London Business School

About: London Business School is a education organization based out in London, England, United Kingdom. It is known for research contribution in the topics: Portfolio & Equity (finance). The organization has 1138 authors who have published 5118 publications receiving 437980 citations. The organization is also known as: LBS.

The Effect of Liquidity on Governance

Abstract: This paper studies the effect of stock liquidity on blockholder governance. Conditional upon acquiring a stake, liquidity reduces the likelihood that a blockholder governs through voice (intervention) – as shown by the greater propensity to file Schedule 13Gs (passive investment) than 13Ds (active investment). The lower frequency of activism does not reflect the abandonment of governance, but governance through the alternative channel of exit (trading): a 13G filing leads to positive announcement returns and improvements in operating performance, especially in liquid firms. Moreover, liquidity increases the likelihood of block formation to begin with. Taking this into account, liquidity leads to an overall increase in both voice and exit, and is thus beneficial for governance. We use decimalization as an exogenous shock to liquidity to identify causal effects.

Organizational Learning Curves for Customer Dissatisfaction: Heterogeneity Across Airlines

Abstract: In the extensive literature on learning curves, scholars have ignored outcome measures of organizational performance evaluated by customers. We explore whether customer dissatisfaction follows a learning-curve pattern. Do organizations learn to reduce customer dissatisfaction? Customer dissatisfaction occurs when customers ex ante expectations about a product or service exceed ex post perceptions about the product or service. Because customers can increase expectations over time, customer dissatisfaction may not decline even when the product or service improves. Consequently, it is an open question whether customer dissatisfaction follows a learning-curve pattern. Drawing from the literatures on learning curves and organizational learning, we hypothesize that customer dissatisfaction follows a U-shaped function of operating experience (Hypothesis 1), that focused airlines learn faster to reduce customer dissatisfaction than full-service airlines (Hypothesis 2), and that organizational learning curves for customer dissatisfaction are heterogeneous across airlines (Hypothesis 3). We test these hypotheses with quarterly data covering 1987 to 1998 on consumer complaints against the 10 largest U.S. airlines. We find strong support for Hypothesis 1 and Hypothesis 3. Hypothesis 2 is not supported in the sense that the average focused airline did not learn faster than the average full-service airline. However, we do find that the best focused airline learns faster than the best full-service airline. We explore this result by extending a knowledge-based view of managing productivity learning curves in factories to complaint learning curves in airlines.

Firm-Level Exposure to Epidemic Diseases: Covid-19, SARS, and H1N1

Abstract: Using tools described in our earlier work (Hassan et al., 2019, 2020), we develop text- based measures of the costs, benefits, and risks listed firms in the US and over 80 other countries associate with the spread of Covid-19 and other epidemic diseases. We identify which firms expect to gain or lose from an epidemic disease and which are most affected by the associated uncertainty as a disease spreads in a region or around the world. As Covid-19 spreads globally in the first quarter of 2020, we find that firms' primary concerns relate to the collapse of demand, increased uncertainty, and disruption in supply chains. Other important concerns relate to capacity reductions, closures, and employee welfare. By contrast, financing concerns are mentioned relatively rarely. We also identify some firms that foresee opportunities in new or disrupted markets due to the spread of the disease. Finally, we find some evidence that firms that have experience with SARS or H1N1 have more positive expectations about their ability to deal with the coronavirus outbreak.

Power and Choice Their Dynamic Interplay in Quenching the Thirst for Personal Control

Abstract: Power and choice represent two fundamental forces that govern human behavior. Scholars have largely treated power as an interpersonal construct involving control over other individuals, whereas choice has largely been treated as an intrapersonal construct that concerns the ability to select a preferred course of action. Although these constructs have historically been studied separately, we propose that they share a common foundation—that both are rooted in an individual’s sense of personal control. Because of this common underlying basis, we hypothesized that power and choice are substitutable; that is, we predicted that the absence of one would increase the desire for the other, which, when acquired, would serve to satisfy the broader need for control. We also predicted that choice and power would exhibit a threshold effect, such that once one source of control had been provided (e.g., power), the addition of the other (e.g., choice) would yield diminishing returns. Six experiments provide evidence supporting these predictions.