Research
My research asks what happens to strategy when the information firms act on, and the information they report, diverges from underlying economic reality. Firms manage earnings, deals fall through, and plans get overtaken by events. I study how these informational frictions and disruptions shape corporate strategy and resource allocation, and I develop the empirical tools needed to draw credible causal conclusions about them.
Making it or faking it?: Earnings smoothing, performance feedback, and the impetus for strategic change
A core prediction of the behavioral theory of the firm is that a firm's propensity for change depends on performance relative to its aspirations, yet the literature treats reported performance as an exogenous signal. Managers can manipulate reported earnings, and this study theorizes that such manipulation dampens feedback response through the mechanism of self-enhancement. Using an instrumental variable with Lewbel instruments, the study finds that aspirations serve as targets toward which managers smooth earnings from both above and below, that smoothing reduces subsequent resource allocation change controlling for pre-manipulated performance, and that reported distance from aspirations partially mediates this effect. Data on CEO incentive contracts show the effect does not depend on whether pay is tied to earnings, making managers’ financial incentives an unlikely driver.
Does Earnings Management Matter for Strategy Research?
With Timothy Simcoe and David Waguespack. Strategic Management Journal, 2025.
Strategic management research often uses accounting data, despite well-known concerns that earnings management could obscure the link between actual and measured performance. We apply methods from the econometric literature on bunching to estimate that around 15 percent of firm-year observations in Compustat manipulate accounting earnings to achieve profitability. We show that cash-based performance measures are less susceptible to manipulation and that the choice of accrual versus cash-based measures “matters” for two classic strategy research questions: a decomposition of ROA variance and an analysis of persistence in firm performance. These findings underscore the importance of robustness testing and contribute to an emerging literature that reconsiders the link between theoretical
constructs and empirical performance measures.
From Perfect to Practical: Partial Identification Methods in Strategic Management Research
With Justin Frake, Brent Goldfarb, Takuya Hiraiwa, Evan Starr, and Shotaro Yamaguchi. Strategic Management Journal, 2025.
Strategy and management scholars have increasingly used difference-in-differences (DD) and instrumental variables (IV) designs to identify causal effects. These methods rely on untestable identifying assumptions to interpret the results as causal. “partial identification” techniques allow researchers to draw causal inferences from imperfect identification strategies by quantifying how results change with the severity of a violation of the identifying assumption. We explain how these tools work in the context of DD and IV designs, provide practical guidance to apply them, and illustrate their use in an empirical example that investigates how first patents affect inventor mobility. In doing so, we emphasize the role of theory, context, and judgment when deciding how strongly to infer a causal relationship from an empirical result.
Build, Borrow, Buy... or Bail?: Divestiture Following M&A Deal Termination
With Heejung Byun and Koungjin Lim. Strategy Science, 2026.
The relationship between divestitures and acquisitions is generally presented in three ways: to free up resources for future acquisitions, to remove redundant parts of a previously acquired firm, or due to underperformance of the combined firm. We propose an additional relationship: if an announced acquisition fails to close, the bidder may pivot to divest resources related to the target firm, particularly when the bidder lacks keystone resources—critical assets that are essential to unlock the value of other resources held by the bidder—that would have been gained through the acquisition. To test this relationship, we augment previous methodological approaches with a novel method: matching successful and unsuccessful bids using the perceived risk of deal failure by using arbitrage spreads between the announced and spot prices of the target. Consistent with this argument, we find that bidding firms are more likely to make divestitures in sectors related to the target after a failed bid, and this effect is amplified under specific conditions: when the target’s resources are highly complementary to the bidder’s, when the target initiates the termination, when the bidder’s stranded assets have a high opportunity cost, and when the focal business is distant from the bidder’s core operations.