Jasmijn C. Bol

Supervisor Discretion in Target Setting: An Empirical Investigation

In a setting in which corporate headquarters dictates total sales targets, we study how supervisors allocate sales targets to individual stores. Specifically, we analyze whether supervisors strategically use discretion in the target-setting process to address compensation contracting issues. We first examine whether supervisors use discretion to manage compensation risk. The results are consistent with the agencytheoretic prediction that supervisors provide easier targets to stores facing higher levels of store-specific risk. Next, we examine whether discretion is used to mitigate fairness concerns. The results suggest that, consistent with behavioral arguments, supervisors use discretion to deal with fairness issues, even if the area of the supervisor’s discretion is not the source of the fairness concerns. Finally, we analyze whether supervisors use discretion in the target-setting process to reduce their potential confrontation costs. Consistent with research in psychology, we find that supervisors provide easier targets to store managers with relatively higher hierarchical status.

The Role of Tacit Knowledge in Auditor Expertise and Human Capital Development

Two critical aspects of Tan and Libby [1997]’s model of auditor expertise development are that audit firms do not value tacit knowledge in inexperienced auditors but do value it in experienced auditors. We update the former and extend the latter. Our paper predicts and finds that audit firms now do value tacit knowledge in inexperienced auditors, especially when their supervisors have higher tacit knowledge. Our proxies of value include higher promotability assessments, annual evaluations, and cash bonuses. Our paper also extends Tan and Libby [1997] by positing that enhanced development of expertise and audit firm human capital are two reasons audit firms value tacit knowledge in experienced auditors. As predicted, higher tacit knowledge in experienced auditors is positively associated with higher tacit knowledge acquisition by their inexperienced subordinates and with stronger firm commitment of inexperienced subordinates having higher tacit knowledge.

The Role of Tacit Knowledge in Auditor Expertise and Human Capital Development: THE ROLE OF TACIT KNOWLEDGE

Two critical aspects of the model of auditor expertise development in Tan and Libby [1997] are that audit firms do not value tacit knowledge in inexperienced auditors but do value it in experienced auditors. We update the former and extend the latter. Our paper predicts and finds that audit firms now do value tacit knowledge in inexperienced auditors, especially when their supervisors have higher tacit knowledge. Our proxies of value include higher promotability assessments, annual evaluations, and cash bonuses. Our paper also extends Tan and Libby [1997] by positing that enhanced development of expertise and audit firm human capital are two reasons audit firms value tacit knowledge in experienced auditors. As predicted, higher tacit knowledge in experienced auditors is positively associated with higher tacit knowledge acquisition by their inexperienced subordinates and with stronger firm commitment of inexperienced subordinates having higher tacit knowledge.

Status Motives and Agent-to-Agent Information Sharing: How Evolutionary Psychology Shapes Agents' Responses to Control System Design

The quality of decision making within firms often depends on the willingness of agents to share information with other agents. In two studies, we examine the effects of status motives, i.e., the desire to gain the respect of and deference from others, on information sharing. We investigate information sharing in two different control systems: one in which agents receive incentives to share and one in which agents incur costs to share. We draw on theory from evolutionary psychology to argue that status motives modify agents’ responses to the control systems — specifically, constraining the willingness to share information when agents receive incentives to do so but increasing this willingness when agents incur costs to do so. We discuss the implications of our findings for information sharing, and the implications of applying an evolutionary framework of agent motivation to understand decision making in firms.