{"id":7887,"date":"2014-12-12T17:26:27","date_gmt":"2014-12-12T22:26:27","guid":{"rendered":"http:\/\/www.vanderbilt.edu\/magazines\/vanderbilt-business\/?p=7887"},"modified":"2015-06-08T14:39:16","modified_gmt":"2015-06-08T14:39:16","slug":"intellectual-capital-3","status":"publish","type":"post","link":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/intellectual-capital-3\/","title":{"rendered":"Intellectual Capital"},"content":{"rendered":"

As members of one of the nation\u2019s top research universities, Owen faculty always have something interesting on their minds. Here\u2019s a portion of what two faculty members are currently pondering.<\/em><\/h4>\n

Yasin Alan<\/h2>\n

\"YasinWho:<\/strong> Assistant Professor of Operations Management Yasin Alan<\/a>. He arrived at Vanderbilt in 2012 after receiving his Ph.D. in production and operations management from Cornell University\u2019s Johnson Graduate School of Management. He currently teaches the core operations management course and an elective course in supply chain management in Vanderbilt\u2019s full-time MBA program. Alan holds two patents in inventory and systems management.<\/p>\n

What he\u2019s researching:<\/strong> When Alan tells nonacademics that he studies the relationship between a company\u2019s inventory performance and its finances, he quietly braces for the inevitable question: Isn\u2019t that obvious? If a company is selling its goods quickly, the stock should go up; if not, watch out for financial distress. But the relationship is not as straightforward as it sounds\u2014and proving so with real data is even harder.<\/span><\/p>\n

\u201cYes, there are lots of correlations, but showing a causal relation is very difficult,\u201d Alan says. In particular, Alan wants to know if there are early signals about a company\u2019s financial performance that investors can glean from inventory metrics.<\/p>\n

For example, a recent paper Alan co-authored for the journal Management Science<\/em> involved ranking retail companies according to their rate of inventory turnover in several different retail segments. The study then tested a portfolio strategy that involved buying stocks in companies in the top 40 percent of the segments\u2014the high performers\u2014and selling the bottom 40 percent in each segment. The result: The portfolio showed a 1 percent average monthly gain over market benchmarks. The results stayed consistent over a 25-year period.<\/p>\n

The study also found that there tends to be a 1-to 2-year lag between the time a company makes inventory information public and when it gets reflected in the stock price. For Alan, this helped confirm earlier studies showing that market participants do not fully understand how to incorporate inventory information into their trading strategies and consequently are leaving money on the table.<\/p>\n

Alan\u2019s work gets at the interplay of inventory and company performance in other ways as well. One ongoing study examines how inventory indicators may serve as an early warning for bankruptcy. Similar to his work on stock returns, Alan wants to know if there are key operational metrics that could suggest bankruptcy risk long before a negative stock price or earning trend becomes apparent. The study is still in progress, but Alan has seen indications that bolster his hypothesis.<\/p>\n

Another avenue of Alan\u2019s research may seem obvious until you dig deeper into the questions being posed and answered. In this case, he\u2019s working with Owen faculty colleagues Michael Lapr\u00e9<\/a> and Gary Scudder<\/a> to understand what operational dimensions have the most impact on airline profitability. \u201cIs it pricing? Is it managing connections? Is it labor? Fuel?\u201d he asks. \u201cWe want to know which components have the biggest effects on profitability.\u201d Alan explains that a low-cost airline like Southwest\u2014rising during the same period that many legacy carriers faced bankruptcy\u2014offers an ideal case study to tease out which operational functions play the biggest roles in profitability.<\/p>\n

Why it\u2019s important: <\/strong>Alan\u2019s work is part of an emerging field that ties together traditional operations management and finance. At its core, his research topics revolve in many ways around identifying and managing risk. Alan is also exploring how banks value the inventory collateral they use for loans. Currently, banks tend to use rules of thumb to place a value on inventory. Alan wants to develop a more refined, informative approach for banks to value inventory collateral fairly.<\/p>\n


\n<\/em><\/p>\n

Catherine F. Lee<\/h2>\n

Who:<\/strong> Catherine Lee<\/a> joined the school\u2019s accounting group in 2013, in what is somewhat of a return home. She grew up in Middle Tennessee and attended Nashville\u2019s Hume-Fogg Academic High School before going to Princeton University to study engineering. From there she worked as an investment banking associate in renewable energies for JPMorgan Chase. She later earned her MBA and Ph.D. from the University of Chicago. \u201cI really enjoyed working on Wall Street,\u201d she says. \u201cBut building investment models for clients all day didn\u2019t involve a lot of thinking about the bigger questions.\u201d<\/p>\n

\"CatherineWhat she\u2019s researching: <\/strong>Disclosures. That may seem like a pretty dry topic for someone interested in the \u201cbigger questions\u201d of accounting and finance, but Lee relishes the opportunity to explore seemingly mundane topics in new and different ways. For example, she enjoys guiding her accounting students through CEO shareholder letters.<\/span><\/p>\n

\u201cIt\u2019s kind of like finding the meaning in a novel. It\u2019s amazing what little gems are there,\u201d she says, fully acknowledging that only a true accounting nerd could say something like that. Lee says shareholder letters often drop key hints about the future direction of large public companies. One example she likes to discuss with students is a letter written by Starbucks CEO Howard Schultz just before the company announced a return to its roots and a major retrenchment of its rapid growth strategy. \u201cHe starts with this wistful recounting of the company\u2019s original Pike Place location in Seattle,\u201d she says. \u201cThen several months later, they began closing stores. It\u2019s pretty fascinating.\u201d Along the same lines, Lee is starting to look at how material disclosures made in social media\u2014not just by companies themselves, but by clients, partners and suppliers\u2014can affect stock performance.<\/p>\n

In another line of research, Lee examines the political influence corporations have on accounting policies and regulation. She says the lobbying money spent by companies to influence the outcome of the 2004 American Jobs Creation Act offers a window into how certain kinds of companies react to changes in accounting regulations. \u201cThere aren\u2019t many opportunities to measure how much companies care about certain accounting policies,\u201d she says. \u201cNormally, a company either submits comments to FASB (Financial Accounting Standards Board) or they don\u2019t. With the 2004 Jobs Act, we can see the magnitude\u2014based on how much money is spent on lobbying\u2014to which managers are concerned about how the changes will affect their financial statements.\u201d But asked whether companies or their executives should be required to disclose more of their lobbying activities in financial statements, Lee comes down as a firm \u201cno.\u201d For starters, she says that information is already publicly available through campaign finance laws for any investor who wants to find it. And making political expenditures part of a financial statement, she says, may infect the financial markets with the same caustic elements currently bedeviling the political arena.<\/p>\n

Why it\u2019s important:<\/strong> Lee initially decided to pursue a Ph.D. in accounting because it offers the tools and language to understand what\u2019s really happening in a company. That\u2019s still the common thread that underlies her research: Discovering new ways to view a firm\u2019s internal economics. \u201cI\u2019ve always been interested in understanding what motivates managers to make the choices they do. Accounting is a tool that allows me to do that.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

What can be learned about a company’s financial well-being from its inventory practices? Do CEOs’ shareholder letters drop hints about pending change? Two Vanderbilt professors want to know.<\/p>\n","protected":false},"author":361,"featured_media":8298,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[66,60],"tags":[],"class_list":["post-7887","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-departments","category-intellectual-capital"],"_links":{"self":[{"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/posts\/7887","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/users\/361"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/comments?post=7887"}],"version-history":[{"count":5,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/posts\/7887\/revisions"}],"predecessor-version":[{"id":8405,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/posts\/7887\/revisions\/8405"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/media?parent=7887"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/categories?post=7887"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/tags?post=7887"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}