Managerial Accounting

In evaluative contexts, evaluatees typically seek to present themselves in a favorable light, while evaluators ask penetrating questions to assess these claims. Here we develop a framework to identify curveball questions: ones that are on-topic yet perplexing (i.e., difficult to predict) relative to past discourse. We develop a language-based measure of curveball questions and apply it to a corpus of quarterly earnings calls.

Cooperativeness is essential to individual and organizational success. We exploit a unique feature of conference calls to study individual executives’ cooperativeness, indicated by their directly inviting colleagues to respond to analysts’ questions, and its relation with their career outcomes and firm performance. After validating our measure, we find that cooperativeness is associated with relevant executive characteristics. Older, more senior, and more experienced executives are more likely to display cooperativeness.

Accounting Standards Update (ASU) 2016-01 requires that unrealized gains and losses on equity investments (equity-URGL) previously recognized in other comprehensive income now be included in net income. Using a sample of public insurers, we examine how this accounting standard change influences managerial investment decisions, with a particular focus on the moderating effects of compensation contracting and financial reporting practices.

This paper investigates the market consequences of sovereign accounting errors. Eurostat, a division of the European Commission, issues semiannual assessments of financial reports produced by the member states of the European Union (EU), and issues reservations that detail financial reporting errors when they have doubts on the quality of sovereign financial reporting.

Many organizations rely on formal management control systems that align employee values with organizational values (i.e., culture-fit) to shape organizational culture. Using proprietary data from a highly-decentralized organization, I examine the employee performance consequences of adopting a formal culture-fit measurement system in employee selection. I exploit the staggered feature of the adoption of the system, and find that employees selected with the system perform significantly better than those without the system.

We revisit the firm value and pricing implications of the negative screening of sin stocks. Unlike prior work, we find that institutional ownership and valuations related to sin stocks are not different from those of other stocks after controlling for differences in fundamentals between sin and non-sin stocks. Sin stocks do not differ in the likelihood of exiting the public market, the cost of raising new equity, and in the announcement returns around negative ESG news relative to non-sin stocks, casting further doubt on whether negative screening hurts sin stocks.

We study optimal team design. In our model, a principal assigns either heterogeneous agents to a team (a diverse team) or homogenous agents to a team (a specialized team) to perform repeated team production. We assume that specialized teams exhibit a productive substitutability (e.g., interchangeable efforts with decreasing returns to total effort), whereas diverse teams exhibit a productive complementarity (e.g., cross-functional teams).

Teamwork and team incentives are increasingly prevalent in modern organizations. Performance measures used to evaluate individuals' contributions to teamwork are often non-verifiable. We study a principal-multi-agent model of relational (self-enforcing) contracts in which the optimal contract resembles a bonus pool. It specifies a minimum joint bonus floor the principal is required to pay out to the agents, and gives the principal discretion to use non-verifiable performance measures to both increase the size of the pool and to allocate the pool to the agents.