Tag Archives: BERT

Do Incentivized Reviews Poison the Well? Evidence from a Natural Experiment at Amazon.com

Park, Jaecheol, Arslan Aziz, Gene Moo Lee. “Do Incentivized Reviews Poison the Well? Evidence from a Natural Experiment at Amazon.com”, Working Paper.

  • Presentations: UBC (2021), KrAIS (2021), WISE (2021), PACIS (2022), SCECR (2022), BU Platform (2022), CIST (2022), BIGS (2022)
  • Preliminary version in PACIS 2022 Proceedings
  • RAs: Minsuk Seo, Vibudh Singh

The rapid growth in e-commerce has led to a concomitant increase in consumers’ reliance on digital word-of-mouth to inform their choices. As such, there is an increasing incentive for sellers to solicit reviews for their products. The literature has examined the direct and indirect effects of incentivized reviews on subsequent organic reviews within consumers who received incentives. However, since incentivized reviews and reviewers are often only a small proportion of a review platform (only 1.2% in our sample), it is important to understand whether their presence and absence on the platform affect the organic reviews from other reviewers who have not received incentives, which are often in the majority. We theorize two underlying effects that incentivized reviews can generate on other organic reviews: the herding effect from imitating incentivized reviews and the disclosure effect from the increased trust or skepticism by explicit incentive disclosure statements. Those two effects make organic reviews either follow or deviate from incentivized reviews. Using Bidirectional Encoder Representations from Transformers (BERT) to identify incentivized reviews and a natural experiment caused by a policy change on Amazon.com in October 2016, we conduct difference-in-differences with propensity score matching analyses to identify the effects of banning incentivized reviews on organic reviews. Our results suggest the disclosure effects are salient: banning incentivized reviews has positive effects on organic reviews in terms of frequency, sentiment, length, image, and helpfulness. Moreover, we find that the presence of incentivized reviews has poisoned the well for organic reviews regardless of the incentivized review ratio and that the effect is heterogeneous to product quality uncertainty. Our findings contribute to the literature on online review and platform design and provide insights to platform managers.

Corporate Social Network Analysis: A Deep Learning Approach

Cao, Rui, Gene Moo Lee, Hasan Cavusoglu. “Corporate Social Network Analysis: A Deep Learning Approach,” Working Paper.

Identifying inter-firm relationships is critical in understanding the industry landscape. However, due to the dynamic nature of such relationships, it is challenging to capture corporate social networks in a scalable and timely manner. To address this issue, this research develops a framework to build corporate social network representations by applying natural language processing (NLP) techniques on a corpus of 10-K filings, describing the reporting firms’ perceived relationships with other firms. Our framework uses named-entity recognition (NER) to locate the corporate names in the text, topic modeling to identify types of relationships included, and BERT to predict the type of relationship described in each sentence. To show the value of the network measures created by the proposed framework, we conduct two empirical analyses to see their impacts on firm performance. The first study shows that competition relationship and in-degree measurements on all relationship types have prediction power in estimating future earnings. The second study focuses on the difference between individual perspectives in an inter-firm social network. Such a difference is measured by the direction of mentions and is an indicator of a firm’s success in network governance. Receiving more mentions from other firms is a positive signal to network governance and it shows a significant positive correlation with firm performance next year.

IT Risk and Stock Price Crash Risk (Working Paper)

Song, Victor, Hasan Cavusoglu, Mary L. Z. Ma, Gene Moo Lee (2023) “IT Risk and Stock Price Crash Risk,” Under review.

IT risk, especially cybersecurity risk, has rapidly increased and become a top concern for researchers, regulators, firm managers, and investors. This study creates a novel firm-level IT risk measure applicable to all US-listed firms by applying the BERTopic topic modeling to risk factors reported in Item 1A of the 10-K annual reports. We validate the measure with multiple approaches including cross-validations, presenting illustrative excerpts of IT risk factors, conducting cross-sectional and over-time distribution analyses, and analyzing firm characteristics associated with IT risk. The measure is found to be heightened in IT-intensive industries and for firms with larger sizes, higher profits, and better growth potential, and it can predict future data breaches. Using this ex-ante IT risk measure, we examine the relation between IT risk and stock price crash risk, which reflects a firm’s propensity to stock price crashes. Our findings suggest that IT risk is positively associated with crash risk, and we also identify that downward operating risk and predictability for data breaches are two mechanisms for the crash risk effect of IT risk. By decomposing IT risk into cybersecurity risk and non-cybersecurity IT risk, we find that both types of IT risk increase crash risk, but the effect of cybersecurity risk is stronger than that of non-cybersecurity IT risk, consistent with their different risk natures. We further observe that the novelty and readability of IT risk factors strengthen the crash risk effects of IT risk, consistent with the notion that the novelty represents updated and increased IT risk, and readability improves the understanding of IT risk. Lastly, difference-in-differences analyses reveal that IT risk increases stock price crash risk, not the other way around. We conclude the paper by discussing academic contributions and practical implications in the context of the SEC’s directives on reporting and managing IT risk and cybersecurity risk.