Cheng's paper, "The Information Content of Managers' Climate Risk Disclosure," is co-authored with the Von Allmen School of Accountancy's Director, Dr. Brian Bratten.
Abstract: We examine whether voluntary disclosures about climate risks provide decision-useful information to investors. Using a sample of more than 70,000 conference-call transcripts from 2005-2020 with over 6,000 disclosures related to climate risk events, we find a negative stock price reaction to climate risk disclosures. However, these climate risk disclosures are positively associated with abnormal trading volume, suggesting investors have different beliefs about how to incorporate them. We also find evidence that managers often bundle climate risk disclosures together with bad news about earnings, and that investors respond less negatively to bad news in these cases. In additional analyses we find investor reactions are more pronounced after the Paris Agreement and when climate risks are more salient. Overall, our results provide evidence on whether and when climate risk disclosures are important to investors and are consistent with regulators’ proposals for more specific guidance on the form and content of such disclosures.
Sohee Kim's paper, "A Moderated Mediation Model of the Fit between Management Regulatory Focuses and Employee Incentive Contracts on Employee Efforts," was accepted and presented. The paper is co-authored with Dr. Jeremy Lill (University of Kansas). In this paper, they examine how informal control and formal control interact and affect employee performance and provide evidence that the alignment between the two types of control is important. Sohee also participated as a discussant of the paper and moderator for two sessions at the conference.
The purpose of this study is to investigate the effect of the fit between management regulatory focuses and employees’ incentive contracts on employees’ performance in an experiment setting. Drawing on regulatory focus theory, this study examines how the regulatory fit between management regulatory focuses and incentive contracts affect employees’ performance using a moderated mediation model. Managers frequently make top-down communications to employees to ensure that their employees understand company strategies. Such communications convey management regulatory focuses and, in turn, prime employees' regulatory focuses. Incentive contracts exist in any organization and are used as a control to motivate employees’ performance and improve firm performance. It is important to examine how these two controls interact because organizations often have different combinations of controls, both formal and informal, that may complement, substitute, or even act against one another. The results suggest that management regulatory focuses influence employee performance via employees’ regulatory focuses, and the association is moderated by incentive contracts. This study makes several important contributions. First, this study extends the prior literature on both the management characteristics and the incentive contracts by examining the two controls together. Second, by carefully considering how top management communicates with their employees, organizations can garner benefits from the established incentive structures in their organizations. Third, this study provides evidence that employees’ regulatory focuses can be manipulated through management’s top-down communication to employees. Fourth, the study presents a detailed process of how these two controls interact and affect employees’ performance.