Creating Knowledge through Research

Paper title: “Further evidence on the effectiveness of community banks in the Paycheck Protection Program”

We analyze the Paycheck Protection Program (PPP) for small business lending of loans of $150,000 or less. Specifically, how did loans get funded during the critical first week of availability? We find that during the first week of available PPP loans, community banks issued nearly three times as many loans as large non-community banks, companies in nonmetro areas were more likely to borrow during the first week, and the effect is largely driven by community bank lending. Using Google mobility data, we show nonmetro borrowing increases with a reduction in geographic mobility.

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Paper title: Is your C-suite risk literate?

Managing risk effectively is essential for business success, and thus understanding risk is vital for business executives. Effective risk management increases firm value, whereas poor risk management will damage shareholder wealth. In this article, we examine the risk literacy of business executives and find significant variation among the leaders we sample. Our findings suggest that business executives would be well served to evaluate their own risk literacy, and remediate, if necessary; to work to increase risk literacy in the company’s employees; and to include risk literacy as an important and routine part of the firm’s overall culture. Because the importance of risk literacy increases with business complexity, we believe that risk literacy will only become more important in the future.

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Paper title: “Do retail traders destabilize financial markets? An investigation surrounding the COVID-19 pandemic”

Existing research suggests that retail trading is associated with volatility in financial markets. To extend the literature, we study the dynamic effects of retail trading on volatility during the COVID-19 pandemic. Using marketable retail trades identified from the Boehmer et al. (2021) algorithm and novel empirical methods discussed in Jordá (2005), we document a negative, persistent impact of retail trading on the stability of stock prices that is particularly stronger during the pandemic than during the pre-pandemic period. These results highlight how periods of crises – like the pandemic – affect the destabilizing influence of retail trading. To provide additional evidence, we replicate our empirical exercise during the 2008-09 financial crisis. Consistent with the COVID-19 period, we again find that retail trading leads to more volatility during the financial crisis vis-á-vis the pre-crisis period. These results again support the idea that periods of crises strengthen the link between retail trading and volatility.

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Paper title: “Putting the First Amendment in Play: Name, Image, and Likeness Policies and Athlete Freedom of Speech”

Decentralization of NIL regulations may put student athletes at risk when freedom of speech is put up against potentially problematic regulation

Following a recent Supreme Court case, the National Collegiate Athletic Association (NCAA) has decided to allow member schools and states to create their own rules and regulations surrounding name, image and likeness rights for their athletes.

While this new mandate may seem benign at first glance, Ehrlich argues that these new rules could put student athletes’ First Amendment rights at risk. According to his article, three recurring regulations may pose a particular danger to these students, namely “restrictions on athlete deals that conflict with institutional endorsement deals, restrictions on athlete deals with vice industries like gambling and alcohol and broad restrictions on deals that conflict with undefined ‘institutional values.’”

By applying legal constitutional analysis to these regulations, Ehrlich finds that by attempting to protect the ruling body the regulations have become overbroad, and can limit the freedoms of student athletes to express themselves under their First Amendment rights. As a result, these rules may likely be unconstitutional, as students who express certain personal or political views may face penalties under these regulations.

In the end, Ehrlich states that these new restrictions on NIL rights “present a ‘realistic danger’ [that these actors] could significantly compromise recognized First Amendment protections.”

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Paper Title: Shifting perspectives: How scrutiny shapes the relationship between CEO gender and acquisition activity

Klein’s research suggests that differences in strategic risk-taking between female and male CEOs depends on the situation that CEOs are facing.

Historically, academic research has suggested that female CEOs are more conservative leaders than their male counterparts. This is largely due to data suggesting that female executives are less likely to engage in risk-taking strategies, such as acquiring other companies.

Conversely, Klein’s research argues that this perspective ignores the larger context behind gender-based CEO behavior, and that this gendered behavior is much more nuanced than we have previously been led to believe. This is due to the fact that previous research largely ignores the situational context these CEOs face within their organizations, which significantly impacts their decision-making. To this end, Klein’s research also integrates executive job demands theory and gender research to reveal new aspects of gender-based CEO behavior.

The executive job demands theory states that as executives face more demanding job conditions it becomes increasingly difficult for them to process information and make decisions. This compounds with the fact that women in executive roles generally deal with more gender bias and face harsher evaluations than male executives. Research also shows that women are more deliberative and comprehensive information processors than men. As such, female executives face generally more demanding job conditions than males, resulting in less risk-taking behavior and more conservative leadership strategies.

These key factors account for many of the differences in risk-taking behaviors between male and female executives. To support this idea, Klein’s research also shows that when male CEOs are faced with similar scrutiny to female CEOs the gap in acquisitions becomes virtually nonexistent. Conversely, prior academic research historically exaggerates the gap in acquisitions when CEO scrutiny is lower.

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