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Seonghoon Kim
1. Valuation for Corporate Mitigation Strategy (w/ Johan Sulaeman and Haoxu Wang)
Abstract: From the perspective of firms, an environmental mitigation strategy should meet societal demands for sustainability while also being economically viable and profitable. In this paper, we develop a financial model to help firms choose their mitigation strategies, using a real options approach. In doing so, we categorize a firm’s potential strategies into abatement (a growth option; investment in new abatement technology for now) and offset (a deferral option; deferring technological investment for now and waiting to purchase environmental credits in the future). Using this framework, we provide firms with financial guidance on which option to prioritize to maximize firm value. Finally, we apply the model to real-world cases, calculating and comparing the option values of each strategy to inform investment decisions.
2. Information Disclosure Weakens Collective Reputations: Shareholder Reaction to the Toxic Release Inventory (w/ Matthew Potoski)
Abstract: A collective reputation is stakeholders’ mental image about how the observable characteristics of a group indicate members’ performance along difficult-to-observe attributes. Collective reputations become less salient when stakeholders receive new information about individual members’ difficult-to-observe qualities. In 1989, the US EPA published the Toxic Release Inventory (TRI) which provided for the first time detailed information on the pollution emissions of large facilities, including companies in the chemical industry, which had a collective reputation for poor environmental performance. We apply multiplicative heteroskedastic linear regression models to data on 82 chemical firms to show that the TRI data release reduced the salience of chemical industry’s collective reputation, resulting in shareholders evaluating the firms’ financial prospects more individually.
3. Into a Vicious Cycle: A Negative Spillover Effect of an Entrepreneurial Failure on an Assessment of Minority Entrepreneurs' Managemerial Competence (w/ Jessica Santana & Sarah Thébaud)
Abstract: In this research, we argue that when people see a business failure of a certain female or minority entrepreneur, they negatively assess managerial competence of all other female or racial-minority entrepreneurs of the same field. At the core of our argument is the role of group stereotypes. In the entrepreneurial domain, differential assessments have existed about female vs. male (or Black vs. white) entrepreneurs, such that people assess female or racial-minority entrepreneurs as less competent than male or racial-majority entrepreneurs in managing their business. Under this circumstance, a female or racial-minority entrepreneur’s business failure can trigger people’s recognition of other female or racial-minority entrepreneurs’ group stereotype, leading to the reinforcement of an already-negative stereotype. Once negatively updating a group stereotype, people further negatively evaluate female or racial-minority entrepreneurs’ multiple, competence-relevant unobservable qualities, such as leadership, R&D knowledge and/or adaptability. Since these attributes are closely related to entrepreneurs’ financial rewards, minority entrepreneurs’ market performance can be significantly reduced on the capital market. In this paper, we derive relevant hypotheses and test them through an experimental vignette study approach.
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