Driving a More Prosperous Future

Identifying Competitors in Geographical Markets Using the CSIS Method
Journal of Marketing Research

Businesses with physical footprints – hotels, retailers, and restaurants – must identify the competitors that matter most. Traditional approaches using brand tier or proximity often fail in dynamic or asymmetric markets. We introduce the Conditional Sure Independence Screening (CSIS) method to marketing to identify true competitors based on their pricing influence on a focal firm’s demand. CSIS is computationally efficient, robust to spatial mis-specifications, and effective for identifying, asymmetric, even non-local, and segment-specific competition. It is also an effective variable selection technique.

In applying CSIS to U.S. hotel data our analysis shows that competition intensity varies not only by location or market segments, but that asymmetry is common – many hotels influence others without being influenced in return. Our methodology enables smarter, data-driven pricing and benchmarking and helps tailor strategy to segment and seasonality. In addition, it is scalable across industries such as retail, services, and hospitality.

Xian Gu, Assistant Professor, Kelley School of Business, Indiana University; P.K. Kannan, Dean's Chair in Marketing Science, Smith School of Business, University of Maryland

• Enterprise and Markets

CFO Narcissism and the Power of Persuasion Over Analysts: A Mixed-Methods Approach
Review of Accounting Studies

We study the role of CFO narcissism in the intent and ability to positively influence sell-side analysts’ perceptions of the firm. Consistent with narcissists casting favorable impressions on others, we find CFO narcissism is associated with overly optimistic analyst valuations. We then study public persuasion attempts by analyzing conference call transcripts and private persuasion attempts through a laboratory study. In the conference call setting, we provide evidence that narcissistic CFOs use more persuasive language and are more inclined to call on bearish analysts, both of which we link to higher price targets. In the lab study, we simulate a one-on-one conversation and find that narcissists are especially more likely to use coercive methods to induce higher valuations (e.g., threatening to remove private lines of communication). Collectively, we provide evidence that narcissistic CFOs exercise persuasion tactics to favorably influence analysts’ perceptions of firm value.

Chad Ham and Mark Piorkowski - Indiana University; Nick Seybert - University of Maryland; Sean Wang - Southern Methodist University

• Enterprise and Markets
• Leadership

Do Credit Rating Agencies Learn from the Options Market?
Management Science, November 2024

Do credit rating agencies (CRAs) learn from the options market? We examine this question by exploring the relation between options trading activity and credit rating accuracy. We find that as options trading volume increases, credit ratings become more responsive to expected credit risk and exhibit greater ability to predict future defaults. We also find that CRAs rely more on the options market as a source of ratings-related information when firm default risk is higher, options trading is more informative, manager-provided information is of lower quality, and firm uncertainty is higher. Our results are robust to a number of sensitivity tests, including alternative measures of options trading and credit rating accuracy. We reach similar inferences using various approaches to address endogeneity issues, including difference-in-difference analyses and an instrumental variables approach. Overall, our findings are consistent with the view that CRAs incorporate unique information from the options market into their rating decisions which, in turn, improves credit rating accuracy.

Musa Subasi, University of Maryland-College Park
Paul Brockman, Lehigh University
Jeff Wang, San Diego State University
Eliza Zhang, University of Washington-Tacoma

• Enterprise and Markets