Monthly Archives: June 2025

New Study Reveals Strategic Motives Behind Accounting Standards

A recent study by Dr Heylel-li Biton of the Hebrew University Business School offers fresh insight into a long-standing question in international finance: why do foreign firms listed on U.S. stock exchanges opt for one accounting standard over another? Rather than simply conforming to regulatory norms in their listing jurisdiction, these companies make deliberate, strategic choices when selecting between International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (U.S. GAAP).

Published in The International Journal of Accounting, the research investigates the underlying motivations of U.S.-listed foreign private issuers (FPIs) in their adoption of accounting standards. In contrast to previous studies, which tended to focus on regulatory alignment or investor familiarity, Dr Biton’s work emphasises two pivotal yet often overlooked considerations: the desire for flexibility in financial reporting and the relative burden of compliance costs.

The findings reveal a nuanced calculus behind these firms’ decisions. Many FPIs lean towards IFRS when their financial reporting would benefit from the standard’s broader range of presentation options across core elements such as assets, liabilities, revenue, and expenses. In such cases, U.S. GAAP is often avoided due to its more rigid framework.
However, the study also finds that some firms prefer U.S. GAAP precisely because it reduces compliance complexity and associated costs. This advantage was especially relevant before the 2007 elimination of SEC reconciliation requirements for IFRS filers.

“This research demonstrates that selecting an accounting regime is far from a perfunctory regulatory choice,” said Dr Biton. “It is, in fact, a strategic decision informed by operational priorities, financial disclosure preferences, and cost efficiency. These findings have important implications not only for understanding firm behaviour but also for shaping more adaptive regulatory responses.”

To underpin her analysis, Dr Biton drew upon a comprehensive dataset encompassing 811 firms and 1,214 individual accounting regime selections between 1995 and 2015. Her methodological innovation—a scoring system to quantify the degree of reporting flexibility required by firms—was paired with data on compliance costs to produce a multidimensional understanding of the trade-offs involved in selecting a regime.

The implications of the study extend well beyond academia. For regulators and standard-setters, these insights shed light on the real-world considerations firms face when navigating transnational accounting environments. For investors, the findings shed light on how accounting policy choices may signal strategic priorities or constraints. For corporate decision-makers, the research underscores the importance of aligning financial reporting strategies with broader business objectives.

In an era marked by increasing regulatory complexity and global capital mobility, Dr Biton’s study contributes a timely and practical perspective to the ongoing dialogue on international accounting standards. It reaffirms that behind every accounting choice lies a strategic intent—one that bridges financial disclosure and the evolving realities of cross-border corporate governance.

More information: Heylel-li Biton, Accounting Regime Selection, The International Journal of Accounting. DOI: 10.1142/S1094406025430036

Journal information: The International Journal of Accounting Provided by The Hebrew University of Jerusalem

Beyond Demographics: Exploring the Economic Trajectories of India and China

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In 2023, India officially overtook China to become the most populous country in the world—a landmark demographic milestone that is expected to persist throughout the remainder of the 21st century. This shift has sparked renewed debate about whether India might not only surpass China in population but also terms of socio-economic influence and global economic clout. A recent study conducted by researchers at the International Institute for Applied Systems Analysis (IIASA) offers a nuanced perspective on this question, exploring whether India’s demographic momentum can be translated into genuine economic power in the coming decades.

While sheer population size often captures the headlines, the researchers argue that a more meaningful measure lies in the concept of productivity-weighted labour force (PWLF). This metric accounts not merely for the number of working-age individuals but for the qualitative dimensions of human capital—particularly educational attainment and the overall quality of education. By focusing on these deeper indicators, the study challenges the conventional view that equates demographic youthfulness with economic superiority. Instead of relying on age structure or headcount alone, the PWLF framework offers a more refined lens for understanding labour force potential and future economic trajectories.

The study, published in Population Research and Policy Review, concludes that China is likely to retain a substantial economic lead for much of the next fifty years. This advantage is rooted not in the number of its workers but in their higher levels of education and greater workforce participation. Even as China’s population begins to shrink and age more rapidly, its educated workforce—shaped by decades of investment in schooling and infrastructure—continues to yield dividends. The results complicate popular narratives that depict China’s demographic decline as imminent and inevitable, as well as India’s demographic ascent as unambiguously beneficial.

One of the key messages from the study is that demographics alone do not determine an economy’s destiny. As IIASA researcher and co-author Guillaume Marois aptly puts it, “It’s not about how many people you have; it’s about what they can do.” His observation cuts to the heart of the issue: without commensurate investments in human capital, even a large and youthful population may fail to translate into economic strength. Policies aimed solely at increasing fertility rates—such as incentives for larger families—are insufficient and potentially misguided if they are not accompanied by strategies to expand opportunities and capacity for all citizens.

India, in particular, stands at a crossroads. Its vast and growing youth population does hold potential for a demographic dividend, but only if structural barriers are addressed with urgency. The study highlights the importance of sustained and inclusive investment in education, particularly for girls and young women, alongside initiatives to address the country’s persistently low female labour force participation. Without substantial progress on these fronts, the sheer size of India’s population may become more of a burden than a blessing, stifling its aspirations for economic parity with China.

On the other hand, China faces the challenge of maintaining economic dynamism amid a rapidly ageing population. The study suggests several strategies the country could adopt to mitigate the impact of demographic decline, including raising the retirement age, increasing reliance on automation, and enhancing workforce productivity. In essence, while India’s challenge is to harness its demographic momentum through inclusive development, China’s task is to preserve its existing economic strength through adaptation and resilience.

Ultimately, the study reinforces a broader global truth: that the future of economic growth will be shaped less by raw numbers and more by the cultivation of human potential. For both India and China—and indeed for all nations—the strategic priority must be to foster education, promote gender equality, ensure social protections, and build inclusive, productive labour markets. As Marois concludes, “The demographic race between giants will be determined more by human capital development than total population size.” It is a powerful reminder that in the twenty-first century, the engine of prosperity will not be demography alone but the dignity, capacity, and agency of people.

More information: Guillaume Marois et al, The Demographic Race between India and China, Population Research and Policy Review. DOI: 10.1007/s11113-025-09966-y

Journal information: Population Research and Policy Review Provided by International Institute for Applied Systems Analysis

Is Your Colleague a Snoop? BU Study Shows Workplace Spying Raises Stress Levels

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Nosy colleagues are a nearly universal fixture in the modern workplace—those individuals who peer over your shoulder at your screen, linger too long during conversations between others or ask prying questions that stray into uncomfortable territory. Encountering them can create a subtle yet persistent sense of unease. Many workers instinctively withdraw or avoid engagement, slipping away to another room or pretending to be preoccupied when the office’s resident busybody comes near. While some level of curiosity is natural, distinguishing between friendly interest and genuine intrusion often proves challenging, especially in workplaces where social interaction is encouraged or even expected.

This grey area—where curiosity borders on invasion—is precisely what has long challenged researchers interested in workplace behaviour and employee privacy. Some people are more naturally open about their lives, while others maintain firm boundaries. Yet until recently, organisational psychologists lacked a clear framework to study nosiness as a distinct phenomenon. Dr Richard A. Currie of Boston University has sought to fill this gap. With colleague Dr Mark G. Ehrhart of the University of Central Florida, Currie conducted a series of four studies involving surveys of 350 young adults, seeking to understand how nosiness manifests in the workplace, how often it occurs, and what effects it may have on individuals and teams.

Through their research, Currie and Ehrhart defined nosiness as “employees’ intrusive attempts to obtain private information from others at work.” They developed a measurable scale for workplace nosiness, identifying core behaviours such as excessive questioning, unsolicited gossip, and invasive probing into both professional and personal matters. Importantly, they distinguished nosiness from more neutral or positive traits, such as social curiosity, arguing that nosiness carries inherently negative implications. According to their findings, roughly a third of participants witnessed nosy behaviour weekly, while another third observed it monthly—suggesting this is far from a rare or harmless quirk.

What makes nosiness particularly insidious, the researchers argue, is its impact on workplace dynamics and individual well-being. Employees who feel their boundaries are being violated often react by withdrawing—sharing less information, avoiding collaboration, and even concealing knowledge from those perceived as intrusive. This pattern, documented in the latter studies of Currie’s project, correlates with higher stress levels, lower job satisfaction, and diminished team performance. Moreover, workplaces perceived to be competitive—where colleagues constantly jostle for recognition or advancement—tended to see more frequent nosy behaviour, suggesting that informational intrusion may be used as a tactic to gain an edge.

The research also uncovered generational differences in how nosiness is both practised and perceived. Younger workers were more frequently seen engaging in nosy behaviour than their older colleagues. This raises intriguing questions about evolving norms around privacy and authenticity, particularly in an era that encourages employees to “bring their whole selves to work.” While this ideal may promote openness and emotional honesty, it can also blur boundaries and lead to a sense of obligation to disclose more than one is comfortable with. Currie reflects on this tension, observing that the pressure to be authentic may inadvertently lead to burnout or stress, particularly if workers feel they have no safe space for privacy and confidentiality.

Currie’s work has practical applications beyond academic insight. In the hospitality sector, for example, he found that supervisor nosiness—especially when it involved questions about personal lives—was linked to reduced perceptions of fairness and diminished knowledge sharing among frontline staff. However, when supervisors were seen as authentic and trustworthy, the adverse effects were softened, illustrating the role that leadership style plays in moderating social boundaries. Currie has since incorporated these lessons into his teaching, encouraging students to reflect on their own biases and information-seeking behaviour. Though he acknowledges that curiosity is natural and even beneficial in moderation, he emphasises the importance of respecting others’ desire for privacy. “Sometimes,” he says, “the most respectful thing we can do is not to ask.”

More information: Richard A. Currie et al, Mind Your Own Business: Developing and Validating the Workplace Nosiness Scale, Journal of Business and Psychology. DOI: 10.1007/s10869-025-10018-7

Journal information: Journal of Business and Psychology Provided by Boston University

Thriving at Work: Are Grit and Talent Enough for Minority Professionals?

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After reviewing 337 peer-reviewed journal articles exploring disparities in career success between minority and non-minority groups, Dr Melika Shirmohammadi, Assistant Professor of Human Resource Development, found a recurring pattern: individuals from minority backgrounds are frequently perceived as ‘outsiders’ in the workplace. This outsider status, she argues, makes them more susceptible to what she calls complex visibility. This condition shapes how others perceive these individuals and how such perceptions influence their access to critical career advancement resources such as mentorship, networks, role models, and professional development opportunities. Her findings challenge the notion that success is solely a matter of talent and diligence, instead pointing to subtle, systemic forces at play.

“Career success isn’t just about hard work or talent; people also face challenges like being judged unfairly, overlooked, or pressured to hide who they are,” Shirmohammadi explained in her article published in the Journal of Management. These added burdens result in unequal access to professional opportunities, which in turn contributes to lower career outcomes for minority groups. Shirmohammadi’s research focuses on four historically marginalised populations: women, racial and ethnic minorities, individuals with disabilities, and the LGBTQ+ community. Across all four, she found that the way they are seen—or not seen—has tangible consequences for their progression in the workplace.

The framework of complex visibility developed by Shirmohammadi encompasses three overlapping dynamics: hyper-visibility, invisibility, and managed visibility. Hyper-visibility occurs when a person stands out, often in ways tied to stereotypes or expectations—such as being the only Black employee in a department. Invisibility, by contrast, manifests when individuals feel their perspectives or contributions are overlooked or undervalued. Managed visibility involves a conscious effort to moderate one’s identity to fit into dominant norms—for instance, modifying dress, speech, or behaviour in ways that conceal cultural or personal identity markers. These dimensions create a paradox in which individuals may simultaneously feel exposed and unseen.

For example, someone who is hyper-visible due to their identity—say, a woman of colour in a leadership team otherwise dominated by white men—may simultaneously feel her voice goes unheard during key decision-making processes. This experience of simultaneous visibility and erasure can take a psychological toll, influencing not only one’s sense of belonging but also one’s ability to use available resources effectively. Similarly, members of the LGBTQ+ community or individuals with disabilities may manage their visibility by concealing aspects of themselves to avoid discrimination, resulting in fewer opportunities to connect with mentors or participate in professional development initiatives authentically.

The broader statistical picture confirms these concerns. Shirmohammadi’s analysis reveals that minority groups continue to be significantly underrepresented in senior leadership roles. Despite growing awareness and policy efforts, women still make up only around 9% of CEOs and 30% of board members across Europe and North America. Political representation follows a similar trend: only 29 countries currently have a woman as head of state or government, and just 23.3% of ministerial positions are held by women. Racial and ethnic minorities fare even worse, with boardroom representation standing at just 19% in the United States, 12.5% in the UK, and 9% in Australia, despite these groups comprising large portions of the general population. For LGBTQ+ individuals and people with disabilities, accurate representation is even harder to gauge, as many feel unsafe disclosing such identities in the workplace.

Looking ahead, Shirmohammadi advocates for intentional organisational change grounded in a deeper understanding of visibility and its implications. “Organisational decision-makers should develop a comprehensive understanding of the complex visibility influencing access to career advancement resources in their context,” she urges. To mitigate disparities, she recommends proactive interventions that facilitate equitable access to mentorship, networks, role models, training, and workplace support systems. Rather than placing the burden on individuals to navigate biased structures, she advocates for institutions to reform those structures so that all professionals, regardless of their identity, have equal opportunities to thrive.

More information: Melika Shirmohammadi et al, Career Success and Minority Status: A Review and Conceptual Framework, Journal of Management. DOI: 10.1177/01492063251342190

Journal information: Journal of Management Provided by University of Houston

Mounting Systemic Threats in US Leveraged Loan Market Could Spark Next Financial Crisis, Study Warns

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A recent study by the University of Bath uncovered troubling distortions in the U.S. leveraged loan market, raising concerns that a new financial crisis could be on the horizon. According to the research, loans with high levels of leverage are being systematically underpriced, particularly by non-bank lenders—often referred to as “shadow banks”—that operate outside the scope of traditional financial regulation. This mispricing, the authors argue, poses a systemic risk that may go undetected until it manifests in severe economic instability.

Leveraged loans, typically extended to borrowers with substantial debt burdens or subpar credit histories, have seen default rates soar to their highest levels in four years. Data from the Financial Times in December 2024 indicated that the U.S. leveraged loan default rate had climbed to 7.2%, marking its highest point since the end of 2020. Many indebted companies are turning to distressed debt exchanges as a last-ditch effort to avoid bankruptcy. These arrangements often erode investor recovery rates, underscoring the fragility and precariousness of this market segment.

Dr Ru Xie, Associate Professor of Finance at the University of Bath’s School of Management and lead author of the study titled Leveraged Loans: Is High Leverage Risk Priced In?, emphasised that the risk associated with leverage is not being adequately priced in—especially by non-bank financial institutions. Since 2014, the pricing of leverage risk has deteriorated markedly, with the sharpest decline evident among the riskiest borrowers. These are typically clients of shadow lenders who issue loans with minimal protective covenants and then package these loans into securities to be sold on secondary markets. The diminished risk premium, particularly for the most vulnerable segments, suggests a breakdown in how financial markets evaluate and compensate for credit risk.

The study portrays a market landscape reshaped by structural changes over the past decade. The rapid ascent of non-bank lenders, the explosive growth of collateralised loan obligations (CLOs), and the proliferation of covenant-lite loan structures have created a breeding ground for systemic vulnerability. Unlike traditional banks, non-bank lenders are not subject to the same rigorous oversight, yet they now originate a significant share of new leveraged loans. This decentralisation of credit risk, with weak documentation standards and limited transparency, leaves regulators in a difficult position—largely unable to see or address the full extent of risk accumulating within the system.

Professor David Newton, co-author of the report, warned that these risks should not be viewed solely through a credit lens. “With today’s heightened geopolitical tensions—from global trade disruptions to military conflicts—and continued market volatility, the mispricing of leverage risk takes on macroprudential significance,” he said. “Should a wave of distress emerge among leveraged borrowers—particularly those financed by shadow banks—we could witness a new credit or banking crisis that escapes regulatory detection until it is too late.” His remarks highlight the growing divide between the visible portions of the financial system and the opaque, complex web of lending arrangements that now operate primarily out of view.

The researchers identified two primary forces driving this decline in risk sensitivity. First, the growing use of covenant-lite loans, which lack the performance-based protections traditionally embedded in lending agreements, significantly increases information asymmetry. With fewer covenants, banks and other lenders have reduced incentives or capacity to monitor borrower behaviour, especially when loans are bundled into CLOs and sold off in tranches. Second, the increasing securitisation of these loans further weakens the alignment of interest between originators and investors. As the risk is passed downstream to third-party investors, the original lenders retain little incentive to uphold rigorous underwriting standards.

In light of these findings, the authors call for more robust regulatory scrutiny of non-bank lenders and the structures they employ. They argue that opaque securitisation practices, coupled with weak documentation and loose lending standards, have enabled a build-up of systemic risk that traditional oversight mechanisms are ill-equipped to address. Global financial authorities, including the European Central Bank and the Bank of England, have recently voiced similar concerns about shadow banking and the unchecked expansion of leveraged lending. The University of Bath study adds an urgent academic perspective to this growing chorus, underscoring the need for coordinated policy action before the next crisis takes root.

The research presents a sobering assessment of the leveraged loan market’s trajectory in the United States. It suggests that without meaningful reform, the current path of underpricing leverage risk—driven by shadow lending, weakened oversight, and a securitisation-fuelled boom—could culminate in a destabilising financial event. As policymakers, investors, and regulators grapple with mounting economic uncertainty and complex global risks, this study serves as both a warning and a call to pre-emptively address the structural vulnerabilities now embedded within modern credit markets.

More information: Ru Xie et al, Leveraged loans: is high leverage risk priced in?, Inderscience Online Journals. DOI: 10.1504/IJBAAF.2025.146550

Journal information: Inderscience Online Journals Provided by University of Bath

Collaborate with Rivals to Influence Tech Standards

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In the 1970s and 1980s, home movie watchers faced a dilemma between two competing video cassette formats: Sony’s Betamax and JVC’s VHS. Though Betamax was often seen as technically superior, VHS ultimately triumphed. This success was mainly due to JVC’s decision to partner with a wider network of film and television producers, illustrating how broad collaboration can help determine the prevailing standard in a technological showdown. This so-called “format war” became a defining case study of how ecosystems of industry players influence technological adoption.

Today, such format battles continue in more advanced arenas—Apple’s iPhone versus Android or Nintendo versus PlayStation. However, modern technology firms have grown more mindful of the need to establish compatibility standards that serve an entire industry ecosystem rather than simply advancing the interests of the original inventors or patent holders. These standards are not just about technical superiority but also about ensuring a broad enough support base across companies, which can help embed technology more deeply into the market.

Recent research by Ramkumar Ranganathan, an associate professor at Texas McCombs, sheds light on how tech companies now strategically influence the shaping of such standards. His work shows that firms often cooperate and compete within the same space—particularly on standard-setting committees. These committees, composed of representatives from multiple companies, negotiate the technical specifications that become industry norms. Each participant seeks to promote their interests while coordinating with others to arrive at shared rules.

One of the case studies examined in this research is the competition between Wi-Fi and WiMAX, two rival standards for wireless internet. Wi-Fi eventually prevailed, but the path to dominance involved complex interactions among various players, from computer and router manufacturers to telecom firms and chipset developers. Ranganathan and his co-authors, John Chen and Anindya Ghosh, analysed over 40,000 technical documents and 18,000 comments from IEEE standard-setting committees dating from 1996 to 2011. Their findings reveal that success often depends on whether a company’s proposal is well-positioned within the broader technological architecture and how well it connects to others in the ecosystem.

The researchers identified two key types of resources that firms use to shape standards: patents and partnerships. Patents can grant companies a strong foundation from which others can build, lending credibility to their technical proposals. However, an abundance of patents without robust partnerships can be problematic. Other companies may be wary of engaging with a patent-heavy firm, fearing it might monopolise shared value. On the other hand, partnerships alone are not enough—if a company’s core technology is misaligned with its partners’ strategic direction, then its influence is curtailed despite its connections.

Another compelling insight from the study concerns the flexibility of potential partnerships. Companies not tied down by rigid existing alliances may have more room to manoeuvre. By forming fresh partnerships aligned with evolving standards, they may find it easier to influence the core technology. Such firms are more likely to have their proposals accepted by standards committees because their contributions are perceived as beneficial to a broader swathe of the ecosystem, not just their commercial interests.

Ultimately, Ranganathan’s research highlights the principle of interdependence in shaping technology standards. The days when a single firm could impose a proprietary standard unilaterally are gone. Instead, influence depends on being embedded within a cooperative network of stakeholders collectively invested in the outcome. Standards committees can issue technical specifications but cannot compel companies to adopt them in real-world products. As such, the actual adoption of standards is determined in the marketplace—by consumers, manufacturers, and complementary partners—making collaboration and ecosystem thinking essential for technological success.

More information: Ram Ranganathan et al, Shaping Ecosystem Rules: Complementarities, Interdependencies, and Firms’ Success in Coordinating Ecosystems Via Standard-Setting, Organization Science. DOI: 10.1287/orsc.2022.16136

Journal information: Organization Science Provided by University of Texas at Austin

The Role of Digital Finance in Promoting Household Carbon Mitigation in China

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In the face of accelerating global warming and its threat to sustainable economic development, reducing carbon emissions—particularly those generated by households—has grown increasingly urgent. With its vast population and dynamic economic landscape, China has embraced ambitious climate targets, aiming to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060. As digital finance becomes ever more embedded in daily life—through mobile payments, e-commerce, and online financial tools—it raises an important question: could digital finance serve as a meaningful lever in mitigating household-level carbon emissions? A new article published in China Finance Review International, titled “Carbon reduction effect of digital finance in China: based on household micro data and input-output model,” addresses this pressing question by exploring how the evolution of digital financial systems intersects with environmental outcomes at the household level.

The study employs a comprehensive methodology that integrates macroeconomic and microeconomic perspectives to investigate this issue. Drawing on data from the China Household Finance Survey (CHFS) across four waves—2013, 2015, 2017, and 2019—the research is further enriched by national input-output tables and energy statistics. These datasets are linked with the Peking University Digital Financial Inclusion Index (2012 to 2018) and city-level economic indicators. This multi-layered dataset comprises a panel of 7,191 households across 151 cities, creating a robust foundation for empirical analysis. Using this panel, the authors estimate household-level carbon dioxide emissions and apply a fixed effects econometric model to isolate the causal impact of digital finance development on the growth rate of these emissions over time.

The findings reveal that digital finance exerts a significant dampening effect on the growth of household carbon emissions. This effect is especially notable among households in the early stages of financial development, smaller in size, in urban settings, or heavily reliant on digital payment methods. The study uncovers key mechanisms that underlie this relationship: digital transformation encourages more efficient energy use, upgrades consumption habits toward greener alternatives, and fosters improved financial literacy among households. These dynamics combine to enhance the carbon-reducing influence of digital finance, offering a promising pathway for sustainable development.

Moreover, the research delves into the various dimensions of digital finance and identifies which aspects are most closely tied to carbon reduction. The breadth of digital finance coverage—how widely it is adopted—and the depth of usage—how intensively it is utilised—emerge as the most impactful drivers. The authors also subject their findings to a range of robustness tests, including instrumental variable approaches, which confirm the consistency and reliability of their results. A key contribution of this study lies in its nuanced approach. Rather than measuring absolute carbon emissions, it focuses on how digital finance influences the growth rate of household emissions. This distinction allows for a more precise understanding of its marginal environmental benefits.

The implications of this research are both practical and profound. It demonstrates that digital finance is a tool for economic inclusion and modernisation and a potentially transformative instrument in the global fight against climate change. The study supports the strategic expansion of digital infrastructure and financial education by offering empirical evidence of how digital financial systems can steer households toward lower-carbon behaviours. It also emphasises the need for differentiated policy interventions tailored to household characteristics, regional contexts, and urbanisation levels. As countries worldwide seek effective, scalable strategies to achieve decarbonisation, China’s experience leveraging digital finance provides valuable lessons for emerging and advanced economies.

Finally, the study outlines tangible applications for a diverse array of stakeholders. Policymakers are encouraged to prioritise investment in digital finance infrastructure, especially in rural or high-emission areas, while promoting digital financial literacy to guide households toward more sustainable practices. Financial institutions and fintech firms can contribute by designing digital products that incentivise eco-friendly behaviours, such as green loans and sustainable spending platforms. Researchers are invited to build on this work by examining household-level differences across other digital ecosystems and periods. For urban planners and competent city developers, integrating digital finance into sustainability initiatives—such as digital fare systems, paperless billing, and support for green investments—offers a powerful means of shaping a low-carbon urban future.

More information: Yongbin Lv et al, Carbon reduction effect of digital finance in China: based on household micro data and input-output model, China Finance Review International. DOI: 10.1108/CFRI-03-2024-0083

Journal information: China Finance Review International Provided by Shanghai Jiao Tong University Journal Center

Executive Credit Scores May Offer Insight into Corporate Decision-Making

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A recent study from Ohio State University reveals a compelling link between the personal credit scores of top-level corporate executives and their decision-making behaviour in high-stakes business environments. The research suggests that credit scores—traditionally viewed as mere indicators of personal financial responsibility—may also serve as proxies for how executives process risk and respond to external advice. In particular, executives with prime credit ratings (typically defined as FICO scores of 660 or above) were found to make more thoughtful, independent decisions, especially in situations requiring critical evaluation of uncertain outcomes. By contrast, those with subprime credit scores were more likely to act as “yes persons”, deferring to consensus or advice from others even when it contradicted their own experience.

The study, led by Associate Professor Noah Dormady and doctoral researcher Yiseon Choi of Ohio State’s John Glenn College of Public Affairs, was recently published in the International Journal of Production Economics. It involved a controlled behavioural experiment with 303 C-suite executives holding high-ranking roles such as CEO, CFO, or COO at middle-market firms with annual revenues between $10 million and $1 billion. Participants self-reported their FICO credit score and engaged in a decision-making simulation that tested their responses to investment recommendations amid hypothetical disaster scenarios. The simulation required executives to decide whether to stockpile inventory that could be a buffer in a production-halting catastrophe, such as a hurricane.

The experiment consisted of ten decision-making periods for each participant, with two rounds each. After the first round of decisions, executives were given a unanimous recommendation from a simulated advisory group—appointed by their fictional CEO—to either invest in or refrain from stockpiling. Participants then made a second decision and were subsequently told whether a catastrophe had occurred, with a 25% chance of such an event per round. The researchers observed how the executives responded to this information over time, particularly how they balanced prior outcomes with advisory input.

Findings revealed that executives with high credit scores were far more likely to treat external advice as one piece of a broader evidentiary puzzle, integrating it only when it aligned with their own scenario experience. For example, if a catastrophe had occurred in previous rounds, they were more inclined to heed advice to stockpile inventory. However, they did not hesitate to reject advisory input when it seemed ill-suited to the facts. This pattern suggests more substantial autonomy and confidence in decision-making, possibly rooted in a personal history of sound financial judgement.

In contrast, executives with subprime credit scores were nearly twice as likely to accept the advisers’ recommendations wholesale—even when the advice was misleading or ran contrary to what their own experience in the simulation should have indicated. Dormady remarked that such executives appeared to prioritise consensus over critical analysis, a tendency that could impair a company’s ability to adapt swiftly and appropriately to volatile conditions. Choi added that this pattern may reflect deeper behavioural tendencies, whereby poor financial decisions in one’s personal life echo a broader difficulty with risk evaluation in professional contexts. While the study controlled for demographic variables such as gender, income, and veteran status, the FICO score most reliably predicted the nature of the decision-making behaviour.

Despite the strong correlation uncovered, Dormady cautioned against using credit scores as a screening tool for executive recruitment. “There are serious ethical considerations to account for,” he said, noting the potential for discrimination or misuse of personal financial data. The authors advocate for additional replication studies to validate the findings before any practical application is considered. Still, the research opens new avenues for understanding how personal psychology and financial behaviour may inform leadership styles. It challenges conventional thinking about what makes a good executive. It suggests that objective, evidence-based reasoning may, in part, be forecast by the seemingly unrelated credit score metric.

More information: Noah Dormady et al, Can FICO Scores Be Used to Explain Managerial Decision making?:Evidence from a Supply-chain Resilience Experiment, International Journal of Production Economics. DOI: 10.1016/j.ijpe.2025.109675

Journal information: International Journal of Production Economics Provided by Ohio State University

CEOs with Machiavellian Traits Reap Higher Compensation, Study Reveals

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A comprehensive study exploring the nexus between personality traits and executive compensation has revealed that CEOs exhibiting stronger Machiavellian tendencies—defined by a drive to advance personal objectives and dominate social interactions—are statistically more likely to command higher overall remuneration. This includes their standard pay packages and severance agreements and the compensation levels of those in their immediate leadership circle.

The research, led by Dr Aaron Hill, Associate Professor at the Warrington College of Business at the University of Florida, found that CEOs with elevated Machiavellian traits demonstrated superior motivation and effectiveness in negotiating compensation. According to Hill and his co-authors, these executives are especially adept at securing advantageous financial arrangements for themselves and members of their top management teams.

The researchers employed a longitudinal dataset encompassing firms listed in the S&P 500 index to arrive at these findings. They meticulously analysed compensation data in conjunction with personality assessments conducted by expert clinical psychologists, who evaluated publicly available video recordings of the executives in question. This methodological approach allowed the team to link observable behavioural patterns with quantifiable compensation outcomes over time.

“Our broad findings indicate that Machiavellianism in CEOs is positively associated with several key aspects of executive pay,” said Hill. “This includes their own salaries, severance packages, and notably, the compensation of their C-suite peers. What is particularly striking is that the increases in top management team pay often precede subsequent increases in CEO pay, suggesting a strategic use of influence to create favourable precedents for their own compensation.”

The study illuminates a subtle but significant bias in how certain personality traits, particularly those associated with strategic manipulation and self-interest, can shape corporate remuneration decisions. This dynamic raises essential questions about the systems and incentives that govern executive pay. Hill and his colleagues suggest that boards of directors—typically responsible for approving compensation—should be more active in ensuring that reward structures align with the behaviours and values they wish to see in leadership.

“Everyone has personality traits that come with trade-offs—some qualities can be strengths in one context and weaknesses in another,” Hill noted. “The key for boards and decision-makers is to create environments that amplify the constructive dimensions of these traits while minimising their potential for harm. In doing so, they can foster leadership cultures that reward performance without succumbing to manipulative or self-serving behaviour.”

Ultimately, the research offers a nuanced look at how individual psychology intersects with organisational governance. It raises awareness of the potential for personality-driven distortions in executive compensation. It encourages more intentional oversight to ensure leadership reward systems serve organisational goals and stakeholder interests.

More information: Aaron Hill et al, Chief executive officer (CEO) Machiavellianism and executive pay, Journal of Applied Psychology. DOI: 10.1037/apl0001290

Journal information: Journal of Applied Psychology Provided by University of Florida

Prioritising Quality over Quantity in Climate Adaptation Finance for Meaningful Impact

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The volume of climate adaptation finance has long been a politically charged topic and a recurring focal point in international negotiations. For developing nations, it represents a lifeline in the face of escalating climate risks and a matter of equity and justice. At COP29, held in Baku last year, developed countries reiterated their commitment to increasing adaptation finance for emerging markets and developing economies. While this pledge was welcomed, it reignited a more fundamental concern—namely, that such finance’s effectiveness remains unmeasured and poorly understood. Dr. Jonathan Verschuur notes, “It is not only the amount of money that matters. We currently lack evidence to determine whether the adaptation finance disbursed so far has been effective, or even clarity about the outcomes we are trying to achieve in terms of reducing climate risk.”

This disconnect between financing volumes and real-world impact underscores a deeper structural issue. Although well-meaning and staffed by committed professionals, many adaptation projects are hindered by misaligned incentives. A prevailing trend is the superficial expansion of adaptation finance commitments by integrating adaptation-related components into pre-existing development projects. This tactic may help to inflate funding figures on paper, but it does little to address the systemic weaknesses that inhibit genuine climate resilience. In contrast, far less attention—and funding—is given to initiatives that aim to build institutional capacity, enable evidence-based policymaking, and support countries in designing and leading their adaptation agendas. Without such foundational support, adaptation efforts risk being fragmented, unsustainable, and ultimately ineffective.

Unlike mitigation efforts, which are often globally standardised—such as transitioning to renewable energy or phasing out fossil fuels—adaptation strategies are deeply context-dependent. They must consider local agricultural practices, socioeconomic conditions, governance structures, and the specific vulnerabilities of communities and ecosystems. Effective adaptation cannot be imposed from the outside; it must be cultivated from within. One illustrative example is the Netherlands’ Delta Works. Far more than a network of dikes and flood defences, the Delta Works reflect a deeply embedded policy culture of long-term planning, public engagement, and integrated water management. Adaptation efforts could be transformed from reactive coping mechanisms into proactive resilience-building frameworks if such a culture can be nurtured in climate-vulnerable countries.

A paradigm shift is urgently required to realise this vision. According to Verschuur, the path forward involves rethinking how adaptation finance is structured and delivered. His team has put forward five key recommendations to improve adaptation programmes’ design, implementation, and monitoring. These include better identification and understanding of climate risks, strategic planning tailored to local realities, robust monitoring and evaluation frameworks, and the creation of enabling environments that allow finance to translate into meaningful, sustainable change on the ground.

At the heart of all five recommendations lies a single unifying principle: the need for more ambitious and coherent capacity-building efforts. Fragmented or ad hoc training sessions and workshops are not sufficient. Instead, a large-scale, coordinated effort is needed to build institutional and human capacity within governments, across key economic sectors, and at the community level. This will require investment in knowledge and skills and the systems and structures that allow such capacities to be sustained and scaled over time.

Verschuur emphasises that the upcoming United Nations climate conference, COP30, scheduled in Belém this October, could be a pivotal moment to launch a serious international dialogue. Rather than framing success solely regarding pledges and dollar amounts, COP30 should shift the narrative towards how adaptation finance can be made genuinely effective—enabling countries to lead their strategies grounded in local knowledge and long-term vision. If this shift can be achieved, the global adaptation agenda will move significantly closer to delivering the outcomes it promises: protecting lives, livelihoods, and ecosystems in an era of accelerating climate change.

More information: Jasper Verschuur et al, Climate adaptation finance: From paper commitments to climate risk reduction, Science. DOI: 10.1126/science.adx1950

Journal information: Science Provided by Delft University of Technology

Research reveals minimal tax-driven profit shifting by foreign multinationals from the United States

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Although the phenomenon of income shifting by multinational corporations has been the subject of considerable scholarly attention, much of the existing research has concentrated on domestic firms or those headquartered in the United States. Few studies have scrutinised the behaviours of foreign-owned companies operating within the U.S., particularly regarding their tax strategies and decisions to reallocate income abroad. In a new study published in The Review of Financial Studies, Jim Albertus, Assistant Professor of Finance at Carnegie Mellon University’s Tepper School of Business, addresses this gap by examining how foreign multinationals respond to tax incentives and how these responses affect their reported income, employment, and investment patterns within the United States.

Albertus’s findings suggest that while foreign multinational firms do engage in income shifting for tax reasons, the degree to which this occurs is relatively modest. The primary mechanism utilised for this purpose is transfer pricing—where firms adjust the prices of intercompany transactions to allocate profits to jurisdictions with more favourable tax regimes. Notably, the study finds little evidence to suggest that these firms commonly rely on more aggressive tactics, such as earnings stripping, wherein interest deductions on internal loans are used to reduce taxable income. This measured level of tax avoidance challenges some prevailing assumptions about the scale of base erosion associated with foreign direct investment. It offers a more tempered view of the strategic behaviour of foreign-owned U.S. businesses.

Albertus compiled a confidential and comprehensive dataset using information from the Bureau of Economic Analysis to overcome one of the main challenges in studying foreign multinationals—the absence of publicly available, detailed data on their U.S. operations. These data, derived from mandatory surveys, included subsidiary-level financial statements and balance sheets, offering a rare and thorough view into how these firms report income and manage their domestic operations. By leveraging this unique panel dataset, the study can explore the operational footprints of foreign-owned firms in the U.S. with precision not typically possible in previous literature.

A second methodological hurdle lies in the difficulty of isolating the effects of tax incentives on foreign-owned firms since changes in U.S. tax policy tend to apply uniformly to all businesses, thereby eliminating the possibility of a natural control group. To address this, Albertus innovatively uses the staggered adoption of controlled foreign corporation (CFC) rules by foreign governments. These rules, which govern the taxation of foreign subsidiaries’ profits, provide natural variation in the international tax environment. This allowed the study to assess how differences in foreign tax policy affect the incentives and behaviour of multinationals with U.S.-based subsidiaries, offering a rare quasi-experimental setting for analysis.

The empirical results indicate that when foreign countries implemented stricter CFC rules, thereby limiting the benefits of income shifting, foreign-owned subsidiaries in the United States reduced their investment and employment levels. These declines, though modest, reveal that tax-motivated income shifting does not occur in isolation from firms’ real economic activities. Instead, the ability to shift income appears to support a degree of economic activity—capital expenditure and job creation—that may be sensitive to changes in international tax policy. From a U.S. policy perspective, this suggests that foreign tax reforms can have tangible, albeit limited, spillover effects on domestic economic performance through their influence on foreign direct investment.

These findings carry significant implications for current policy debates, particularly in light of the proposed “Revenge Tax” provisions in the U.S. tax bill under congressional consideration in June 2025. Albertus’s work provides critical empirical grounding to assess the potential economic consequences of such measures. While foreign multinationals do shift some income out of the U.S. in response to tax incentives, the extent of this activity appears limited, and its economic impact, though real, is not substantial. As policymakers weigh the risks of tax base erosion against the benefits of attracting and retaining foreign investment, this study contributes a balanced and evidence-based perspective to a debate often dominated by more extreme characterisations of corporate tax avoidance.

More information: James F Albertus, Income Shifting out of the United States by Foreign Multinational Firms, Review of Financial Studies. DOI: 10.1093/rfs/hhaf021

Journal information: Review of Financial Studies Provided by Carnegie Mellon University

Returnless Refunds Strengthen Brand Loyalty

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Recent research has illuminated a significant trend in online retail: nearly one in every five items purchased through digital platforms is returned by consumers. While this pattern is expected in the realm of e-commerce, it creates a complex and costly dilemma for retailers. The expenses incurred in processing, restocking, and sometimes refurbishing returned merchandise frequently outweigh the revenue from reselling these items. As such, the traditional return model has become financially unsustainable for many businesses, particularly as online shopping surges.

In response, a growing number of retailers have begun adopting what are known as “returnless returns” — policies that allow customers to receive refunds without sending the item back. Instead, consumers are often told to “keep it.” What began as an experiment in customer service and logistical efficiency has evolved into a common retail strategy. Data from a 2023 survey of over 500 retail executives revealed a dramatic shift: 59 per cent had implemented returnless returns, up from just 26 per cent the previous year. This change reflects an industry-wide reevaluation of how best to handle post-purchase dissatisfaction without compromising profit margins.

The rationale behind this approach extends beyond mere cost containment. According to new research conducted by John Costello and Christopher Bechler, assistant marketing professors at the University of Notre Dame’s Mendoza College of Business, return policies also have a noteworthy psychological effect on consumers. Their forthcoming article in the Journal of Marketing Research explores how these policies enhance brand perception and strengthen customer loyalty. Drawing on nine empirical studies — spanning laboratory experiments, field tests, and online surveys — the researchers found that customers offered a returnless option were more likely to make repeat purchases and recommend the brand to others. This effect was pronounced when the returnless decision was presented as a personalised, considerate gesture rather than a cost-cutting tactic.

Several key factors amplify the positive impact of returnless returns. When customers are not required to provide proof that an item is defective or unwanted, and when the refund decision is framed as unique to the individual case, the gesture feels generous and authentic. Additionally, perceived brand warmth increases if the brand encourages the recipient to donate the item or explains the returnless decision regarding environmental responsibility or customer care. These human-centric communications are critical in an age where impersonal digital interactions often leave consumers feeling alienated or undervalued.

Contrary to popular belief — and even the researchers’ own pilot study with retail professionals — cost reduction is not the sole or primary driver of success in returnless return policies. The team found that returnless returns could generate more brand support than simply delivering a product that meets expectations and requires no return. This finding challenges traditional assumptions in customer satisfaction research, suggesting that how a company handles problems can be more impactful than whether issues occur in the first place.

Brands are adopting returnless policies in a variety of ways. Some, like Chewy and Bombas, have instituted blanket policies that apply to all customers, regardless of product type or situation. Others, including Amazon and Walmart, assess each case individually. The study, however, indicates that selective implementation — when done correctly — may be more effective. When consumers feel they receive personalised treatment, particularly through human interaction rather than automated responses, their emotional connection with the brand deepens. This perceived “special attention” enhances trust and loyalty more than a universal policy might, which can feel impersonal or even algorithmically indifferent.

Ultimately, the study offers concrete guidance for retail managers looking to leverage returnless returns as a cost-saving measure and a brand-building tool. Communicating a genuine customer-first philosophy, suggesting charitable reuse of items, and emphasising care in personalised messages are all strategies that can make these interactions feel more human and more meaningful. As Bechler summarised in one example, “When managing returns, our primary goal as a company is to make our customers’ lives better… please do whatever you want with these items.” Such messages shift the focus from transaction to relationship and policy to empathy. This reorientation may prove invaluable for retailers navigating a competitive digital landscape and cultivating enduring consumer trust.

More information: John Costello et al, Just Keep It: When and Why Returnless Product Returns Foster Brand Support, Journal of Marketing Research. DOI: 10.1177/00222437251337723

Journal information: Journal of Marketing Research Provided by University of Notre Dame