Title: Supply chain disruptions and the role of information asymmetry
Description: My research examines how firm operational decisions influence and are influenced by firm value. In particular, I focus on these relationships in the context of low probability, high impact disruptions. With my research I intend to provide firms with meaningful insights on how to manage this uncertainty by measuring and mitigating the level of risk in their operations. My dissertation focuses on one important aspect of this issue -- 

how information asymmetry between the firm and its investors may lead managers within the firm to take actions. In the first chapter, I examine the role of information asymmetry in inducing managerial decisions that contribute to supply chain disruptions. I use signaling game theory to develop a stylized model of a capacity investment decision by the firm's management. Distinguishing features of the analysis are that: (i) I allow the capacity decision to be either in discrete increments or continuous, and (ii) I allow beliefs to be refined based on either the Undefeated refinement or the Intuitive Criterion refinement. I build on this research by showing the existence of pooling outcomes in which low quality firms over-invest and high quality firms under-invest so as to provide identical signals to investors. Finally, I provide evidence from executive interviews that support the results of our model. 

This analysis is important because it provides a tractable model to analyze myopic behavior in a common operations management setting. In the second chapter, I present the results of a controlled experiment that analyzes whether the Intuitive Criterion refinement or the Undefeated refinement is a better predictor of decisions made under information asymmetry. Recall that chapter 1 considers the implications of both discrete capacity decisions and refining the participants' beliefs using the Deciding which refinement to employ is central in analyses involving better informed decision makers that are called upon to make choices which may provide a costly yet informative signal to less informed parties. Our experiment, however, is the first direct empirical evidence of whether individuals make decisions which are consistent with the Undefeated refinement compared to the Intuitive Criterion refinement. I examine this issue in a setting central to operations management -- 

a capacity investment decision. I show that individuals making decisions which are consistent with the Undefeated refinement report a higher understanding of the game and earn more money from the game.

These results provide strong support that decisions are made consistent with the Undefeated refinement rather than the Intuitive Criterion refinement. This is surprising because the Undefeated refinement has not been applied in our field, and yet it is more predictive of actual decision making. It is also important because, as I show in both chapters 1 and 2, the results generated by the Undefeated refinement can often be materially different compared to those generated by the Intuitive Criterion refinement. For instance, the Undefeated refinement is far more likely to predict a pooling equilibrium such that managers at superior firms commit to lower capacity levels while managers at inferior firms commit to higher capacity levels. In the final chapter, I examine whether managers exercise significant discretion in disclosing supply chain disruptions to investors. 

A major challenge in empirical research on supply chain disruptions is the possibility that selection issues prevent the identification of material, disruptive events. I examine these issues using a sample of over 500 disruption announcements collected from company press releases. I take advantage of an exogenous regulatory shock, the enforcement date of new corporate disclosure rules, to identify whether managers were previously exercising significant discretion in deciding whether or not to reveal material disruptions affecting the firm. I find that after the regulatory change, managers disclosed far more material disruptive events, indicating that they had previously been suppressing their release. I also find that there is a significant amelioration in the average impact of disruptions on firm value after managers improve their disclosure practices. 

Finally, I show that disruptions attributed to the firm's internal operations are far more damaging to firm value than those attributed to environmental factors, and this difference persists after disclosure is improved. The impact of disruptions on firm value can vary widely. My findings are important for managers and investors alike because they help identify the types of disruptions and the firm characteristics that contribute disproportionately to the most damaging announcements.
Subjects: Business logistics