wisdom and purpose. In the age of analytics and ChatGPT鈥 where data is turned into information, and perhaps knowledge, at the click of a button鈥擪essler鈥檚 timely book makes a strong case for how to take the next step during this challenging time and actually become a wise leader.