Alex Thevaranjan
Associate Professor of Accounting
- Email Contact Me
- Phone 315-443-3355
- Department Accounting
- Office 639
- Website Visit
- Resume
Total Citations
-Google Citations 517
-h-Index 10
-i10-Index 11
-Google Citations 517
-h-Index 10
-i10-Index 11
Professor Thevaranjan has a special interest in encouraging students to do a side business and to teach them the financial and managerial accounting they need to make decisions related to do their side business. He also emphasizes the importance of ethical decision making. In the past, he also directed the summer internship program in Singapore and taught in the Sejong-Syracuse MBA program in South Korea.
Professor Thevaranjan’s research revolves around agency theory and organizational control. His main contribution has been extending the principal-agent framework to study issues pertaining to morality and moral hazard. Currently, he is researching the interplay between the moral and incentive solutions to the moral hazard problem.
I have numbered my 14 published papers in the order they were published, i.e., P14 is my latest publication and P1 is my first publication.
My primary research interests revolve around analyzing and resolving goal conflicts in various environments in the real world. The primary methodology I have employed is the multi-task principal-agent models. My doctoral dissertation (CEO Compensation and Effort Allocation) received the 1994 Outstanding Management Accounting Doctoral Dissertation
Runner-up Award.
Given the difficulty I encountered in publishing analytical papers in accounting journals, I decided early on in my career to be inter-disciplinary since goal conflicts are present in various business disciplines. I am pleased that this approach allowed me to publish in premier journals in accounting (P7, P11) marketing (P4) and operations management (P1). In marketing, I was also able to publish in other high quality journals (P6, P9, P14). I was also successful addressing issues in economics (P5, P8, P14), finance (P2, T1), education (P8), Auditing (P10, P13), Taxes (P3), Technology (P9) and Ethics (P11).
I also decided to collaborate with empirical and experimental researchers in accounting to test the predictions of the agency theory (P3, P7, P11, P13). These tests exposed the failure of agency theory to adequately explain the behavior of economic agents in real world and laboratory experiments.
Agency Theory predicts that the solution to goal conflicts is incentive contracts based on performance measures that are both controllable and congruent. In many environments, however, it is difficult to find both controllable and congruent performance measures. Congruence with company’s goals call for the use of bottom-line measures such as stock returns. On the other hand, such bottom-line measures fail the controllability requirement, because they are also impacted by many other factors that are beyond the control of agents.
Measures closer to the agent’s actions are more controllable, e.g. sales for a salesperson, defect rates for a machine operator, and student evaluations for a teacher. Yet these measures fail to be congruent because they do not emphasize the relative importance of the various tasks to the organization. For example, student evaluations do not reflect the importance of calling, content and communication in the same proportion as what is required of a good teacher.
More seriously, if agents can manipulate performance measures without personal costs and organizational detection, performance measures become totally useless and according to agency theory, the incentive solution to goal conflicts should completely collapse. Yet, even in such environments, we do see incentives being used, and agents not responding with effort distortion and manipulation to its full extent. These findings confirmed my belief that the way an agent’s behavior is modelled in agency theory needs to be improved upon to better explain laboratory and real world findings.
Accordingly, I am pleased that notwithstanding the repeated rejections (desk rejection by TAR, rejected in the first round by CAR, rejected in the second round by AER), my co-author and I were able to publish our message in the premier behavioral accounting journal (P1) in accounting. In this article, we relax the traditional assumption of a purely self-interested opportunistic behavior of agents and introduce the notions of moral sensitivity and reciprocity into the principal-agent models. We show that with reciprocity and moral sensitivity, there exists a ‘moral solution to the moral hazard problem.’ In other words, by imperfectly modeling an agent’s utility function, agency theory has incorrectly presented incentive solutions as the only way to resolve the moral hazard problem. Thereby, the literature has ignored altogether the possibility of a moral solution to the moral hazard problem. Obviously, we do not imply that all agents, under all circumstances, will do the right thing, but we do argue that the current paradigm in Agency Theory, which assumes that all agents, under all circumstances care only about their income and leisure is ignoring significant reality. All agents, albeit at various levels, are morally sensitive and care about reciprocity.
Accordingly, I am currently working on a line of research examining the optimal contract in the presence of moral sensitivity and reciprocity (W2). The interplay between incentive and moral solutions is a vastly under explored area in agency theory. I am passionate about closing this significant gap, which should keep me active in research until retirement. Some specific questions I would like to explore are:
1.) How can one empirically measure moral sensitivity and reciprocity?
2.)Do incentive solutions that appeals to an agent’s self-interested behavior damage the moral sensitivity and reciprocity, which appeals to an agent’s altruistic behavior?
3.)How does one model moral sensitivity and reciprocity in a multi-task setting?
4.) More importantly, how do these two notions affect effort allocation in multi-task settings?
I have numbered my 14 published papers in the order they were published, i.e., P14 is my latest publication and P1 is my first publication.
My primary research interests revolve around analyzing and resolving goal conflicts in various environments in the real world. The primary methodology I have employed is the multi-task principal-agent models. My doctoral dissertation (CEO Compensation and Effort Allocation) received the 1994 Outstanding Management Accounting Doctoral Dissertation
Runner-up Award.
Given the difficulty I encountered in publishing analytical papers in accounting journals, I decided early on in my career to be inter-disciplinary since goal conflicts are present in various business disciplines. I am pleased that this approach allowed me to publish in premier journals in accounting (P7, P11) marketing (P4) and operations management (P1). In marketing, I was also able to publish in other high quality journals (P6, P9, P14). I was also successful addressing issues in economics (P5, P8, P14), finance (P2, T1), education (P8), Auditing (P10, P13), Taxes (P3), Technology (P9) and Ethics (P11).
I also decided to collaborate with empirical and experimental researchers in accounting to test the predictions of the agency theory (P3, P7, P11, P13). These tests exposed the failure of agency theory to adequately explain the behavior of economic agents in real world and laboratory experiments.
Agency Theory predicts that the solution to goal conflicts is incentive contracts based on performance measures that are both controllable and congruent. In many environments, however, it is difficult to find both controllable and congruent performance measures. Congruence with company’s goals call for the use of bottom-line measures such as stock returns. On the other hand, such bottom-line measures fail the controllability requirement, because they are also impacted by many other factors that are beyond the control of agents.
Measures closer to the agent’s actions are more controllable, e.g. sales for a salesperson, defect rates for a machine operator, and student evaluations for a teacher. Yet these measures fail to be congruent because they do not emphasize the relative importance of the various tasks to the organization. For example, student evaluations do not reflect the importance of calling, content and communication in the same proportion as what is required of a good teacher.
More seriously, if agents can manipulate performance measures without personal costs and organizational detection, performance measures become totally useless and according to agency theory, the incentive solution to goal conflicts should completely collapse. Yet, even in such environments, we do see incentives being used, and agents not responding with effort distortion and manipulation to its full extent. These findings confirmed my belief that the way an agent’s behavior is modelled in agency theory needs to be improved upon to better explain laboratory and real world findings.
Accordingly, I am pleased that notwithstanding the repeated rejections (desk rejection by TAR, rejected in the first round by CAR, rejected in the second round by AER), my co-author and I were able to publish our message in the premier behavioral accounting journal (P1) in accounting. In this article, we relax the traditional assumption of a purely self-interested opportunistic behavior of agents and introduce the notions of moral sensitivity and reciprocity into the principal-agent models. We show that with reciprocity and moral sensitivity, there exists a ‘moral solution to the moral hazard problem.’ In other words, by imperfectly modeling an agent’s utility function, agency theory has incorrectly presented incentive solutions as the only way to resolve the moral hazard problem. Thereby, the literature has ignored altogether the possibility of a moral solution to the moral hazard problem. Obviously, we do not imply that all agents, under all circumstances, will do the right thing, but we do argue that the current paradigm in Agency Theory, which assumes that all agents, under all circumstances care only about their income and leisure is ignoring significant reality. All agents, albeit at various levels, are morally sensitive and care about reciprocity.
Accordingly, I am currently working on a line of research examining the optimal contract in the presence of moral sensitivity and reciprocity (W2). The interplay between incentive and moral solutions is a vastly under explored area in agency theory. I am passionate about closing this significant gap, which should keep me active in research until retirement. Some specific questions I would like to explore are:
1.) How can one empirically measure moral sensitivity and reciprocity?
2.)Do incentive solutions that appeals to an agent’s self-interested behavior damage the moral sensitivity and reciprocity, which appeals to an agent’s altruistic behavior?
3.)How does one model moral sensitivity and reciprocity in a multi-task setting?
4.) More importantly, how do these two notions affect effort allocation in multi-task settings?