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The value of sunshine

Deakin Business School researcher Dr Edward Podolski explores the economic implications of weather.

When the days are filled with sunshine, life can seem happier and healthier.  The air is warmer, the light is brighter and there’s definitely a boost to the feel-good brain chemicals.  

But do sunny days impact the workplace? Are employees more productive when it’s blue skies all round? And when it comes to company profits, does sunshine equal prosperity?

These are some of the questions Deakin Business School (DBS) academic Dr Edward Podolski is exploring in his studies around corporate innovation and finance.

A senior lecturer in finance, Dr Podolski is looking at effects that weather has on corporate outcomes. In particular, he’s examining whether the amount of sunshine that employees or executives are exposed to, influences a firm’s fortunes.

‘Perhaps somewhat surprisingly, the answer is yes,’ he says. ‘For example, patent inventors are considerably more productive in years with greater than usual sunshine exposure around their residential location. Sunshine exposure also makes inventors concentrate their efforts on more specialised inventions. The underlying reason for this finding is that sunshine exposure makes inventors more optimistic, risk-taking, and creative.’

Dr Podolski’s academic career began with a double law/commerce undergraduate degree and after honours in finance, he knew he wanted to pursue a research career.

‘Since then I haven’t looked back. I first did a PhD at Monash on corporate takeovers, then obtained a faculty position at La Trobe as a lecturer before moving to Deakin in 2016 as a senior lecturer,’ he says.

His research revolves broadly around two areas: the determinants of corporate innovation and behavioural corporate finance.  

Corporate innovation research looks at the factors within an organisation which help promote innovation.

‘These include incentives at the top executive level, rank-and-file level, as well as cultural factors,’ he explains.

In his studies around behavioural corporate finance, Dr Podolski is particularly interested in whether the deeply-ingrained behavioural preferences of stakeholders influence corporate outcomes. 

‘In this context, my research has shown that amongst public US firms, the prevalent religion around corporate headquarters is a key factor influencing things such as the level of corporate innovation as well as the success of mergers and acquisitions,’ he says.

Because economics and finance cross a very broad field, much of the work in trying to understand the behaviour and impact of economic agents is still in its infancy he says.

‘My research on behavioural corporate finance is motivated by a fairly sizable gap in the literature … we don’t fully understand which behavioural factors are most important when trying to understand corporate decision making.’

The link between economic wellbeing and technological innovation is one of the drivers behind Dr Podolski’s corporate innovation research.

‘Living standards around the world have improved over the past two centuries primarily as a result of the adoption of technologies around the world… [but] the distribution and generation of new technologies has not occurred uniformly. For example, while the richest county in the 18th century was roughly four times richer than the poorest county, nowadays the richest country is over forty times richer than the poorest country,’ he says.

One of the key reasons for the wealth disparity, he adds, is in the adoption and generation of innovative technologies by the private sector.

‘The underlying factors which motivate and lead to technological innovation are therefore extremely important, yet to a large extent, not understood.’

And this is where the weather – and how it impacts mood, productivity and innovation – becomes important.

‘We’ve found that executives are limited in controlling the innovative process with the external environment, such as weather, playing a significant role in the productivity of the corporate workforce.’

Largely, Dr Podolski hopes that his research will help develop a better understanding of the drivers behind corporate innovation.

‘These are incredibly important to our future progress as a society,’ he says.  

But the influence of sunshine exposure is not limited to inventors alone. One of Dr Podolski’s projects explores whether exposure to sunshine influences the accounting practices of top executives, especially with respect to their likelihood of manipulating the corporate earnings that they report to their shareholders.

‘And the answer is again yes. This is because sunshine induces managers into a positive mood which alters their subjective assessments of the benefits and risks associated with earnings manipulation.’

While psychology literature is full of notions about sunshine-induced mood enhancement, Dr Podolski’s work is one of the first to explore the consequences of sunshine exposure on the ‘real’ economy.

‘Given the current discourse on the potential consequences of climate change, I believe that my research on the economic implications of weather are a good starting point to understanding the indirect implications of potentially changing weather conditions in the future,’ he says.

As a relative newcomer to the DBS, Dr Podolski says he’s delighted to be working in a university that provides a youthful, energetic and positive environment.

‘This gives all of us more energy to pursue excellence in our research. Deakin is extremely supportive in terms of providing both monetary and non-monetary research support, making it one of the best places to conduct research … these are some of the reasons why the DBS produces some of the best business and economics research in the Asia Pacific region.’

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