Financial Markets

Just in case it needs explanation, financial markets are the markets where people trade financial securities. This is an interesting area for research since it has such a big impact on publicly traded organizations.

There are several research questions and ideas that can be examined in this setting (and many fields comment on them including finance and economics). In management, we are concerned with things such as strategy, top management, corporate governance, etc. This is a small sampling on this research:

  • Hayward and Boeker 1998:
    • They examined how the conditions underlying intragroup conflict affect analysts’ rating. They argue that an action that appears to be an act of self-interest may be explained by power structure between the departments of an organization, and such effect may be moderated by the reputation of analysts and his or her department.
  • Rao, Greve, and Davis 2001:
    • They examined a fragile nature of imitation-based institutionalization. They studied how Wall street stock price analysts’ initiate and abandon coverage of the securities of the firms. Drawing on social cognition literature, they argue that heuristics of social proof leads to imitation of others’ behaviors but it also leads to postestimation regrets that cause the decision makers to reverse their decision. Their findings show that analysts who initiate coverage by imitating peers are more likely to experience disappointment and abandon the coverage later.
  • Fanelli, Misangyi, and Tosi 2009:
    • They look at whether the projection of charismatic language (or CEO Charismatic Vision) in organizational discourse influences the judgements of institutional intermediaries (analysts). Yes, yes it does.
  • Benner and Ranganathan 2012:
    • They investigate how pressures from institutional environments influence firm’s responses to technological change. Analysts’ evaluations, as institutional pressure, affects strategic investment and firms that go against it try to offset it by share repurchasing.
  • Wiserma and Zhang 2013:
    • They look at how the board’s response to corporate misconduct is influenced by the social context, Board sensitively reacts to the pervasiveness of the misconduct and the media attention. This is stronger when the firm is under investigation.
(Adapted from course notes)
(Flashcards and other resources here)

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