Steve Wu is an Assistant Professor in Managerial Accounting and Control at the Ivey Business School. He obtained his Ph.D. in Accounting from the University of Illinois at Urbana-Champaign. Steve’s research focuses in the area of management accounting, especially the design of management control systems and how these systems influence employees/managers’ decisions and behaviors. He is also interested in topics of corporate governance and executive compensation.
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Chen, C. X.; Nasev, J.; Wu, S., 2022, "CFO Overconfidence and Cost Behavior", Journal of Management Accounting Research, June 34(2): 117 - 135.
Abstract: Using a large sample of U.S. firms, we provide evidence of the effect of CFO overconfidence on firms' resource adjustment decisions. After controlling for CEO overconfidence, we find that CFO overconfidence is positively associated with cost stickiness. In addition, we find that CFO power relative to the CEO increases the positive association between CFO overconfidence and cost stickiness. Our study contributes to our understanding of the important role of CFOs in operational decisions such as resource adjustment decisions. We also extend the literature on cost behavior by highlighting managerial characteristics as an important determinant of resource adjustment decisions. Our study has important practical implications. Unlike resource adjustment decisions driven by agency problems or other incentive-related issues, such decisions driven by managerial overconfidence cannot be addressed with incentive contract designs. More promising ways to mitigate overconfidence-driven resource adjustment decisions include making overconfident managers aware of their potential behavioral biases and challenging their expectations.
Link(s) to publication:
http://dx.doi.org/10.2308/JMAR-18-055
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Van der Stede, W. A.; Wu, A.; Wu, S., 2020, "An Empirical Analysis of Employee Responses to Bonuses and Penalties", The Accounting Review, February 95(6): 395 - 412.
Abstract: We examine how employees respond to bonuses and penalties using a proprietary data set from an electronic chip manufacturer in China. First, we examine the relative effects of bonuses and penalties and observe a stronger effect on subsequent effort and performance for penalties than for bonuses. Second, we find that the marginal sensitivity of penalties diminishes faster than that of bonuses, indicating that the marginal effect of a bonus may eventually exceed that of a penalty as their value increases. Third, we find an undesirable selection effect of penalties: penalties increase employee turnover especially for skillful and high-quality workers. These results may help inform our understanding of the observed limited use of penalties in practice due to their bounded effectiveness and possible unintended consequences.
Link(s) to publication:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3531586
http://dx.doi.org/10.2308/tar-2017-0141
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Chen, C. X.; Matsumura, E. M.; Shin, J. Y.; Wu, S., 2015, "The Effect of Competition Intensity and Competition Type on the Use of Customer Satisfaction Measures in Executive Annual Bonus Contracts", The Accounting Review, January 90(1): 229 - 263.
Abstract: This paper empirically examines the interactive effect of competition intensity and competition type on the use of customer satisfaction measures in executives' annual bonus contracts. Specifically, we predict a stronger association between competition intensity in an industry and the use of customer satisfaction measures in executives' annual bonus contracts when the competition is non-price-based than when the competition is price-based. Using hand-collected data from Standard & Poor's (S&P) 1500 firms' disclosures of the use of customer satisfaction measures in executive bonus contracts in 2006 and 2010 proxy statements, we find results consistent with our prediction. Our results are robust to alternative measures of competition type and competition intensity. We also find similar results when we use the weight on customer satisfaction measures in executive bonus contracts as the dependent variable. Our study extends the literature on the effect of competition on the design of managerial incentives by distinguishing between competition intensity and competition type, and providing the first large-sample empirical evidence on the joint effect of these two dimensions of competition on the incentive use of an important nonfinancial performance measure.
Link(s) to publication:
http://dx.doi.org/10.2308/accr-50870
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Ho, J. L.; Wu, A.; Wu, S., 2014, "Performance Measures, Consensus on Strategy Implementation, and Performance: Evidence from the Operational-level of Organizations", Accounting, Organizations and Society, January 39(1): 38 - 58.
Abstract: In this article, we examine how consensus between operational-level managers and employees on strategy implementation affects the effectiveness of performance measures and employee performance. We use field-based surveys and proprietary archival data from a Taiwanese financial services company to answer our research questions. Consistent with the predictions of person–organization fit theory, we find that consensus on the implementation of the customer-oriented strategy is positively associated with frontline employees’ performance. Our results also indicate that the incentive effect of using performance measures in performance evaluation and promotion is stronger for employees with a higher level of consensus. Our findings suggest that consensus is critical to the success of an organization’s strategy implementation and the effectiveness of performance measures.
Link(s) to publication:
http://dx.doi.org/10.1016/j.aos.2013.11.003
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Gong, J.; Wu, S., 2011, "CEO Turnover in Private Equity Sponsored Leveraged Buyouts", Corporate Governance-An International Review, May 19(3): 195 - 209.
Abstract: Manuscript Type: EmpiricalResearch Question/Issue: We examine the governance role of private equity (PE) firms in post-LBO companies in the US.We propose and test whether PE firms remove entrenched CEOs or CEOs who cause agency problems.Research Findings/Insights: Using archival data from a sample of 126 PE sponsored LBOs in the USA between 1990 and2006, we document a CEO turnover rate of 51 per cent within two years of an LBO announcement. We find that the boardsof directors replace CEOs in companies with high agency costs, as measured by low leverage and a high level ofundistributed free cash flow. In addition, unlike the boards of directors in public companies, the boards in post-LBOcompanies tend to replace entrenched CEOs. Finally, the boards are more likely to replace CEOs if pre-LBO return on assetsis low.Theoretical/Academic Implications: According to the agency theory, a PE-sponsored LBO is a new organizational form thatreduces agency costs by enhancing corporate governance. This study uses CEO turnover as a setting to test that prediction.We find that PE firms replace CEOs who can cause agency problems, thus providing empirical support for the propositionthat PE firms improve corporate governance in LBO companies.Practitioner/Policy Implications: This study offers insights to policy makers who are interested in regulating PE firms. Ourresults suggest that, in the US, PE firms provide effective corporate governance mechanisms by replacing incompetent andentrenched CEOs. In addition, our results provide a set of factors for PE firms to consider when they make CEO retentiondecisions.
Link(s) to publication:
http://dx.doi.org/10.1111/j.1467-8683.2010.00834.x
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