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Costello College of Business finance professor receives coveted NSF early-career award

Greg Johnson — Thu, 22 Feb 2024 15:43:13 +0000

Costello College of Business finance professor receives coveted NSF early-career award Greg Johnson Thu, 02/22/2024 - 10:43

Jiasun Li, a recently promoted associate professor of finance at the Costello College of Business at �鶹��Ƶ, has received a prestigious CAREER award from the National Science Foundation (NSF).

Jiasun Li

According to the NSF website, the CAREER award is given to “early-career faculty who have the potential to serve as academic role models in research and education and to lead advances in the mission of their department or organization.”

The award totals $711,679 over five years. It will support Li’s ongoing research into the organization of digital services with the rise of emerging technologies.

This project jumps off from recent developments in cloud and decentralized computing. Both technologies present radical new possibilities for off-premise digital services, as evidenced by the rise of numerous cloud service providers as well as blockchain platforms.

However, the presence of strategic incentives may undermine the smooth and reliable functioning of such systems. For example, cloud providers may opt to short-charge clients when it comes to the provision of services, if it is in their best interests to do so. Alternatively, strategic actors may also disrupt the consensus protocols governing decentralized systems.

Li proposes to tackle these problems in an interdisciplinary manner, blending tools from computer science (as the topic is inherently about digital services) and economics (since incentive analysis traditionally falls in the domain of economics). He has finely honed this approach in a series of papers applying analytical models based on economic principles to decentralized systems such as blockchain proof-of-work technologies.

The ultimate goal of Li’s project, as stated in his NSF proposal, is to “guide the efficient organization of digital services for productivity gains, and thus enhance the economic competitiveness of the United States.”

Previously, Li received individual and collaborative grants from �鶹��Ƶ’s Multidisciplinary Research Initiative, the U.S. Department of Homeland Security, and the Ethereum Foundation, among others. He was recently named an inaugural Faculty Fellow of �鶹��Ƶ’s Institute for Digital Innovation (IDIA).

“I am extremely honored to receive an NSF CAREER Award because such grants are traditionally rare in business schools," said Li. "I really appreciate the trust NSF bestowed on me. This recognition is only possible thanks to the tremendous support and many forward-looking initiatives from �鶹��Ƶ and the Costello College of Business, as well as many colleagues across different disciplines who have inspired, guided, and elevated me over the years. I look forward to carrying out the interdisciplinary research projects under the continued support from NSF and the University/Costello College of Business.”

Ajay Vinzé, dean of the Costello College of Business, said, “This prestigious award from NSF is a fitting recognition of Jiasun’s superb/impactful research record and a proud moment for Costello College of Business--Congratulations Jiasun! As the evolution of the digital economy plays out, research like Jiasun’s project is going to provide relevant and actionable insights. I look forward with great excitement to contributions that are forthcoming.”

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Elevating impact through innovative research partnerships

Marianne Klinker — Fri, 21 Jul 2023 19:27:11 +0000

Elevating impact through innovative research partnerships Marianne Klinker Fri, 07/21/2023 - 15:27

�鶹��Ƶ School of Business boasts more than 60 full-time, research-active faculty across the accounting, finance, information systems and operations management, management, and marketing areas. In addition to pursuing research questions within their area of specialty, many School of Business scholars team up with peers from other disciplines to tackle complex societal problems.

These include so-called “wicked problems”, e.g. climate change and inequality, that require coordinated interventions because of their multifaceted nature.

Rich Klimoski, School of Business associate dean for research, says, “Business schools do in fact have multidisciplinary roots and are often composed of faculty that can apply expertise from diverse areas of study, including economics, mathematics, statistics, psychology, sociology, law, and others.

“Moreover, because big societal and economic challenges and opportunities are multidisciplinary in nature, business schools are uniquely prepared to contribute to understanding and solving these problems via research.”

Here are just a few examples of how SBUS professors are elevating their real-world impact through multidisciplinary collaboration.

J.P. Auffret

J.P. Auffret directs research partnerships for the School of Business, and the Center for Assurance Research and Engineering (CARE), housed in the College of Engineering and Computing. He will also co-lead (with computer science professor Amarda Shehu) the future Center for Excellence in Government Cybersecurity Risk Management and Resilience, which was founded with significant support from U.S. Representative Gerry Connolly, whose congressional district includes Fairfax, Virginia.

To be headquartered in �鶹��Ƶ Square, this Center-to-be will support and advance cybersecurity leadership and governance across the U.S. federal government by educating executives and middle managers, acting as a strategic partner in cybersecurity and IT modernization efforts, translating state-of-the-art research into federal government practice, collating and disseminating best practices for cybersecurity, and fostering cybersecurity organizational capacity.

Additionally, Auffret is furthering his long-standing local government cybersecurity partnering initiative which originally started as a National Science Foundation project with Virginia Tech professor Angelos Stavrou. As he explains, “Many local governments are quite small, and have limited budgets and resources while facing many of the same cybersecurity technology and organizational challenges as larger local governments. Partnering between local governments and with the states provides a means for enhancing cybersecurity capabilities." 

Lei Gao

Lei Gao, an associate professor of finance, contributes to several multidisciplinary research projects at various funding stages. One proposal, aimed at curbing gun violence, has Gao working alongside researchers from the fields of computer science, statistics and criminology. The team intends to use machine learning and other advanced technologies to discover leading indicators of mass shootings. Gao’s role relates to the economic piece of the puzzle, exploring questions such as whether localized or national economic downturns may be a precursor to mass shootings. “We might be able to provide some insights or early warnings for law enforcement to detect or forecast so that they can go there earlier and try to prevent these tragedies,” Gao says. He is also interested in what happens after mass shootings occur. “When gun violence occurs in a particular area, it can significantly decrease the attractiveness of the area to new businesses and talented individuals, leading to reduced tax revenues and economic consequences. By quantifying these costs, the public can better understand the costs of inaction on gun violence,” Gao says.

Abhishek Ray

Abhishek Ray, an assistant professor of information systems, has teamed up with a �鶹��Ƶ economics professor on a project investigating the online news market. The proposal jumps off from the idea that while democracy depends upon a well-informed citizenry, the internet is known for shunting users into “echo chambers” that reinforce pre-existing political biases. Using innovative techniques from “complex systems science for investigating economic activities and cognition in markets”, Ray aims to show how competition within the news industry drives the political polarization of journalism, and how these shifting levels of bias affect reader engagement. “Digital news has impacted consumers’ political involvement and information-seeking more profoundly than other media,” Ray explains. “This project will design mitigating regulatory frameworks using economics, computational and cognitive science.”

Sarah Wittman

Sarah Wittman, an assistant professor of management, and faculty from �鶹��Ƶ’s Volgenau School of Engineering are developing wearable technologies to empower people with various types of neurodiversity–Autism spectrum disorders, ADHD, etc.–to thrive at work. The project focuses on the retail and hospitality industries, where employment opportunities for neurodiverse people abound. Yet aspects of working life, such as the need to interact with others and complete tasks in a specific order, are frequently problematic for many in these communities. Wearables provide real-time biometric monitoring and simple interventions–e.g., encouraging the wearer to take a five-minute break when their heart rate rises to indicate frustration or agitation. By helping remove obstacles to gainful employment, these devices would create greater financial and emotional independence for the neurodiverse population.

While not a complete list, these examples help illustrate how School of Business scholars are breaking siloes to address problems of national, if not global import. As Klimoski states, “I am absolutely convinced that the kinds of research that will have the greatest likelihood of making an impact upon the world will require the coordination and collaboration of multiple teams made up of researchers from many different disciplines.”

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Four stop signs at intersections are one too many, suggests �鶹��Ƶ researcher

Jennifer Anzaldi — Wed, 19 Oct 2022 14:18:05 +0000

Four stop signs at intersections are one too many, suggests �鶹��Ƶ researcher Jennifer Anzaldi Wed, 10/19/2022 - 10:18

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For most drivers in the United States, obeying a stop sign upon approaching an intersection is an unavoidable annoyance. But for �鶹��Ƶ Finance Professor Jiasun Li, it’s a problem waiting to be solved.

His recent working paper proposes a simple and economical improvement: removing one stop sign from every four-way intersection. According to his calculations, this would boost not only driver safety, but environmental sustainability as well.

Li specializes in game theory, which models strategic interactions where rational agents seek – as humans generally do–to optimize outcomes for themselves. As he drove around Fairfax, Virginia, Li could not help but view four-way intersections through this academic lens.

He was struck by the suspicion that having four stop signs at an intersection was a flawed way of preventing traffic accidents. In effect, they lowered the potential cost of not stopping at the intersection, because drivers could assume that motorists from other directions, should there be any, would come to a stop. Drivers turning right, a shallower maneuver with less exposure to oncoming traffic, have the least risk to begin with and would have the greatest incentive to ignore the sign.

Li surmised that the outcome of all drivers obeying the sign fell short of a Nash equilibrium–game theory’s term for a stable set of norms that all parties are incentivized to follow.

His working paper presents mathematical models that support his intuition. Comparing the risks of collision against the gains from ignoring the sign (i.e. a smooth driving experience or conserving gasoline), he finds that a symmetric equilibrium under the current four-sign mechanism to be one in which left-turners and straight-line travellers honor the stop sign but right-turners do not.

In real life, of course, fear of getting slapped with a moving violation increases the likelihood of compliance with stop signs. But the need for law enforcement is less than ideal, Li says. If the four-way stop system were self-enforcing, expensive police resources could be directed toward serious crimes and away from preventive punishment for traffic violators.

Li’s working paper first considers what would happen if traffic laws were changed to allow right-turners to run the stop sign legally. In an intersection with four stop signs, this would indeed prevent accidents. However, many U.S. intersections have only two signs, which would place right-turners at risk of colliding with traffic coming from the left. In addition, Li argues that old habits die hard, including behind the wheel.

“If you need people to change their behavior, that’s going to be difficult,” he says.

Instead, Li recommends removing one sign–any sign–from among the four. In that case, drivers would know that running a stop sign could send them straight into the path of an oncoming car that has not been directed to stop. The universal fear would incentivize compliance without relying on the threat of police punishment. “Importantly, although the safety and incentive analysis rely on game theoretical reasoning, once implemented, a three-sign mechanism does not require any changes in behaviors for law-abiding drivers,” Li says.

Further, Li’s back-of-the-envelope math suggests that his relatively mundane change could be surprisingly impactful. Based on official statistics from various U.S. authorities, he estimates there are about one million four-way intersections with stop signs in the U.S., each one being traversed by more than 760,000 vehicles per year. That amounts to more than 760 billion (760,000 x one million) stops and starts in a year, one-fourth of which (190 billion) would be avoided in a three-sign setup.

According to Li’s calculations, assuming it takes 124.9 kilojoules of work to bring a car of average weight to a full stop, and the same amount to resume the previous level of speed, adopting a three-sign system would save a total of 118.65 trillion kJ in the U.S. per year. That equates to one billion gallons of gasoline, or about 2.7 days’ worth of national gas consumption.

Looking farther out on the technological horizon, Li speculates in the paper that “when self-driving cars finally become real, our new simpler mechanism may also economize AI computational costs.”

Li has no illusions about the resistance his recommendation may provoke. “You’re challenging people’s conventional wisdom. If there’s criticism, that’s to be expected. For example, some cops might not like this idea, because I’m taking away one of their income sources, even though there could be an overall gain to the whole society.”

This paper is only one manifestation of what Li sees as a scholarly mission to apply novel perspectives – in this case, an economics viewpoint derived from game theory – to real-world problems, especially those that have been taken for granted for so long that they are not even recognized as problems.

“Economics thinking should be applicable to a lot of different fields and improve our daily lives,” Li explains.

What seems totally natural in one context, after all, may be foreign in another. Many countries–including China, where Li was born–don’t use four-way stop intersections. “If I grew up with these stop signs, I probably wouldn’t think about it,” he says. This is an example, Li suggests, of how diverse experiences and ideas imported via immigration can enrich host nations. Far from wanting the last word on the issue, Li is hoping to inspire wide-ranging conversation about how to change environments and communities for the better.

“I would rather have the discussion ongoing and people give me ideas,” he says. “Only through debate will people understand it better.”

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Beyond the business case for Corporate Social Responsibility

Jennifer Anzaldi — Wed, 12 Oct 2022 12:25:31 +0000

Beyond the business case for Corporate Social Responsibility Jennifer Anzaldi Wed, 10/12/2022 - 08:25

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Corporate social responsibility (CSR) has been on the business leadership agenda for more than 50 years, yet executives and corporate boards still demand to see the “business case” for CSR. Clearly, CSR’s familiarity as a concept has not translated into coherent ideas of where it fits into the cost-benefit calculations that motivate business strategy.

A forthcoming article in the Journal of Financial and Quantitative Analysis by Lei Gao, associate professor of finance at �鶹��Ƶ School of Business, Jie (Jack) He (of University of Georgia) and Juan (Julie) Wu (of University of Nebraska – Lincoln) goes beyond the business case to form cause-and-effect connections involving companies’ CSR efforts. Gao and his co-authors found that companies under negative share-price pressure have used CSR to telegraph their strong fundamentals to investors, a tactic that paid off in the marketplace. The researchers homed in on real-life scenarios where companies randomly received tougher treatment in equities markets, so that price pressure could be cleanly separated from business fundamentals. They chose to look at the arbitrarily selected pilot group of companies affected by Regulation SHO, an SEC rule that abolished the “uptick rule” for short selling – thereby potentially making these companies more attractive targets. As an additional setting, they studied companies exposed to downward pricing pressure due to mutual fund fire sales.

The companies that suffered through these forms of arbitrary adversity exhibited higher-than-average levels of CSR activity, as reflected in the MSCI KLD Stats Database. KLD reports on individual companies’ strengths and weaknesses across seven areas, including employee relations, the natural environment, and human rights. To ensure accuracy, the KLD scores were double-checked against Thomson Reuters ASSET4, a leading CSR data provider for thousands of global companies.

Gao explains that when companies are randomly swept up in forces beyond their control (such as new regulations and asset fire sales) that throw their market value into doubt, executives try to send countersignals that reflect positively on company fundamentals. And if these countersignals can help the company connect with an entirely new category of well-informed investors, so much the better.

“If I want to show I’m a better company than peers, I can do a special dividend, or a share repurchase. This is a kind of signalling that is very direct and expensive, and only reaches existing shareholders,” Gao says. “CSR is basically kind of broadcasting to so many different kinds of stakeholders, including environmentally and socially aware investors.”

These messages seemed to reach their intended targets. The researchers found that in both the Regulation SHO and mutual fund fire sale settings, socially responsible institutional investors increased their holdings of price-pressured companies that stepped up their CSR signalling.

Enlarged positions from this investor class was a main contributor to an overall decline in cost of equity capital for CSR-signalling companies. In the case of the Regulation SHO pilot stocks, capital cost declined by around 50-60 basis points, compared to non-CSR-signallers and non-pilot stocks.

CSR initiatives, then, help firms with strong fundamentals distinguish themselves from others undergoing similar pricing pressures. But that doesn’t mean CSR can be used as a smokescreen for badly run businesses, or a cynical short-term evasion.

“Companies should keep in mind that it’s not a one-and-done,” Gao says. “You have to keep working to keep these investors happy once you’ve won them over…Signalling is not cheap talk or a rumor. This is something they have committed to. They have the resources to do so, and they believe it will benefit them in the long run.”

The companies in Gao’s sample were highly incentivized to undertake CSR signalling. But the tactic would presumably work for strong companies in general, regardless of pricing pressures. When it comes to CSR, therefore, “business case” thinking may be backward. Instead of pursuing a short-term upside, well-run companies may consider CSR engagement as a way toward claiming their proper status – and the rewards that go with it – in the eyes of investors. To put it another way: Rather than vegetables swallowed down dutifully, CSR could represent the icing on the cake of success.

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