This study examines whether nonfinancial rewards are used to facilitate organizational change during outsider leadership transitions. Outsider leaders frequently introduce significant change, risking disruptions to the psychological contract between employees and their organization. Using data from surveys and an archival database, we first present evidence that the appointment of outsider leaders brings about a period of significant change. Next, we find that outsider leaders are more likely to use nonfinancial rewards than insiders to recognize employees who perform below their expectations. When examining the broader employee population, we also find that outsider leaders make greater use of nonfinancial rewards compared to insiders. Finally, we find that the use of nonfinancial rewards by outsider leaders to reward employees who performed below expectations has an inverted U-shaped relationship with employee perceptions of their leader's ability to manage change. These results highlight the value and limits of nonfinancial rewards in facilitating organizational change.

Building effective corporate culture is challenging as it requires senior managers to embed shared values within the firm. Yet some firms can do so, and some cannot. This study examines whether managers' career preferences influence manager-employee value misalignment and weaken corporate culture. Career preferences for job-hopping provide incentives for managers to signal their leadership quality in the labor market. We capture managers' and employees' attention allocation across different cultural values using data from conference calls and Glassdoor. We predict and find that job-hopping managers direct their attention away from soft cultural values (e.g., respect and integrity) that are less observable by the external labor market. Furthermore, job-hopping managers who pay insufficient attention to soft cultural values fail to address the concerns that employees have in their everyday work, resulting in lower overall employee culture ratings. Our study highlights the significance of managers' career preferences in shaping different cultural values and offers implications for firms selecting senior managers.

Many organizations have professional employees on fixed-term and ongoing employment contracts. While hiring employees on fixed-term contracts offers organizations operational flexibility and other benefits, it also brings about challenges in the form of relatively lower goal alignment and ability of these employees, thus creating the need for management controls. At the same time, given the costs and constraints of designing and implementing a control system, we expect that the planned use of fixed-term workers would be affected by the type of control environment that organizations are willing or able to create. Hence, this study investigates whether an organization's choice of its control environment and its use of fixed-term professional employees are interdependent (i.e., made jointly). Using surveys from different sources and archival data from the education sector, we find that some types of controls (i.e., action controls and organizational culture) and the organization's choice of using fixed-term employees are interdependent, while other controls (i.e., employee selection practices and results control) are independent of this choice. We also find that the interdependence between the choice of using fixed-term employees and the control environment is generally weaker when organizations use fixed-term contracts as an implicit screening mechanism for ongoing employment. Finally, in additional analysis, we find evidence that the interdependence between controls and the use of fixed-term employees is primarily due to concerns related to goal alignment rather than ability.

We examine whether pay differentials between the chief executive officer (CEO) and vice presidents (VPs) can be explained by firms' strategic priorities. We find that firms that pursue prospector-type strategies have a larger CEO−VP difference in equity compensation. We argue that such a pay differential relates to the relative authority that CEOs have in strategic decision-making, and we find that authority allocation based on a firm's strategic priorities is consistent with the relative ability of the CEO vis-à-vis the VPs. Our results remain consistent after considering alternative explanations including CEO power, risk-taking incentives, and tournament incentives among VPs. Further analyses reveal that a large CEO−VP equity pay differential enhances firm value for prospector-type firms, and that shareholders and proxy advisors tend to incorporate firm strategy in their say-on-pay votes and proxy recommendations.

Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Share Icon Share Facebook Twitter LinkedIn Email Tools Icon Tools Get Permissions Search Site Cite View This Citation Add to Citation Manager Citation Margaret A. Abernethy; A Fortunate Life: 2023 Lifetime Contribution to Management Accounting Award. Journal of Management Accounting Research 1 July 2023; 35 (2): 1–4. https://doi.org/10.2308/JMAR-2023-034 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentJournal of Management Accounting Research Search Advanced Search

Recent advancements in technology have resulted in more sophisticated employee monitoring systems. We study the impact of a technology-enabled advanced monitoring system deployed by the National Basketball Association and explore whether it serves a decision-facilitating role and/or a decision-influencing role at the individual-level. We find that the system impacts players’ playing strategy (i.e. a decision-facilitating role), but not their effort (i.e. a decision-influencing role). The impact on playing strategy increases average individual performance across the entire sample. We also find that the effect is somewhat greater for lower ability individuals in the first year of implementation. At the team-level, we find that system adoption is associated with a smaller dispersion of effort and a greater degree of specialization among individuals in a team. Our study has implications for the use of technology-enabled advanced monitoring systems in a range of industries.

The corporate culture within firms is a significant concern for regulators, shareholders and other stakeholders. Drawing on a large sample of US firms, we use the political preferences of the top management team (TMT) to proxy for a firm's culture and examine whether it influences the decision to implement an effective internal control system (ICS) and whether the ICS plays a mediating role between the culture created by the TMT and financial reporting quality. We find that a Republican-leaning TMT with a more conservative ideology is associated with a more effective internal control system. In addition, the TMT's political preferences affect financial reporting quality, both directly and indirectly, via the internal control system. A range of robustness tests reinforces our main findings.

We study theoretically and empirically the relation between altruism and incentive contract design. Theoretically, we extend Fischer and Huddart (2008) to investigate how social norms reinforce managers’ altruistic preferences, thus affecting the optimal contract design related to incentive strength and performance measurement. Empirically, we draw on the notion of an organization’s work climate to capture managers’ altruistic preferences. Using data collected from a sample of 557 managers, we find that in a work climate where managers are mostly out for themselves, firms have lower pay-for-performance sensitivity and place a greater weight on aggregate performance measures. In addition, respondents report that they engage more in undesirable actions that are unproductive and costly to firm owners. In contrast, in a work climate where managers care about others (including peers in their organizational unit), firms place lower weights on aggregate performance measures. At the same time, respondents report that they supply more effort and engage less in undesirable actions.

We examine whether different organizational forms influence agents' pricing decisions. We study a secondhand car loan setting consisting of independent agents and in-house agents. We consider independent agents to be more entrepreneurial than in-house agents and argue that entrepreneurship motivates agents to scan the environment for the opportunity to maximize their payoffs. We predict that entrepreneurial agents are more likely to increase prices when presented with the opportunity to do so. We expect this to be the case for opaque loans as these loans are less subject to competition than transparent loans. We find that opaque loans have higher prices than transparent loans for both types of agents, and the price difference is more pronounced for independent agents. Our evidence suggests that entrepreneurship enables agents to perform better in an environment where agents can profit from exploring opportunities, i.e., a less competitive environment.

We draw on a five-year longitudinal data set to investigate the influence of performance measurement in the processual dynamics of strategic change, particularly in enacting effective strategic change. Our model examines the role of performance measurement in driving strategy-consistent operational changes and in ensuring that the desired objectives of the strategic change process are achieved. We investigate these roles for performance measurement over time and empirically document lags between changes in strategic priorities, changes in operational processes, and subsequent changes in firm performance. We find that performance measurement supports the implementation of strategic change by influencing the extent to which changes to operational tasks and activities are made in response to new strategic priorities, as well as influencing the quality and impact of these operational changes, as reflected in improved contemporaneous and future firm performance. This paper was accepted by Suraj Srinivasan, accounting.

How managers think about capabilities is related to how they manage resources in their organizations. More than 30 years ago, Stanford psychologist Carol Dweck and her associates became interested in how students’ attitudes about failure influenced long-term academic success. They noticed that some students rebounded, while others seemed devastated by even the smallest of setbacks. After studying the behavior of thousands of students, Dweck identified mind-set—the way people think about the mutability of intelligence and ability—as an explanatory factor for different responses to failure.

We study the relation between a manager’s growth mindset and their use of resource management practices. Growth mindset is based on implicit person theory and is an established and measurable psychological construct. It refers to a person’s deeply held beliefs about whether, in general, people can learn, develop, and change throughout their lives or whether “who they are” is relatively fixed by initial talent endowments (termed a ‘fixed mindset’). Given the demonstrated importance of a growth mindset for educational outcomes and the emerging research studying the influence of mindset on behavior within organizations, we explore whether school principals’ mindset is associated with their resource management practices. Using survey and archival data from 257 primary and secondary school principals, we find that a growth mindset is associated with greater use of budgets to explain and discuss budget variances with key constituents and as an enabler in their managerial role. Principals with a growth mindset also engage in fundraising activities and use non-financial rewards for their teachers significantly more than fixed mindset principals. We also find that the relations between a principal’s mindset and some of these practices are different depending on the school’s performance context.

We examine whether different organizational forms influence agents’ pricing decisions. We study a secondhand car loan setting consisting of independent agents and in-house agents. We label independent agents more entrepreneurial than in-house agents and argue that entrepreneurship motivates agents to scan the environment for the opportunity to maximize their payoffs. We predict that entrepreneurial agents are more likely to increase prices when presented with the opportunity to do so. We expect this to be the case for opaque loans as they are less subject to competition compared with transparent loans, that experience stronger competition. We find that opaque loans have higher prices than transparent loans for both types of agents. Moreover, the price difference between the two loan types is greater for independent agents than for in-house agents. While prior literature suggests greater agency costs of outsourcing, our study recognizes the potential benefits of outsourcing sales activities to independent agents.

An effective corporate culture takes a long time to build and requires considerable effort from top management. However, top management can only profit from their investment in building corporate culture if they remain in the same firm. We study how top management’s external and internal career preferences offer differential incentives to develop corporate culture. We use top management’s networks as a proxy for their career preferences and find that their external network (i.e., external career preference) is negatively associated with corporate culture building, whereas their internal network (i.e., internal career preference) is positively associated with corporate culture building. Additional analyses show that top management build corporate culture through developing effective formal internal controls and/or engaging in internal communication and information sharing. Our study highlights that top management’s career preferences can explain why some firms are not able to develop effective corporate cultures.

ABSTRACTWe examine whether a firm's strategic priorities influence its selection of a new CEO and what conditions enable such an appointment to add value to the firm. More specifically, this study investigates the value‐adding effect when prospector firms (i.e., those pursuing a prospector‐type strategy) select a CEO with high social capital. We argue that uncertainty, driven by a firm's strategy, will determine the decision to select a CEO with high social capital; such CEOs can use their networks to mitigate the uncertainty and thus can be valuable to the firm. However, prior research indicates that CEOs with high social capital can engage in behavior detrimental to firm value. To mitigate the potential for this to occur, we assess whether corporate governance can play a role in prospector firms who appoint CEOs with high social capital. Drawing on archival data of CEO successions over a 14‐year period, we find that prospector firms have greater incentives to appoint CEOs with high social capital. We also find that prospector firms who appoint a CEO with high social capital improve their performance. Furthermore, the value‐adding effect of this selection choice is stronger in prospector firms with good corporate governance.

CEOs of retirement age are likely to exhibit a “horizon problem,” whereby they are reluctant to make decisions that are beneficial to the firm in the long term but potentially costly to the CEOs' personal wealth in the short term. We predict that a CEO with strong organizational identification (OI) will be less likely to behave opportunistically. Our results are consistent with our expectation when we examine three types of decisions that reflect the CEO horizon problem. Specifically, we find that retiring CEOs with strong OI are less likely to reduce research and development investments or decrease the firm's commitment to corporate social responsibility. Retiring CEOs with strong OI also behave less opportunistically when making voluntary disclosures; namely, they issue fewer management earnings forecasts in their last year of employment. Our findings indicate that cultivating a CEO's OI can be an effective way to mitigate her horizon problem.

ABSTRACT Management accounting researchers have been slow to explore the empirical implications of the “manager effect” on management control choices. We critique the “manager effect” literature and identify research opportunities for management accounting researchers. Since the publication of Bertrand and Schoar's (2003) seminal paper, which shows that individual managers have an effect on firm behavior, a large and growing body of accounting and finance research has used publicly available data to identify individual manager effects on a variety of firm outcomes. Management accounting researchers can add significant value to this research; for example, by exploring the control choices that a firm makes to mitigate the adverse consequences associated with some managerial characteristics. In this critique we first identify some of the theoretical and methodological challenges associated with the “manager effects” research and second identify opportunities for management accounting researchers to explore these effects while overcoming some of the limitations.

ABSTRACTEconomics, social psychology, and management studies suggest that group identity plays an important role in directing employee behaviors. On the one hand, strong group identity could motivate high effort to resolve conflicts of interests in the workplace. On the other hand, it could encourage conformity toward group norms. We examine whether the effect of group identity is conditional on managers' performance reporting choices. Drawing on survey and archival data from a field site, we find that when performance transparency is low, the interest alignment effect is more salient and group identity positively relates to employee performance. However, when performance transparency is high, the conformity effect is more salient and higher group identity is associated with more homogeneous, but not necessarily higher, employee performance. Our findings contribute to the management control literature by documenting that managers' performance reporting choices determine whether group identity has positive effects on employee performance.Data Availability: Data in this study are derived from a proprietary source.

We examine whether different organizational forms influence agents’ pricing decisions. We study a secondhand car loan setting consisting of independent agents and in-house agents. We consider independent agents to be more entrepreneurial than in-house agents and argue that entrepreneurship motivates agents to scan the environment for the opportunity to maximize their payoffs. We predict that entrepreneurial agents are more likely to increase prices when presented with the opportunity to do so. We expect this to be the case for opaque loans as these loans are less subject to competition than transparent loans. We find that opaque loans have higher prices than transparent loans for both types of agents, and the price difference is more pronounced for independent agents. Our evidence suggests that entrepreneurship enables agents to perform better in an environment where agents can profit from exploring opportunities, i.e., a less competitive environment.