Dissertation

Sales-based CEO Incentive and Its Effect across the Supply Chain 

Winner of the 2024 AAA Competitive Manuscript Award

Presented at Arizona State University, Boston College, Chinese University of Hong Kong, 2022 GMARS, 2022 HARC, Harvard Business School, 2021 JMAR Online Rookie Camp (selected six rookies), Korea University, London School of Economics, 2022 MAS Meeting, Indiana University, Seoul National University, University of Iowa, University of British Columbia, University of Michigan, University of Texas Arlington, and Texas A&M University.  2022 MAS Meeting

"I shed light on the real effects of CEO sales incentives on the firm and its suppliers."

I examine the costs of using sales performance measures in CEO incentive contracts. A growing number of firms are evaluating and compensating their CEOs based on sales performance. However, since sales is a narrow metric of performance that does not incentivize expenditure control, these measures can motivate costly operational decisions that affect not only the firm, but also its suppliers. In this study, I show that sales performance measures in CEO annual bonus contracts promote inefficient inventory management that generate the “bullwhip effect,” whereby demand becomes more volatile as it travels up the supply chain. Instrumental variable tests using the firm’s network connections to other firms suggest that the results are not driven by omitted factors. Collectively, my findings illuminate the spillover effect of CEO incentive contracts on economically linked operations.