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Professor Li Examines the Impact of Corporate Activity in Tax Havens on Equity Markets

Tiemei Sarah Li The establishment of corporate subsidiaries or affiliates in diverse countries has given rise to many as-yet unanswered questions. For example, how do these international operations impact the valuation of corporate assets? Prof. TieMei Li of the Telfer School belongs to a new cadre of accounting scholars delving into this area, and she is focused on one type of international setting, in particular: Offshore Financial Centres, or OFCs.

“Understanding the effects of corporate activity in countries with uneven levels of institutional quality and investor protection is especially important in an era of continued financial distress,” says Prof. Li, who joined the faculty at the Telfer School in 2011 after completing her PhD at Concordia University. OFCs have come under increasing scrutiny by organizations like the IMF; the G20 countries have also signalled that they intend to increase global cooperation in targeting tax evasion and asset diversion by offshore companies.

In a recent study, Prof. Li and her co-researcher demonstrated that firms that are registered in OFCs and/or located in these countries are more often associated with lower information flows than firms that are not. In other words, less information tends to be capitalized into the stock prices of OFC companies. “Our findings support the view that an environment that is favourable to tax avoidance, is less institutionally sound, etc. translates into lower stock-price informativeness,” says Prof. Li.

Prof. Li, who worked in investment banking with one of China’s largest banks for nearly 10 years, says OFCs “provide a very unique research angle to investigate finance-related aspects of multinational companies.” She plans to research what happens to accounting quality in companies that operate in tax-avoidance jurisdictions. On that front, there is some evidence suggesting that profitable companies with extensive tax-haven subsidiaries manage earnings more than other firms.

Old rules, new realities

A fundamental problem for researchers in this area is that financial accounting has not fully evolved to keep pace with the growing complexity of companies’ foreign activities and ever more diffuse corporate organizations. But developments in the scholarly literature suggest that may be about to change.

Prof. Li says several prominent researchers have shown that globalization has led to profound changes in the concept of firm. Others, she notes, have proposed models for how corporate tax avoidance activity should be valued fully by the market. Says Li: “Global realities have redefined what it means to be a company, energizing debate over how (or how should) various aspects of international activity create or distort value.

“It is a tall order to explain the impact of economic activity in OFC companies, given its complex and opaque nature. But it is a necessary step in adapting accounting to 21st-century realities.

Magda Donia Awarded Grant for a Study on ‘Altruistic’ Leadership

Magda Donia Professor Magda Donia and lead researcher Alexandra-Joëlle Panaccio of Concordia University’s John Molson School of Business will study servant leadership in diverse cultural contexts through a grant from the Social Sciences and Humanities Council of Canada (SSHRC).

Servant leadership theory proposes that leaders who engage in altruistic or selfless behaviours help nurture positive employee behaviours, but little is known about the mechanisms that underlie that relationship. The researchers will therefore examine the mediating role of employee attitudes, and the moderating role of cultural context in the manifestations and impact of servant leadership behaviours. They will also examine how servant leadership may, over time, influence followers to themselves engage in organizational citizenship behaviours for altruistic motives.

To do this, the researchers will be collecting and analyzing data from employees and their immediate supervisors in three countries (Canada, Pakistan, and Brazil) and in two time periods.

The research will contribute to a better understanding of the impact of cultural values on the outcomes of particular leadership styles that will help improve the training and development managers. Titled Putting the needs of others above my own: The impact of cultural values on the manifestations and outcomes of servant leadership, this study will receive $49,351 over two years.

Nurturing Mentorship

Understanding what drives leaders to offer mentorship can help firms make the most of promising employees.

The problem

Studies time and again have shown that leader-provided mentorship is a winning proposition for companies. Mentorship can entail work-related support, which might involve providing opportunities for career growth, or psychosocial support, as in sharing personal experiences and conveying empathy. Yet despite its acknowledged importance, “the reasons why leaders decide to engage in mentorship are not clear,” says Laurent Lapierre, Telfer Research Fellow and an associate professor of organizational behaviour.

The study

In a new study, Laurent Lapierre, Silvia Bonaccio of the Telfer School, and Loren Naidoo of Baruch College hypothesized that leaders with a more relational identity might be more disposed to mentor subordinates. People who have a more relational identity or “self-concept” are more focused on developing and maintaining one-on-one connections with significant others. These leaders also base much of their self-worth on whether they believe these significant others appreciate them.

The study factored in social exchange theory, which is used to explain why individuals would be motivated to provide mentorship. It posits that when an individual “perceives that a relationship will provide greater rewards than costs, she will be more motivated to develop the relationship,” explains Bonaccio, an associate professor of organizational behaviour and human resources.

One factor that should convince a leader that providing mentorship to a follower would be more beneficial than costly is whether that follower has shown strong job performance. In a 2009 study, Lapierre, Bonaccio, and Tammy Allen of the University of South Florida found that leaders are more willing to mentor a follower who has displayed strong rather than weaker job performance.

Building on this earlier work, the researchers used a sample of 137 leader-follower pairs to investigate how leaders’ relational self-concept relates to the mentoring they provide, and whether the mentee’s job performance influences this relationship. As expected, leaders with a stronger relational self-concept provided more career support to followers who displayed higher (vs. lower) job performance. But leaders’ relational self-concept was unrelated to their provision of psychosocial support, irrespective of followers’ job performance.

The implications

The pattern of results intrigues Lapierre, who is an expert on leader-follower work relationships. It suggests that leaders with a more relational self-concept “may consider the provision of career support as more beneficial – to their relationship and thus to their self-worth – and less costly when a follower displays stronger rather than weaker job performance.”

Lapierre adds: “It would be valuable for future research to examine factors that leaders with a more relational identity – or leaders in general, for that matter – consider when deciding whether to offer psychosocial support.” Reciprocity may play a role here; in other words, whether the follower offered the leader psychosocial support in the past and may therefore do so again if the leader offers this type of support.

What’s next?

The study highlights the need for further research on the interplay between leaders’ identities, follower behaviour and how leaders enact their role, but it also points to some interesting practical implications.

For example, “organizations could consider the strength of individuals’ relational self-concept when trying to predict their propensity to mentor employees. They could use this information for making leadership selection or promotion decisions,” says Silvia Bonaccio.

It would be valuable to have more leaders mentor promising employees in regards to career growth, but providing such support is often at the leader’s discretion. Organizations could cultivate mentorship by using a relational self-concept measure as one among several reliable and valid tools for staffing leadership positions.

“Among the measures that organizations can take,” Lapierre concludes, “are to ensure that leaders with strongly relational self-concepts are paired with more high-performance followers.”

The paper was published in The Leadership Quarterly.

Best Papers in Tourism and Sport Management and Information Systems

Telfer School faculty are presenting innovative research in the fields of finance, marketing, information systems, international business, and technology and information management at this year’s Administrative Sciences Association of Canada conference in St. John’s, Newfoundland.

The work presented during June 9 to 12 at Memorial University includes:

Best paper, tourism and sport management
Using Internet-Based and web 2.0 technologies to Attract the Wine Tourist: An International Comparison
Leighann C. Neilson (Carleton University) and Judith Madill (Telfer School).

Best paper, information systems
Au cœur de la transformation de la fonction TI : Une analyse du travail institutionnel de ses entrepreneurs
Manon Guillemette (Université de Sherbrooke), Muriel Mignerat (Telfer School), and Guy Paré (HEC Montréal).

Honourable mention, information systems category
Stand-Alone Literature Reviews in Information Systems Research: Development of a Taxonomy of Review Types and Assessment of Current Practices
Guy Paré (HEC Montréal), Marie-Claude Trudel (HEC Montréal), and Mirou Jaana (Telfer School).

The following papers were also being presented:

  • The Relative Importance of Firms, Universities, Governments, and Nonprofits as Innovation Intermediaries
    Weiwei Wu (MSc in Management graduate) and Margaret Dalziel (Telfer School).

  • Patterns of Innovation in Renewable Technologies in Canada, the USA, China, and South Korea Post Kyoto
    Xiao Zhao (MSc in Management student) and Ajax Persaud (Telfer School).

  • Système de rémunération pour un entrepreneur général : Iranian Offshore Engineering and Construction Company (IOEC)
    Ahmad Theymouri (University of Ottawa graduate student) and Jules Carrière (Telfer School).

  • The Relationship between Export Success Factors and Export Performance
    Sadrudin Ahmed (Telfer School) and Juan Rock T. (Universidad de Talca).

  • Capital Constraints and Syndication of Early Stage Venture Capital Investment
    Miwako Nitani and Allan Riding (Telfer School).

Morad Benyoucef Identifies the Key to Social Marketing Success

Morad Benyoucef Who can advance your viral marketing campaign the furthest, and how can you find these key individuals on social networks? The answers “can predict the success or failure of social commerce initiatives,” says Morad Benyoucef, an associate professor of management information systems and a contributor to the IBM Centre for Business Analytics and Performance at the Telfer School.

Benyoucef’s ongoing project, Increasing Marketing Campaign Performance: Using Influential Users in Social Networks, has the potential to make a real impact, with particular relevance for companies using predictive analytics to market their products and services. The social media interactions that shape what people buy are a gold mine to companies seeking to make their campaigns more targeted and cost-effective, Benyoucef notes. The evidence for this is all around: Nielsen’s latest Global Trust in Advertising report, for example, found that 92 percent of consumers say they trust recommendations from friends and family above all other forms of advertising.

The notion of influence applies as much to conventional marketing tactics as it does to emerging approaches, such as promotions that provide consumers with opportunities for interaction (e.g., coupon offers where the redemption value increases the more people who share the coupon) and predominantly crowd-sourced marketing, where advertisers tap into social expressions about products or offers which they can then use to communicate a brand’s feel.

Facebook provides a ubiquitous illustration of influence; the integration of marketers and merchandisers on the social network allowing them to target customers based on what they “like” and “share.”

The ability to broadcast to your friends “that you just purchased the latest iPad” is very powerful for businesses, and influence is central to this, Benyoucef says.

“If the two of us are friends and I purchase iPad, chances are I can influence you to purchase an iPad.”

Electronic word of mouth

Part of the research project involves propagation, or how far or how fast users distribute messages in a social network. Amir Afrasiabi, a PhD student in computer science, has investigated how people repost or share content differently based on whether they are friends or followers of a channel.

“Knowing the difference between subscribing to a channel and being friends with a channel is important because that’s how you target people – based on the kind of relationship they have with others,” says Afriasiabi.

Afrasiabi, who recently published a study titled, "Propagation in online social networks" in the Journal of Information Systems Applied Research, is pursuing doctoral work under Dr. Benyoucef’s supervision which focuses on, among other questions, new algorithms for community detection.

Benyoucef says computer scientists and marketing researchers have much to contribute on the question of leveraging influential users. It’s difficult to compare existing commercial platforms in this regard because their algorithms aren’t public. For this reason, a prototype model developed within a university setting can play an important role in filling the knowledge gap. That’s the anticipated contribution of the Telfer School project: the development of a complete model with the potential to be used to locate influential users in a social network.

“Being able to identify influential users in a social network would provide business with the ability to direct their marketing towards them and in return, they would influence others,” said Benyoucef.

Related links

Morad Benyoucef commented on social media influence firm Klout in an article in USA Today.
For more information about Prof. Benyoucef.

  1. Three research projects by Telfer graduate students presented at the 2012 CORS/MOPGP
  2. Professor Margaret Dalziel Measures the Impact of Government Investments in Research and Innovation
  3. Sylvain Durocher Awarded CGA-Canada/CAAA Grant
  4. Nurturing Innovation: Professor Margaret Dalziel on the Impact of Investments in Innovation

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