Professor Explores Intricacies of Corporate Governance in Research

Many corporations offer stock options to reward lower-level managers for hard work. A UT Dallas accounting expert’s research shows giving those incentives also can improve the performance at the top.

Dr. Meng Li, assistant professor of accounting in the Naveen Jindal School of Management, examined whether stock incentives for lower-level managers could encourage the CEO to do what’s best for the bottom line. She found that the stock options can create what she calls an internal discipline effect.

“If lower-level managers own stock in the company, they will have less incentive to work hard when they see that their boss is not doing the right thing for the company,” Li said. “This works as a disciplinary mechanism for the CEO because she wants her subordinates to work hard.”

Li joined the faculty last year after earning her PhD in accounting and an MBA at The University of Chicago Booth School of Business. She combined her accounting and management expertise for her dissertation on the disciplinary role that stock options can play.

The assistant professor said she became interested in the topics because of the increasing focus on corporate governance, or improving the way corporations are run.

Li and her co-authors also are researching whether corporate governance has improved in Japan in the past 20 years due to changes in Japanese firms’ cash holdings and payout policies.

Dr. Hasan Pirkul, Naveen Jindal School of Management dean and Caruth Chair of Management, said that Li is making important contributions with her research on the disciplinary role of accounting and other corporate governance issues.

“Interest in corporate governance is high given the regulatory changes in recent years at the federal level,” Pirkul said. “We know that Dr. Li’s research will contribute to our knowledge of the impact that compensation policies have on corporate governance.”

Li, who teaches introductory financial accounting, received her bachelor’s degree in economics from Tsinghua University in Beijing before getting a master’s in economics at The Ohio State University. After living in Chicago for the past several years, she said that she was drawn to Dallas for its warmer winters, her extended family in the area and a great opportunity to teach and research in a large accounting department.

“The dean pays a lot of attention to research and that’s very important to get research support,” said Li.

The professor said that she enjoys being part of the growing university.

“Everyone is talking about UT Dallas when I’m at conferences,” Li said. “They say, ‘UT Dallas is a powerhouse. You’re hiring a lot of people.’ It feels good to be in a school that’s rising so fast.”