03 Management Accounting (including Behavioral) (MAN)
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ItemHuman Resources, Managerial Ability, and Innovation: HR’s Moderated Effect on Firm Growth( 2022)Drawing from Penrose and March, we conceptualize human resource (HR) slack as the margin for firm growth and managers as the firm’s coordinating mechanism. Therefore, we propose that the effect of HR slack on firm growth systematically depends on managerial ability. We elaborate our conceptual model to distinguish between managers who invest in HR slack primarily as additional units of time from those who invest in HR slack as unknown potential, by testing a three-way interaction among HR slack, managerial ability, and innovation intensity. Using publicly available firm-level data, we find that managerial ability negatively moderates HR slack’s effect on firm growth. The three-way interactions indicates that medium and high-ability managers of non-innovation intensive firms positively moderate HR slack’s effect on firm growth while high-ability managers of innovation intensive firms have the oppositive effect. In the Penrosian tradition, we interpret these results as different illustrations of HR slack envisioned as additional units of time compared to HR slack envisioned as unknown potential.
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ItemThe Balanced Scorecard: Plant-Level Evidence of Relations Between the Four Perspectives( 2022)We use structural equation modeling to evaluate patterns of relations in two models – a sequential model that links a series of non-financial and financial outcome measures in an ordered hierarchical manner according to the four perspectives described in the balanced scorecard (BSC) and a complex model that permits direct relations between outcome measures in lower-order perspectives with outcome measures in any higher-order perspective of the BSC hierarchy. We perform our analysis at the plant level using generic outcome measures from a nation-wide survey of business establishments in Canada. Our model specifications follow Bryant, Jones and Widener (2004) who conduct a firm-level analysis of companies included in the American Customer Satisfaction Index. Our plant-level results indicate that both the sequential and complex models fit the data well. The validity of the sequential model supports the premise of linking the outcome measures in a sequential chain ordered according to the BSC hierarchy. Direct relations observed in the complex model support the proposition that some relations between perspectives exist that are not permitted in the sequential model. We find evidence of two such types of relations for our outcome measures and data. Innovation and quality (internal business process perspective) link sequentially to profitability outcomes (financial perspective) through customer satisfaction and market share (customer perspective) but also link directly to productivity (financial). Computer usage (learning and growth perspective) links sequentially through innovation and quality (internal business process) to customer satisfaction (customer) but also links directly to return on sales and productivity (financial).
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ItemEffects of Transparent Performance Data on Employee Performance: Evidence from a Field Experiment( 2022)There is a growing trend of continuously tracking performance metrics and providing them to employees via digital means without supervisor intermediation. Using a field experiment at a service organization, we examine how employees respond to transparent performance data previously available only to supervisors (i.e., daily performance metrics of employees in the same work group). We find that, compared with the pre-intervention mean value, the treatment group experienced an 11-percent decrease in strictly nonproductive time relative to the control group. The effect on reducing strictly nonproductive time seems greater than that on increasing strictly productive time. Performance improvements are greater in certain employee subsamples: those who previously perceived their supervisors as less-supportive, those with low intrinsic motivation, and those with high extrinsic motivation. We find inconclusive evidence on the moderating effects of social comparison orientation, suggesting that the main effect is unlikely to be driven by access to relative performance information.
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ItemThe Effect of Electronic Medical Records on Hospital Utilization Costs( 2022)This paper examines the impact of adopting electronic medical record (EMR) systems on hospital utilization costs. We proxy for such costs using hospital charges (i.e., prices of services rendered) for Medicare diagnosis-related groups (DRGs), and hospitals’ cost-to charge ratios (total Medicare allowable costs divided by total charges). Our sample is US hospitals, which exhibit considerable variation in the timing and extent of EMR adoption. We document a negative association between EMR adoption and both hospitals’ DRG charges and cost-to-charge ratios, consistent with efficiency improvements stemming from higher quality of information supporting clinicians in patient care decision-making. Our results are robust to different EMR adoption measures, and various approaches to enhance identification including propensity score matching and a placebo test. Overall, our results indicate that EMR adoption is associated with reductions in healthcare expenditures, despite potential frictions such as high costs of adoption, maintenance, and integration.
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ItemAlgorithmic Trading and Directors’ Learning from Stock Prices: Evidence from CEO Turnover Decisions( 2022)We examine the effect of algorithmic trading (AT) on directors’ learning from stock prices. We find that the sensitivity of forced CEO turnover to stock returns decreases with AT. We mitigate correlated omitted variable bias by using the 2016 Tick Size Pilot Program as an exogenous shock to AT. In cross-sectional analyses, we document that the negative effect of AT is more pronounced for growth firms, firms with greater exposure to macroeconomic factors, and firms with a geographically dispersed investor base, where the information that AT crowds out is more likely to be new to directors. We also find that the effect is stronger when directors’ expertise likely allows them to extract decision-relevant information from prices and when the directors’ own information set is poor. Overall, our findings suggest that stock prices aggregate information about CEO performance and CEO-firm match, which is otherwise unavailable to directors, and that directors incorporate this information into their CEO turnover decisions.
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ItemGrowing Pains or Confidence? CEO Relative Age, Stress, and Firm Performance( 2022)CEOs face tremendous stress at work. Motivated by the psychological literature that self-efficacy helps people overcome stress, we examine if the self-efficacy of CEOs alleviates their stress and improves their firms’ performance. Using CEOs’ relative age, i.e., age in kindergarten due to state-level eligibility cutoff date, as a proxy for the CEOs’ self-efficacy, we find that CEOs with higher self-efficacy generate better firm performance, especially in high-stress situations such as industry downturn, expansion into a new sector, mergers and acquisitions, and innovation. While existing literature documents negative impacts of CEO overconfidence, our findings suggest that the confidence of CEOs can be beneficial to their firms.
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ItemRelative Performance Information and Employee Performance: The Role of Need for Cognition( 2022)Relative performance information (RPI) can be a valuable performance feedback mechanism within a management control system. However, it is likely that not all types of employees respond similarly to the implementation of RPI. Since firm resources are constrained and RPI requires considerable resources, our study seeks to understand what type of employees benefit most from the expectation of RPI. Specifically, we examine the personality trait of need for cognition (NFC). Using a laboratory experiment, we predict and find that an expectation of RPI results in increased performance for individuals low in NFC because it increases the amount of time they spend seeking out information in an effort-sensitive decision-making task. In contrast, an expectation of RPI has no effect on individuals high in NFC as they naturally seek performance-relevant information in the absence of expecting RPI. In an effort to increase the application of our findings, we employ a broadly-distributed survey to gather descriptive information on NFC by industry and job types. The results of this study provide important nuance to our understanding of RPI and how managers can better implement RPI to achieve the greatest effect.