Kelley School of Business (Indianapolis) Works

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The Effects of Sources of Earnings Forecasts and Degree of Source Expertise on Subjects' Estimates of Earnings per Share: A Field Experiment
(1983) Hassell, John M.
Motivated by previous research in accounting, finance, and psychology, this dissertation reports the results of a field experiment to determine whether two particular variables affected subjects' estimates of earnings per share. The variable used were the source of an earnings forecast and the degree of expertise of the source of the earnings forecasts. Subjects were professional employees of bank trust departments whose jobs normally entail analyzing firms and estimating the firms' future earnings per share. The research utilized Analysis of Variance (ANOVA) for statistical tests of the dependent variables. The sources of earning forecasts used in this study were financial analysts and company officials (management). Earnings forecasts issued by financial analysts and management are widely disseminated in the financial press. Abundant theoretical and empirical literature exists that supports the notion that investors use financial analyst and management earnings forecasts when making investment decisions. The question of whether investors are influenced more by financial analyst or management earnings forecasts has not been answered. This dissertation provides empirical evidence about which source of earnings forecast was more influential in one particular research setting. The second experimental variable examined in this study was a degree of expertise of the sources of the earnings forecasts. A stream of social psychology literature has dealt with the variable source credibility, of which source expertise is a component. That literature, in a variety of experimental settings, consistently has reported that source expertise is a significant variable. However, the sources used in the psychology literature ranged from non expert to expert. Both financial analysts and company officials are considered to be expert sources of earnings forecasts. Thus, this study investigated whether differences in the degree of expertise of expert sources was a significant variable. For the experimental setting used in this study, the source variable was found to be a significant variable while the degree of expertise of the source was not significant. Thus, subjects' earning per share estimates reflected a preference for one earnings forecast source (company officials) over another source (professional financial analysts). On the other hand, subjects' earnings per share estimates were not affected by the degree of expertise of the source.
"Golden Parachutes": A Closer Look
(University of California, 1984) Cochran, Philip L.; Wartick, Steven L.
This article describes various aspects related to the policy of golden parachutes (GP). Discussed are golden parachutes in regards to changes in organizational control, voluntary and involuntary termination, and guaranteed employment provisions. In regards to the question of who has golden parachutes, the authors examined the proxy statements of all of the 1981 Fortune 500 companies. Content analysis of these statements was conducted. The authors determined that 11 percent of those firms had GPs. Also discussed is what is included in a GP, the pros and cons of GPs, and the legal perspectives.
Heuristics and Biases in the Intuitive Projection of Retail Sales
(1987-08) Cox, Anthony D.; Summers, John O.
Retail merchandise buyers are shown to exhibit a nonregressive bias when making sales projections. A quantitative model based on the principle of statistical regression is found to outperform the judgmental sales predictions of experienced buyers. Implications for the appropriate roles of intuitive and model-based decision making in retail merchandise buying are discussed.
What Does Familiarity Breed? Complexity as a Moderator of Repetition Effects in Advertisement Evaluation
(1988-06) Cox, Dena S.; Cox, Anthony D.
This article examines how consumers' attitudes toward advertisements are affected by their previous exposure to them. The results of our experiment suggest that the effects of exposure on ad attitudes may be moderated by the complexity of the advertisement: evaluations of complex ads become more positive with exposure, while those of simple ads do not. This finding may help explain why previous studies of ad exposure effects have yielded mixed results.
The Effects of Background Music in Advertising: A Reassessment
(1989-06) Kellaris, James J.; Cox, Anthony D.
Gorn's (1982) pioneering article on the effects of background music in advertising has spurred a significant controversy and inspired vigorous interest in the topic. Following the recommendation of Allen and Madden (1985), we conducted three experiments that attempted to replicate Gorn's results. Contrary to Gorn's findings, there was no evidence that product preferences can be conditioned through a single exposure to appealing or unappealing music.
When Consumer Behavior Goes Bad: An Investigation of Adolescent Shoplifting
(1990-09) Cox, Dena S.; Cox, Anthony D.; Moschis, George P.
Shoplifting is a troubling and widespread aspect of consumer behavior, particularly among adolescents, yet it has attracted little attention from consumer researchers. This article reports and interprets findings on the pervasiveness of shoplifting among adolescents, the characteristics that distinguish adolescent shoplifters from their nonshoplifting peers, and adolescents' views regarding the reasons for this behavior. Our findings contradict some popular stereotypes concerning the typical shoplifter and suggest some rethinking about adolescents' reasons for shoplifting.
The Effect of Background Music on Ad Processing: A Contingency Explanation
(1993-10) Kellaris, James J.; Cox, Anthony D.; Cox, Dena S.
Music is an increasingly prominent and expensive feature of broadcast ads, yet its effects on message reception are controversial. The authors propose and test a contingency that may help resolve this controversy. Experimental results suggest that message reception is influenced by the interplay of two musical properties: attention-gaining value and music-message congruency. Increasing audience attention to music enhances message reception when the music evokes message-congruent (versus incongruent) thoughts.
Communicating the Consequences of Early Detection:The Role of Evidence and Framing
(2001-07) Cox, Dena S.; Cox, Anthony D.
Despite the enormous benefits of early-detection products, consumers are reluctant to use them. The authors explore this reluctance, testing alternative approaches to communicating the consequences of detection behaviors. The results suggest that anecdotal messages are more involving than statistical messages and that positive anecdotes (about gains from screening) are less persuasive than negative anecdotes (about the losses from failing to get screened); positive anecdotes appear to cause a “boomerang” effect. The authors discuss implications for promoting consumer risk-reduction behaviors.
Research Report: Modifying Paradigms—Individual Differences, Creativity Techniques, and Exposure to Ideas in Group Idea Generation
(2001-09) Garfield, Monica J.; Taylor, Nolan J.; Dennis, Alan R.; Satzinger, John W.
In today's networked economy, ideas that challenge existing business models and paradigms are becoming more important. This study investigated how individual differences, groupware-based creativity techniques, and ideas from others influenced the type of ideas that individuals generated. While individual differences were important (in that some individuals were inherently more likely to generate ideas that followed the existing problem paradigm while others were more likely to generate paradigm-modifying ideas that attempted to change the problem paradigm), the exposure to paradigm-modifying ideas from others and the use of intuitive groupware-based creativity techniques rather than analytical groupware-based creativity techniques were found to increase the number of paradigm-modifying ideas produced
Capital market reactions to the passage of the Financial Services Modernization Act of 1999
(The Quarterly Review of Economics and Finance, 2002) Carow, Kenneth A.; Heron, Randall A.
The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act (GLBA), removed most of the remaining barriers between financial companies. Stock market reactions to the passage of GLBA vary across financial sectors and company size. Specifically, we find negative returns for foreign banks, thrifts and finance companies; insignificant returns for banks; and positive returns for investment banks and insurance companies. Additionally, larger non-depository firms have higher returns. The return variation reflects resolution of uncertainty surrounding the final provisions of GLBA, competitive pressures, and expectations of future business combinations. Potential gains from business combinations may arise from economies of scope, market power, and/or from an implicit extension of government guarantees to banking affiliates.

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