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Alex Thevaranjan

Alex Thevaranjan

Associate Professor of Accounting

Room: 639
Contact Me

Other, Institute of National Security and Counter Terrorism, Syracuse University
PhD, University of Minnesota (Accounting)

Total Citations

-Google Citations 517
-h-Index 10
-i10-Index 11

Research Topics

  • Agency theory
  • Entrepreneurial accounting
  • Incentive schemes
  • Ethics of economics
  • Economic solutions to spam
  • Ethical leadership

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?

Working Papers
  • "Why are Revenue Contracts So Ubiquitous?", Marketing Science
Selected Publications
  • "When Sales Spill Over to Unprofitable Customers ", Quantitative Marketing and Economics, 17 (1), 81-104, 2019 (with Banerjee, S.)
  • "The Impact of Audit Quality on the Components of Executive Cash Compensation. ", Journal of Centrum Cathedra: The Business and Economics Research Journal , 10(1), 49-62, 2017 (with D, F.)
  • "The Role of Non-financial Measures in Controlling Myopic Activities: The Case of Hard-selling. ", International Journal of Accounting, Auditing and Performance Evaluation, 12( 2), 103-130, 2016 (with Asthana, S.)
  • "The Role of Non-financial Measures in Controlling Undesired Activities: The Case of Hard-selling", International Journal of Accounting, Auditing and Performance Evaluation, 2014 (with Srinivasan, D.)
  • "A moral solution to the moral hazard problem", ACCOUNTING, ORGANIZATIONS AND SOCIETY, 35(1), 125-139, 2010 (with Stevens, D.)
  • "Returns to scale pattern and efficient firm size in the public accounting industry: An empirical investigation", Journal of the Operational Research Society, 60(11), 1495-1501, 2009 (with Chang, H., Galantine, C.)
  • "Investigating pricing solutions to combat spam: Postage stamp and bonded senders", Journal of Interactive Marketing, 22(1), 21-35, 2008 (with Joseph, K.)
  • "An economic analysis of the use of student evaluations: Implications for universities", Managerial and Decision Economics, 24(1), 1-13, 2003 (with Kanagaretnam, K., Mathieu, R.)
  • "The Shielding of CEO Compensation from the Effects of Strategic Expenditures", Contemporary Accounting Research, 19(2), 175-193, 2002 (with Duru, A., Iyengar, R.)
  • "Optimal Monitoring in Salesforce Control Systems", Marketing Letters, 10(2), 161-176, 1999 (with Joseph, K.)
  • "Incentives and Job Redesign: The Case of the Personal Selling Function", Managerial and Decision Economics, 20, 205-216, 1999 (with Joseph, K.)
  • "Incentive Potential of Tax Expense in Bonus Plans", International Review of Accounting, 3, 1-13, 1998 (with Subramaniam, C.)
  • "Monitoring and incentives in sales organizations: An agency-theoretic perspective", Marketing Science, 17(2), 107-123, 1998 (with Joseph, K.)
  • "Accounting Earnings and Effort Allocation", Managerial Finance, 23 (5), 56-70, 1997 (with Banker, R.)
  • "Current production targets and strategic decisions by corporate managers", Journal of Operations Management, 12(3-4), 321-329, 1995 (with Hughes, J.)
  • "Targeting and Salesforce Compensation: When Sales Spill Over To Unprofitable Customers", Quantitative Marketing and Economics (with , B.)

Awards and Honors

  • Please see my CV for photos of the various seminars - Sri Lanka
  • Meeting with the Dean and Department Heads - Faculty of Engineering, University of Jaffna
  • Teacher Seminar on Establishing a School of Excellence - Northern Province Educational Secretariat, Mylankadu
  • Management Seminar on the five levels of Leadership - Jaffna Divisional Secretariat, Sri Lanka
  • High School Seminar on being a Smart Student - Hatton Highland School
  • High School Seminar on being a Smart Student - Ganesha Vidyalayam
  • Principal Seminar on Establishing a School of Excellence - Hatton Zonal Education Office, Maskeliya Division
  • Guest Speaker to High School Students - Maraya Tamil Maha Vidyalayam
  • Outstanding Teaching Award - Syracuse University
  • Heilman Award for Excellence in Teaching - University of Minnesota