Johnson Professor of Operations Management Wins Award for PhD Dissertation
Council of Supply Chain Management Professionals honors William Schmidt with Doctoral Dissertation Award
August 15, 2014
William Schmidt, assistant professor of operations management at Samuel Curtis Johnson Graduate School of Management at Cornell University, was recently recognized for his doctoral dissertation, “Supply Chain Disruptions and the Role of Information Asymmetry.” Conferred by the Council of Supply Chain Management Professionals (CSCMP), the Doctoral Dissertation Award (DDA) goes to recent doctoral graduates who demonstrate significant originality and technical competence in any supply chain function. Schmidt received his doctorate in business administration in 2013.
Schmidt’s research examines the role of information asymmetry between a firm and its investors during extreme risk situations (hurricanes, earthquakes) and conventional risk situations (sourcing problems, transportation breakdowns), and the market reaction to such disruptions. His research shows that reducing information asymmetry between firms and investors leads firms to make better operational decisions and ameliorates the market reaction when operational disruptions occur. Schmidt’s dissertation provides insights for measuring and mitigating these risks in operations.
“A lot of operational models do not account for the possibility that there is information asymmetry between the firm and its investors,” Schmidt said. His research suggests that such information asymmetries can have a dramatic impact on both the firm’s operational decisions and the investor’s valuation of the firm. For example, a firm with uninformed investors may make operational decisions that improve its valuation in the short term, but increase the risk of a disruption in the long term. This can magnify the investor’s adverse reaction, when a disruption to the firm’s operations occurs.
It is worthwhile to understand what types of disruptions are the most damaging to firm value and the circumstances that can aggravate or ameliorate such value destruction. As Schmidt’s research makes clear, “countermeasures to mitigate the risk of disruptions have a cost, and insights into the type of disruptions that represent the greatest risk to company value will help managers assess whether the company is investing appropriately to mitigate the most material risks.”
Reducing information asymmetry is one important factor that can improve the quality of the firm’s operational decisions and alleviate the market’s response to future disruptions. Information asymmetry occurs when the firm and its managers cannot credibly reveal everything they know that can affect the firm’s performance.
“Managers in a firm may use this information irregularity to make short-term decisions that may be damaging in the long-run,” Schmidt said. “Reducing information asymmetry between the firm and its investors can mitigate adverse incentives that may otherwise lead the firm to make suboptimal operational decisions.”
-- Pallavi Rao
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