I have 9+ years of experience of executing empirical studies that examine various topics including incentive contracts, performance measures, target setting, control systems, human capital, corporate governance and ESG. Here are some examples of my research projects.
Charitable CEOs
Do charitable CEOs who take positions in charities care more about their employees and deliver better ESG performance? After analyzing 20,000+ CEO and firm data and 1M+ records of employee reviews and coroproate donation collected through web-scrapping, this study shows that they do!
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Recently, both firms and individuals face high expectations that they behave responsibly. Not only individuals volunteer for chritable organizations, CEOs have been observed taking up roles as trustees, members or directors at chariatlable organizations as well. By analyzing data on CEO and firm characteristics, 1M+ employee reviews on Glassdoor.com, and 1M+ records of corporate donations, this paper studies whether charitable CEOs, those taking positions in charities, behave consistently and ethincally in making corporate decisions.
Although concerns persist that CEOs engage with charities for enhancing social image, our paper uncovers that charitable CEOs on average are likely prosocial in nature. They invest more in ESG activities and consequently garner appreciation from the employees. Furthermore, charitable CEOs behave responsibly in other corporate matters, such as issuing higher quality financial reports and offering more precise management forecasts to stakeholders.
Should firms easily give up their underperforming employees? The answer is a resounding NO. Using incentive plan and performance data of managers from a large retail chain (sales €5bn), this paper shows that a better strategy is to provide human capital investment to those underperforming employees who still have the potential for improvement.
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Undoubtedly employees are the most valuable assets of an organization. Motivated employees reach new targets, develop innovative products, and dedicate great efforts to realizing company objectives. However, some employees miss the target due to a deficiency in requisite management knowledge and skills despite having the potential for improvement. Studies often suggest to fire underperforming employees, but this suggestion seems over-simplified given that underperformance occurs so often and probably not realistic in practice given the cost of dismissal.
Using performance data from a successful retail chain, this papers investigates the role of human capital investments in keeping underperfomring employees motivated and helping them improve performance. Our research shows that when employees underperform the targets but outperform their peers, it is beneficial for firms to provide training and mentoring opportunities to these employees, rather than dismiss them. Through such investment in human capital development, underperforming employees can elevate their performance, consequently enhancing a firm's probability of sustaining good performance.
Target ratcheting and effort withholding
Data of target setting and bonus plans from an international car franchisor shows that franchisees withhold effort if targets are ratcheted annually based on past performance. On the contrary, the franchisor gains more by setting less challenging targets for franchisees that they trust.
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Setting targets for employees serves multiple purposes, including encouraging high levels of effort, directing employees' behaviors, providing monetary rewards and evaluating performance. However, firms may neglect the fact that continuous target ratcheting results in reduced employee efforts. Such strategic behaviors occur because employees recognize that strong perfomrance leads to even more difficult targets in the future. As a preemptive measure, employees choose to withhold efforts now to avoid significant target rathceting in the following period, to increase their chance of meeting future targets.
We collected incentive and performance data from car franchisor and franchisees and found that effort withholding exists among franchisees. The franchisor can mitigate this issue by constraining target ratcheting, so that franchisees do not need to hide their performance potential to influence future targets. But less target ratcheting may be associated with lower effort. This paper also shows that franchisees who are consistently committed to their work and outperforming their peers will continue to exert high efforts even if targets are less challenging. Therefore limited target ratcheting yields a win-win situation for the firm and the committed agents. The pay of these franchisees is insured and the franchisor benefits from high efforts of these franchisees.
Superiors’ control and characteristics of middle-level managers
Using survey data from project managers of a large manufacturing firm (sales €700mil), this study finds that to create an appealing working environment, superiors should know their subordinates well and adapt their control approaches to enable managers with varying characteristics to work in their preferable ways.
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Being the connection between upper management and front-line employees, middle-level managers hold significant importance for firms. As managers differ in characteristics and hence prefer diverse working styles, applying the same control approach may not incentivize all the managers to work at their best. To gain a deeper understanding, this project collected survey data from middle-level project managers, together with information on the proejcts they operated. In particular, we look into two characteristics of middle-level managers: conformity and originality. Conformative managers comply with established rules, reducing the conflicts in the workforce. While original managers are inclined to explore new ideas, proving benefits for tackling challenging tasks.
This project finds that superiors know their subordiantes sufficiently well and adapt their controls accordingly. Conformative managers discuss more frequently with superiors and these talks are mostly initiated by the managers themselves. These discussions assure comformative managers that their decisions align with the firm's objectives. In contrast, original managers are assigned more complicated tasks and also have more discussions with superiors but the discussions are often requested by superiors. These controls mitigate the chances that original managers take risky steps and allow supeiors to closely follow the project progress. The findings suggest that controls can be more effective by consiering the characteristics of middle-level managers.
Knowledge exchange and spillover effects through headquarter site visits
A study of performance trends of store managers from a successful retail chain (sales €3bn) shows that headquarter visits facilitate knowledge exchange between headquarter managers and unit managers being visited. Moreover, unit managers who do not receive visits also beneift from site visits through knowledge spillovers among peers.
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The practice of headquarters' visits to local units is a common strategy implemented by organizations to facilitate knowledge transfer. During these visits, headquarter managers can share their knowldge and assist local managers via face-to-face communications and on-site training. Leveraging on operational data from a chain firm,
this study first confirm that local managers who receive visits indeed enhance performance through improved management practices.
Additionally, this study suggests that local managers that are not visited by headquarter managers but are located close to those who are visited experience performance improvement as well following the visits. This is attributed to the fact that these managers can learn from their peers' examples of improved management practices. Overall, site visits do not only benefit local managers via direct knowledge exchange between headquarter managers and unit managers, but also indirectly help local managers who do not receive visits through knowledge spillover among peers.