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By 2010, the McCombs School of Business plans to bolster its professorial
ranks by adding 40 new tenure-track positions. That expansion, in conjunction
with the normal attrition of faculty due to retirement, means that we’re
likely to meet 70 new faculty members over the next five years.
This year, the McCombs School welcomed seven new faculty members from
Columbia, Harvard, Kellogg, MIT, Michigan and Wharton. Having already
earned your MBA, you might never study capital markets with Zhenyu Wang
or negotiation with Jeffrey Loewenstein—but as we pursue our goal of
becoming the nation’s top public business school, their teaching and
research will contribute to the value of your degree.
Faculty Profiles
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Yanfeng Xue
The past few years have been wild for the normally staid discipline
of accounting, which has seen its corporate scandals, national headlines
and experts all over the news. Can the Tom Wolfe treatment be far behind?
If so, Yanfeng Xue would probably not be surprised.
“Accounting research is not that narrow,” says Xue. “It’s very closely
tied with finance.”
Her own research has led Xue into hot-topic territory on several occasions.
One of her working papers, prepared this year as she was finishing up
her Ph.D. at MIT, concerns the relationship between CEO compensation
and a firm’s innovation strategies. Xue found that when a CEO’s compensation
package includes stock and, especially, stock options in the company,
that correlates with a tendency on the part of the company to develop
technology internally. However, if the CEO’s compensation is more accounting-based,
the tendency is for the firm to purchase their technology from others.
Slightly more controversial, Xue says, is her work on earnings management,
the recently notorious practice whereby companies deploy accounting
strategies to nudge their quarterly earnings past a given threshold.
Often, this threshold number is zero. The practice is commonly looked
down on and considered a transparently opportunistic attempt to placate
or impress investors.
As Xue sees it, though, it is exactly this transparency that should
give lie to the common view. “Investors aren’t that stupid,” she says.
“Both managers and investors are rational.” Although crossing the line
from negative to positive earnings is psychologically important, she
says, investors are not going to be overly impressed by pennies. Managers
would not expect them to be, nor would they be willing to dig themselves
an expectations hole for future quarters without a good reason to do
so. Rather, Xue says, her research indicates that earnings management
should be considered a signaling device. Small firms in particular may
manage earnings to reflect information about their future prospects.
Xue’s industry experience enhances her research background. She worked
for two global energy firms, doing trading risk and credit risk analysis
for the electricity trading division of Boston’s AES Corporation, and
working as an accountant for Shell in China.
Paul Tetlock
Paul Tetlock’s career thus far must make
his parents proud. “I was literally listening to graduate economics
lectures in the womb,” observes Tetlock, a new arrival at the McCombs
School, “so I was probably destined for something like this.” He’s joking,
but he’s also an assistant professor of finance, so there you go.
After earning his undergraduate degree at Harvey Mudd, Tetlock worked
at the AEI-Brookings Joint Center in Washington, D.C. He continued his
study of economics at Harvard. His thesis examined how the expectations
of investors can affect financial markets and yielded this encouraging
conclusion: “Even in situations where some investors are behaving irrationally,
market prices can look as if everyone is rational,” he says, explaining
that observant investors see irrationalities in prices as profit opportunities
and quickly pounce.
Tetlock’s interest in behavioral finance carries over into his interest
in asset pricing. He is currently working on a paper with a colleague
from AEI-Brookings about how asset markets can be used to improve public
policy decisions. “The great thing about asset markets,” he says, “is
that they have this amazing ability to aggregate information from different
sources, so prices reflect all available public information.” Tetlock
and his co-author developed an algorithm that combines asset markets
and incentive contracts to help decision makers obtain the information
and means necessary to achieve their objectives.
Zhenyu Wang
McCombs students are not particularly adversarial. If they were, however,
Zhenyu Wang would be ready. Having worked as a consultant and economist
for the Federal Reserve System, it fell to him to arbitrate several
disputes the Fed and the U.S. Treasury face with the banks. In the process,
he has had a significant impact on the U.S. banking industry. In 1999, for example, Wang developed a pricing formula for the interest rate the government charges banks in the Treasury Tax & Loan Investment Program, through which the Treasury invests the Federal tax collected by the U.S. government. And in 2002, based on a paper Wang wrote, the Federal Reserve System changed the regulation that governs the fees the Fed charges banks for using the services and payment system, such as Check Clearing and Fed Wire, provided by the Federal Reserve Banks.
Meanwhile, Wang maintained a side gig as a professor at Columbia University, where he arrived right after earning his Ph.D. from the University of Minnesota at Twin Cities in 1995.
In addition to government policy in banking and finance, Wang’s research interests include asset pricing and allocation, investments and portfolio management, risk theory and financial econometrics.
He is an associate editor of Management Science and Journal of International Financial Markets, Institutions & Money. He is also on the editorial board of Annals of Economics and Finance.
Some of Wang’s research on investment has actually already been taught here by other professors. His research on beta and the CAPM can be found in the popular investment textbook by Bodie, Kane and Marcus and in the famous book, “A Random Walk Down Wall Street.”
Dovev Lavie
An arrival from the Wharton School, Dovev Lavie specializes in strategic
management and the study of alliance networks. Although primarily trained as an engineer, he realized early on in his career that he was less interested in maximizing efficiency than in envisioning strategy and improving organizational performance. For this reason, he went back to pursue his MBA at Technion, the Israel Institute of Technology, where he had previously studied economics, industrial engineering and management.
After working in project management for several years as an organizational consultant and a manager in the aerospace and defense industry, Lavie went to Wharton for his Ph.D.
Lavie’s dissertation concerned what he calls “interconnected firms.” These are companies that form alliance networks and collaborate extensively with others.
“A traditional belief in the field of strategic management,” says Lavie, “is that successful companies like to keep others at bay.”
This view, Lavie says, “should be revisited, since in real life, you have a combination of competition and collaboration.” His findings reveal how interconnected firms evolve and how the composition of alliance partners and the nature of inter-firm relationships contribute to firms’ financial performance.
Lavie’s research interests are manifold. They include value creation and appropriation in alliance networks; applications of the resource-based view and dynamic capabilities approach in technology-intensive industries; the positioning of multinational corporations in foreign markets; and the implications of technological change.
Jeffrey Loewenstein
It’s tempting to think of a negotiations expert as a diabolical mastermind
just waiting to come into his own. However, this is assuredly not true
of Jeff Loewenstein, a new assistant professor of management. For one
thing, the goals he identifies for a successful negotiation leave little
room for mischief: “Ideally, both parties reach an agreement that’s
valuable to them and in the process establish positive relationships
and reputations, which can be even more valuable.”
Loewenstein, who has formerly taught at Kellogg and Columbia, will teach
negotiations to MBA students. The simulation-based format of the class
“helps students grapple in real time with the cognitive and interpersonal
challenges of negotiating.”
The class itself fortuitously combines Lowenstein’s teaching interests
with his research interests, which include how people learn to negotiate.
Loewenstein is trained as a psychologist, having earned his Ph.D. in
cognitive science from Northwestern University. “One of the joys in
moving from a psych department is that the study of management is interdisciplinary
in a whole new way,” he says.
In one recent research project, for example, Loewenstein studied the
role of analogies in learning. His conclusions suggest a way to enhance
the case-based method found in many business school courses.
“Examples are great,” he says. “They’re memorable. The problem is what
you remember. I’m working on methods for helping people retain and use
what’s important.” If anyone is curious about the success of these methods,
they can easily find out by dropping in on one of his classes.
Romana Khan
The next time the salesperson at Banana Republic offers you the chance
to save 15% on that dress shirt by signing up for a credit card, you
might want to question his motivation. As Romana Khan, a new assistant
professor of marketing at McCombs, points out, these credit cards track
purchase history information for ongoing customer loyalty programs,
as well as market research. “A few years ago, it became illegal to track
your usage of regular credit cards,” she notes, “so stores started pushing
their own.”
Marketing research is one of Khan’s primary teaching interests and an
area in which she has practical experience, having worked as a marketing
analyst for Prevision Marketing. Her other teaching and research interests
include pricing, database marketing, price discrimination and market
segmentation.
One of her recent research projects, for example, concerns the sales
of a product when a relatively similar product becomes available. Specifically,
she and her co-researchers looked at what happened to the over-the-counter
crowd when the FDA approved naproxen sodium, also known as Aleve. With
Aleve on the shelves, sales of ibuprofen went up and acetaminophen went
down. This is somewhat counterintuitive, since ibuprofen and naproxen
sodium have a lot in common, and acetaminophen is comparatively unique.
As Khan just received her Ph.D. from the Kellogg School of Management
at Northwestern in June, this is her first faculty position. “Great
people, a supportive research environment, and a great city,” are what
attracted Khan to McCombs.
Oh, and why did acetaminophen sales drop? To find that out, you might
have to come back to school.
Paul Damien
“My primary interest was always in mathematics, and applying mathematics
in a variety of contexts,” says Paul Damien, a new professor of management
science and information systems. While this fascination is not unusual
given Damien’s field, many of his other scholarly pursuits run counter
to the expected.
Elaborating on his interests, Damien moves quickly from risk management,
option pricing and the Riemann hypothesis to Mark Twain, Gustav Mahler
and Emily Dickinson. The latter lent her given name to a literary magazine
Damien spearheaded at the Michigan Business School, where he taught
from 1996 until his arrival here. His diverse publications include “Implementation
of Bayesian nonparametric inference using beta processes,” a paper that
appeared in the Scandinavian Journal of Statistics, and “Death in C
Minor,” a psychological thriller.
“I hate to be pigeonholed,” says Damien.
In addition to teaching at the Michigan Business School, Damien has
been a visiting professor at Duke. His industry experience includes
a stint as a senior research manager at Kimberly-Clark and as an econometrician
at the Public Utility Commission of Texas here in Austin.
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Faculty Expertise Guide: www.utexas.edu/faculty/
