Smith School of Business Graduate Theses

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    Three Essays on Sustainable Finance: Canadian Physical Costs of Climate Change, Global Carbon Prices and the Costs of Climate Change, and, Environmental and Disclosure Performance: A Study of CA 100+ Companies
    Willcott, Neal; Business; Cleary, Sean
    Sustainable finance has been increasingly gaining prominence in mainstream financial studies. The consideration of sustainability concerns within the sphere of finance has significant economic implications for society, investors, and beyond. In the past decade, the severity of climate change and its associated costs has spurred conversations about how to safeguard our prosperity in the face of this growing concern. These questions form the fundamental motivation for the study of how global climate change influences economic outcomes and firm performance and cost of equity. Specifically, this thesis is motivated by areas within sustainable finance that demand further research. The results from the first essay provide insight into the economic costs to Canada across several temperature outcomes leading into 2100. Using the Dynamic Integrated Climate and Economic (DICE) model, we project that climate change mitigation efforts that lead to a 2oC outcome more than pay for themselves in avoided climate costs from physical damages. The second essay investigates the climate change outcomes under varying global average carbon prices. We find that a global carbon price, while playing a critical role, will not be sufficient to meet our Paris Climate Agreement goals of limiting our global temperature increase to 1.5-2oC above pre-industrial levels by 2100. We also project significant differences in global physical costs, highlighting the urgency of taking action to mitigate global warming. The third essay investigates how environmental and disclosure performance influences firm’s return performance and cost of equity. We examine CA 100+ and find that they outperform other world indices in returns at a lower standard deviation, indicating stochastic dominance performance. We further find that the 2022 cost of equity (CoE) estimates for CA 100+ firms are in line with expectations after adjusting for country and industry impacts. We also find that, among CA 100+ firms, those that performed the worst environmentally and regarding disclosures had a lower CoE, contrary to expectations.
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    Professional Identity and Culture: A Review on Auditors' Professional Identities Through the Ranks and a Study on Auditors' Identities Away from Centers of Power
    Stack, Ryan; Business; Malsch, Bertrand
    In my thesis, I examine the behaviours that constitute proper professional conduct within professional service firms (PSFs). In the first study, I explore prior studies relating to professional socialization of auditors. Drawing on 22 qualitative field studies, I synthesize socialization through the ranks of PSFs. The levels of the journey range from students in prestigious Canadian business school learning how to present themselves to elite accounting firms, to partners who emphasize the increasing need to build the business at the expense of technical expertise. Critically, this work recognizes the historic overfocus on a specific type of firm – Big 4 offices in metropolitan locations, and the need to build a more complete perspective by cultivating new research by examining historically neglected firms, locations, and individuals. My second study is based on 22 semi-structured interviews conducted with partners and senior managers at PSFs on the island of Newfoundland, where I was born and lived before moving to Ontario to attend Queen’s. I investigate the key attributes and skills that are needed to thrive in a PSF in Newfoundland. Newfoundland is a place far from centers of power, possessed of a unique culture and an economy starkly different from many prior sites of study. At the theoretical level, my study employs Bourdieu’s triad of Field, Capital, and Habitus to examine interviewees’ responses. I find that, contrary to prior studies of Western power-central locales, Newfoundland’s practitioners show an emphasis on client retention, on maintaining good relationships with other professionals, and on serving the community. Many of the forms of capital valued in other settings, such as displays of wealth or associations with elite educational institutions, are devalued in the Newfoundland setting. Likewise, interviewees often distanced themselves from traditional audit and assurance roles, deriding them as ‘non-value-added work’, while showing a preference for the trusted business advisor milieu. Overall, my dissertation contributes to our understanding of the linkage between local culture and the behaviour that is appropriate or required of accounting professionals. Newfoundland provides one example of a site ripe for further study, though other such sites abound. As my first paper asserts and my second further contends, a complete picture of the accounting profession can only be formed by recognizing the field beyond the metropole.
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    Three Essays in Corporate Finance
    (2024-01-30) Drapeau, Line; Business; Gagnon, Louis
    Leniency laws constitute a powerful deterrent to the formation of new cartels and an effective tool facilitating the dismantling of existing cartels, thereby introducing a competition shock in the countries where they are enacted. While the connection between product market competition and firms’ financial decisions has been a subject of interest (e.g., Khanna and Tice (2000), Xu(2012), Jiang, Kim, Nofsinger, and Zhu (2015)), the lack of exogenous variation has hindered definitive inferences. This thesis explores the impact of the anticipated passage of leniency laws worldwide on firms’ valuations and financial decisions. In the first study (Chapter 2), I investigate the causal link between competition and firm value. My findings indicate that the investing and funding decisions made after the anticipated enactment of leniency laws translate into an increase in firm value for the average firm. However, this value-enhancing effect is concentrated among those firms that are domiciled in developed countries operating under common law, in countries where law enforcement is strong, and in countries where corporate governance standards are high. In the second study (Chapter 3), I investigate whether the impact of competition on firms' financial decisions, as documented by Dasgupta and Žaldokas (2019), is stronger for firms in tradable industries, where prices are set internationally, rather than for firms in nontradable industries, where prices are set domestically. I find that firms in tradable industries experience more asset growth, mainly explained by a rise in cash. Moreover, these firms undertake more funding by equity in response to a reshuffle of their asset base. In the third study (Chapter 4), I investigate the causal link between competition and tax avoidance. The results indicate that, on average, firms do not engage in more or less tax avoidance. However, firms operating in more concentrated industries reduce their tax avoidance. The latter is statistically significant only when U.S. firms are included in the sample. This finding suggests that the reduction in tax avoidance is primarily present among U.S. firms in more concentrated industries.
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    Affective Computing and Emotions: A Multimodal Analysis on Oscar-Nominated Films
    Lui, Jeffrey; Business; Dacin, Tina
    The field of Affective Computing (AC), or Emotion AI, has rapidly grown in popularity over the last three decades since its inception in 1995. Independent researchers, and academic and industrial organizations have all been discovering new ways to utilize automatic affect recognition to uncover new efficiencies, maximize net profits, and even design new media from a subject’s emotive state. To date, most AC research has primarily focused on the use of one single sensorial modality (unimodal) to extract emotions. However, as the field evolves, the use of multimodal sensory inputs (multimodality) is rising and provides researchers with more rich, accurate, and reliable insights from affect recognition and identification. In this thesis dissertation, a literature review of Affective Computing is included. It defines the main constructs of AC and the main modalities used to detect emotions. I draw from the most significant literature produced in the field, beginning from Rosalind Picard’s originating literature in 1995. I conduct a systematic review of the most notable modalities used in AC research and then how emotion appraisal is foundational to this field. Following this, I conducted an analytical study where affect data is extracted from all Oscar-nominated films for "Best Picture" since 2010 using three AC modalities: (1) Facial Features, (2) Language & Text, and (3) Prosody. Using a novel and proprietary extraction method, followed by descriptive statistical analyses, I answered the research question, "What is the volume and variety of emotions portrayed by actors in Best Picture Oscar-nominated films, and how might they impact the film’s potential for success?" It was discovered that there are moderately strong positive correlations between a film’s critic ratings and the volume of emotional language used. Similarly, results showed that there was a significant negative correlation between audience reviews and the volume of emotions detected from an actor’s face. And when comparing audience reviews to the co-efficient of variation from the variety of emotions detected, it was found that films with a more balanced and equal variety of emotions significantly produced higher audience film review scores.
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    Behavioral Consumers and Behavioral AIs: Three Studies
    Chen, Yang; Business; Ovchinnikov, Anton
    In this thesis, we conduct three research projects in operations management with behavioral underpinnings. With most businesses, the behaviors of employees and customers require careful consideration since they are pivotal to business decision-making and firm profitability. Understanding consumer and AI behavior in business is the central topic throughout the thesis. In the first part of this thesis, we study the effect of tier rewards on customer loyalty. We report on the results of a large-scale field quasi-experiment in a loyalty program (LP) offering premium status. Our main goal is to understand strategic consumer behavior in such programs and quantify the tier reward's value to the firm. We follow the addition of a new reward tier to an existing LP and compare participant behavior before and after the program structure change. We find a ~3.3% lift in revenue among strategic participants, and document rich behavioral patterns. Our findings provide valuable information for the design of the LP tier structure. In the second part of the thesis, we study the effect of redeemable points on customer loyalty in an LP where consumers decide how much to redeem. We investigate the effect of reward redemption size and consumer "type" on long-term loyalty. We find that size does matter in reward redemptions, and so does the operationalization of size and prior reward redemption behaviors. Medium-sized redemptions are most consistently associated with increased loyalty. Small redemptions are sometimes associated with increased loyalty. With large redemptions, however, we sometimes observe a decrease in loyalty. Our findings suggest that the optimal redemption size for firms to encourage should be personalized. In the third part of this dissertation, we investigate whether ChatGPT exhibits behavioral biases commonly found in operations management tasks. We find that although ChatGPT can be much less biased and more accurate than humans in problems with explicit mathematical nature, it also exhibits many biases humans possess, especially when the problems are complicated, ambiguous, and implicit. This study characterizes ChatGPT's behaviors in decision-making and showcases the need for researchers and businesses to consider potential AI behavioral biases when developing and employing AI for business operations.