Last month, four distinguished professors in University of Delaware’s Alfred Lerner College of Business and Economics presented their recent findings and research methods during Lerner’s Emerging Scholar Research Showcase held in the Lerner Atrium. Below are summaries of the presentations:
Youngki Jang, Assistant Professor of Accounting
“Are Audit Committee Directors with Prior Experience of Financial Reporting Failure Ineffective Monitors”
Jang and his fellow researchers found that firms are more likely to have a financial misstatement when they appoint an AC director who has previously experienced a misstatement at another company.
They also found evidence that AC directors with prior experience can improve their monitoring quality when they have participated in restating the misstated financial statements, as this first-hand experience makes it more salient, leading them to apply the learning in future roles. Additionally, those directors may have stronger reputational concerns and more up-to-date knowledge of accounting practices.
The researchers, among the first to examine how prior accounting-related experience of AC members affects audit outcomes, found that AC directors with prior adverse experiences tend to be ineffective monitors, likely due to lower legal and reputational costs compared to managers and auditors.
Tom Eisenberg , Assistant Professor of Economics
“Environmental Liability, Insurance, and Market Structure in Coal Mining”
Eisenberg’s motivation was to study the ongoing issue in environmentally risky industries, especially fossil fuel extraction. Firms incur environmental damages as they operate, which often need to be resolved when they shut down.
Eisenberg and his co-researchers looked at a case study of a liability reform for coal mines in Pennsylvania. They used a novel dataset of liabilities, production, and environmental violations to estimate the effects of increased environmental liability with and without insurance.
They found evidence that insured increases cause mines to exit or stop production earlier, driven by higher polluting mines. The research helps them understand how to manage the transition off of fossil fuels, how market structure and environmental liability interact, and what types of environmental regulation are effective.
Ruiqi Wu, Assistant Professor of Marketing
“Platform Information Design and Competitive Price Targeting”
Wu and her fellow researchers sought to find what information about individual consumers should a platform provide to competing sellers with differentiated products, and when consumers differ in multiple aspects like tastes for products or sensitivity to prices.
The professors analyzed Steam, the largest PC-based video game platform, for their research. The marketplace featured over 20,000 games, a 75 percent market share, and $4.3 billion in sales in 2017. Game players could access the platform for free, but had to purchase games to play, while each seller set the prices for the games they sold. Steam’s primary revenue source was 30% of all sellers’ revenue as the commission fee.
They found that understanding similarity across consumers alone is insufficient in information design, while a platform should take seller competition into account. Additionally, a coarsened segmentation designed for profit objectives could align well with non-profit considerations.
Hong Soon Kim, Assistant Professor of Hospitality Business Management
“Is a High Pay Disparity Harmful to Productivity? Findings from the Restaurant Industry”
Kim’s study examined the relationship between CEO pay disparity and restaurant productivity. He used annual firm-level data for publicly traded restaurant firms between 1995-2000, with a total of 278 firm-year observations used to test his hypotheses.
His study was the first to examine the effect of the pay disparity on restaurant productivity in the field of hospitality management and adds to the pay disparity literature by empirically proving that CEO-employee pay disparity has a nonlinear effect on restaurant productivity.
Implications included that a widening pay gap between CEO and employees aggravates employee morale, causes workplace decommitment, and eventually decreases restaurant productivity. Therefore, management should employ initiatives to minimize the adverse effect of high CEO-employee pay disparity.
Additionally, restaurant productivity increases until a CEO is paid on average 3.75 times more than executives and starts to decrease beyond the 3.75 times threshold. Restaurant companies should consider maintaining the pay difference up to the 3.75 times threshold between the CEO and executives to maximize the positive effect on productivity.