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search.filters.applied.f.advisor: Hales, Jeffrey × End date: 2022 × search.filters.applied.f.resourcesubtype: Dissertation ×

Publication Search Results

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Trust versus Rewards: Revisiting Managerial Discretion in Incomplete Contracts

2022-05-02 , Hu, Wenqian

Incentive compensation is often characterized by incomplete contracts. While managerial opportunism has been documented as one of the most pronounced problems with managerial discretion in incomplete contracts, prior work has not investigated the underlying mechanisms driving a loss of productivity. In this study, I experimentally investigate whether replacing human managers’ decision making with algorithm-generated bonus schemes that mimic managers’ decision making improves employee productivity. I find that compensation determined by algorithms generate higher productivity without sacrificing the residual profits. Further, the productivity-inducing effect of algorithms is stronger when the rewards are not contingent on the performance signal. These results are consistent with the idea that it is hard for managers to establish credibility for rewarding employees for their performance in incomplete contracts. Employee productivity can be improved by enhancing their trust in the rewarding mechanism, even when they are not paid a more generous bonus scheme. This study advances our understanding of the behavioral factors influencing employee productivity in incomplete contracts and the potential ways algorithm-based evaluations can be used to improve firm outcomes.

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The influence of CSR reporting models on managers' capital allocation decisions

2015-06-11 , Johnson, Joseph Aaron

In my dissertation, I experimentally examine whether and how the reporting model a firm uses to guide its corporate social responsibility (CSR) disclosures can influence managers’ capital allocation decisions. Chapter 1 provides an overview of my research question, why this research question is important, what I predict I will find, and the main results of my experiment. In Chapter 2, I briefly review the CSR literature generally and in accounting specifically, touching particularly on what has catalyzed the recent growth in CSR disclosure, how it influences behavior, and the emerging role of CSR reporting models as well as differences among these models. Two key features that differ among available reporting models are the intended users of the disclosures (e.g., capital providers or all stakeholders) and the disclosure location (e.g., MD&A or Sustainability Report). In Chapter 3, I draw upon research in social psychology on the social contingency model to hypothesize that differences in the intended users and the disclosure location jointly influence the extent to which managers’ capital allocations are weighted toward financial versus social benefits. I also hypothesize that this influence is mediated by how accountable managers feel for financial and social performance. Chapter 4 outlines the experimental design and method I use to test my hypotheses. The results of my experiment and related statistical analyses are reported in Chapters 5 and 6, in which I find support for my predictions across two different participant populations I use as proxies for managers. Specifically, I find that participants allocate capital to social benefits across all conditions, but that their overall allocations are largely driven by financial considerations. That is, they weight financial benefits more heavily than social benefits. However, when the reporting model disconnects CSR disclosure from a more traditional financial reporting setting (i.e., when the CSR disclosures are made to all stakeholders in a Sustainability Report), participants’ weight on financial benefits is reduced. In addition, I find that these results are driven by changes in perceived accountability for both financial and social performance. I also find evidence that the influence of the CSR disclosure location is contingent on whether the disclosure audience’s preferences are perceived to uniformly favor financial benefits. Chapter 7 concludes and reiterates the important implications of my dissertation. Namely, the results of my study help inform standard setters, regulators, stakeholders, and managers about the consequences of alternative CSR reporting models and highlight the potential effects of CSR disclosure standards on stakeholder welfare.

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The hidden benefits of control: The effect of peer competition on employee responses to restrictive controls

2019-12-16 , Samet, Jordan A.

Managers must decide whether to grant their employees the freedom to make their own choices or to restrict their employees’ decision rights by proscribing specific actions, behaviors and decisions. Prior research finds that employees perceive restrictive controls as a signal that their manager does not trust them to behave appropriately. While this might be true sometimes, I argue that an employee’s belief as to why a restriction was imposed could depend on contextual factors, such as how competitive the workplace is. Specifically, I predict that, compared settings where there is little peer competition or the competition is not salient, experiencing stronger peer competition will push employees to view a restrictive control through a lens of how it affects their performance relative to their peers, increasing the likelihood that employees will view a restrictive control as improving fairness. If so, employees might respond positively to the imposition of a restrictive control rather than negatively, as suggested by prior research. The results of a laboratory experiment suggest that employee reactions to a control decision depends not only on the presence of peer competition, but also on the perceived cost incurred by management to impose the control.

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The power of perspective: the effect of performance reporting frames on collaboration

2019-05-21 , Li, Siman

While organizations want to encourage collaboration, individual free riding undermines the success of collaborative efforts. In this paper, I investigate whether it is possible to mitigate free riding problems through altering how individual performance is framed when reported. On the one hand, individuals could report their performance using an individualistic frame that only focuses on the individual’s net cost of collaboration, which will merely highlight the incentive to free ride. In contrast, individuals could instead report their behavior using alternative frames that emphasize collaborative aspects of their actions. Drawing on research in psychology, I predict that individuals who report under collaborative frames will be more willing to collaborate than those who report under an individualistic frame. Utilizing an anonymous and single-shot public goods game, I demonstrate that contribution amounts are higher with collaborative frames than with an individualistic frame. Results also suggest that the reporting frames alter participants’ reasoning focus, which helps to explain their levels of collaboration. Further, a second experiment shows that performance reporting frames impact collaboration even in a repeated setting. My findings have broad implications for organizations that face free riding problems, from individual firms that want to encourage collaborative efforts among their employees to organizations that want to encourage firms to invest more in public goods.

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