Each week, the Daniels Debrief is featuring a researcher who conducts meaningful research that impacts their field and the wider community. Learn more about their work in Q&As with Melissa Archrpru Akaka, associate dean for research. Email Melissa to nominate yourself or a colleague for a future Q&A.
Lorenzo Patelli is associate dean for faculty and a professor in the School of Accountancy. He has been at Daniels since 2011. The evolution of his research reflects a movement from studying organizations to studying humans and ethical issues related to managerial behavior. He has published research in the Journal of Business Ethics and is currently exploring topics related to political activism and managerial tone. Lorenzo is passionate about supporting faculty as they aim to balance a teacher/scholar approach in their efforts for continuous learning both in and outside of the classroom. Lorenzo will be a panelist on the first Hot Topics Panel: Why Business Ethics Research Matters, along with Michael Nalick and Don Mayer, this Friday, Oct. 6, from 3-4 p.m., just before the research recognition celebration.
Lorenzo Patelli, interim director of the Institute for Enterprise Ethics
Can you provide some background on the type of research you do?
I do research in two primary areas. The first one is performance measurement, and the second stream is tone management. Performance measurement looks at how performance metrics influence managerial decisions and behaviors. Tone management looks at how voluntary financial disclosure can be managed to influence investor expectations. They are very different streams of research and I tend to use two different methodologies. They also refer to different periods of my scholarship. Performance measurement is my traditional area and very much related to what I teach in the classrooms, which is managerial accounting. I started this work using surveys and some interviews, and my unit of analysis has primarily been the firm and shifted to the employees. In the last 15 years, I published a few papers on tone management, where I analyze voluntary disclosures, and use texts to extract managerial characteristics that then are linked to specific outcomes. For example, I look at optimism of managers, and use language to operationalize it, and see if it’s more or less connected with specific accounting practices, such as financial reporting aggressiveness. In turn, aggressive reporting could be related to fraud, it raises audit fees, and could lead to other financial outcomes.
I do research in two primary areas. The first one is performance measurement, and the second stream is tone management. Performance measurement looks at how performance metrics influence managerial decisions and behaviors. Tone management looks at how voluntary financial disclosure can be managed to influence investor expectations. They are very different streams of research and I tend to use two different methodologies. They also refer to different periods of my scholarship. Performance measurement is my traditional area and very much related to what I teach in the classrooms, which is managerial accounting. I started this work using surveys and some interviews, and my unit of analysis has primarily been the firm and shifted to the employees. In the last 15 years, I published a few papers on tone management, where I analyze voluntary disclosures, and use texts to extract managerial characteristics that then are linked to specific outcomes. For example, I look at optimism of managers, and use language to operationalize it, and see if it’s more or less connected with specific accounting practices, such as financial reporting aggressiveness. In turn, aggressive reporting could be related to fraud, it raises audit fees, and could lead to other financial outcomes.
What do you think is the difference between academic research and research done by practitioners?
In some ways, our scientific research is more rigorous than practitioner research but that doesn’t mean that we can’t learn from practitioner studies. My research ideas in the area of tone management mostly came from comments I heard at the Advisory Board meetings of the School of Accountancy. Audit partners were lamenting the difficulty of assessing tone at the top and the lack of systematic approaches. That sparked the idea to use tectual analysis techniques to systematize the measurement of certain elements of tone at the top. Academic research emphasizes rigor for both theory development and empirical design. From a theoretical perspective, rigor requires academic research to argue based on theory rather than conjectures. Academic research is required to advance theory, and empirical designs need to reflect that.
In some ways, our scientific research is more rigorous than practitioner research but that doesn’t mean that we can’t learn from practitioner studies. My research ideas in the area of tone management mostly came from comments I heard at the Advisory Board meetings of the School of Accountancy. Audit partners were lamenting the difficulty of assessing tone at the top and the lack of systematic approaches. That sparked the idea to use tectual analysis techniques to systematize the measurement of certain elements of tone at the top. Academic research emphasizes rigor for both theory development and empirical design. From a theoretical perspective, rigor requires academic research to argue based on theory rather than conjectures. Academic research is required to advance theory, and empirical designs need to reflect that.
You have a very big role to play now in supporting faculty and a teacher/scholar model in Daniels. What are some things you do to maintain that balance?
Overall, this is not an easy thing to do but it is actually related to my research in performance measurement! It is not easy to balance two conflicting goals because as individuals we have a tendency to prioritize one or the other goal–in this case, research or teaching– even though we are actually expected to do both. However, at DU we have very concrete advantages: for instance, the 10-week quarters really help me balance the two by having period of intense teaching followed by long breaks where I can focus on research. Also at DU, I have been helped by the collaborative culture. I am fortunate to be in a place where we tend to help each other more than compete with each other, and we are in a profession, as we all know, that is incredibly competitive. So it was a blessing for me to have the opportunity to publish with several of my colleagues at Daniels.. I definitely think that we need to support and sustain collaborative research efforts.
Overall, this is not an easy thing to do but it is actually related to my research in performance measurement! It is not easy to balance two conflicting goals because as individuals we have a tendency to prioritize one or the other goal–in this case, research or teaching– even though we are actually expected to do both. However, at DU we have very concrete advantages: for instance, the 10-week quarters really help me balance the two by having period of intense teaching followed by long breaks where I can focus on research. Also at DU, I have been helped by the collaborative culture. I am fortunate to be in a place where we tend to help each other more than compete with each other, and we are in a profession, as we all know, that is incredibly competitive. So it was a blessing for me to have the opportunity to publish with several of my colleagues at Daniels.. I definitely think that we need to support and sustain collaborative research efforts.
How do you integrate your research into the classroom? Or disseminate it for managers more broadly?
This is also not an easy thing to do, but I’m a strong believer of the spillover effects that we can enjoy in our work by having to excel at both research and teaching. And so I love to be in a balanced school like DU because I am pushed to do both at very good levels. I believe my performance would suffer on both research and teaching if I were to be forced to only care about one. I tell myself that it has been a good class if I walk away having learned something myself, something that maybe I can apply in my research. This can happen through a question from a student or a thought I have while I deliver the material.
This is also not an easy thing to do, but I’m a strong believer of the spillover effects that we can enjoy in our work by having to excel at both research and teaching. And so I love to be in a balanced school like DU because I am pushed to do both at very good levels. I believe my performance would suffer on both research and teaching if I were to be forced to only care about one. I tell myself that it has been a good class if I walk away having learned something myself, something that maybe I can apply in my research. This can happen through a question from a student or a thought I have while I deliver the material.
In the spirit of thinking about our ethics panel coming up. What do you think is the primary value of doing research in business ethics?
First, at a very philosophical level, people matter. Our business research focuses more and more on understanding how human aspects, including ethics interact with some of the other constructs that we traditionally study. A focus on ethical issues is more and more accepted in the literature, which is very encouraging. I tend to believe that managers agree that we should learn about ethical behaviors, but it’s not necessarily an acquired experience based on clear understanding. It’s becoming increasingly important to understand how characteristics of managers and employees actually matter for achieving certain results. We all know the problem of companies that have incredible systems, even incredible managerial skills, but they lack some of the ethical components in their culture and their individual management. The disasters that occur due to lack of ethical considerations could lead to a lot of unfortunate outcomes for people. So, I think that becoming aware of how certain ethical values affect decisions, behavior and performance outcomes could be very valuable.
First, at a very philosophical level, people matter. Our business research focuses more and more on understanding how human aspects, including ethics interact with some of the other constructs that we traditionally study. A focus on ethical issues is more and more accepted in the literature, which is very encouraging. I tend to believe that managers agree that we should learn about ethical behaviors, but it’s not necessarily an acquired experience based on clear understanding. It’s becoming increasingly important to understand how characteristics of managers and employees actually matter for achieving certain results. We all know the problem of companies that have incredible systems, even incredible managerial skills, but they lack some of the ethical components in their culture and their individual management. The disasters that occur due to lack of ethical considerations could lead to a lot of unfortunate outcomes for people. So, I think that becoming aware of how certain ethical values affect decisions, behavior and performance outcomes could be very valuable.
What’s up next in research for you?
I’m working on a paper with Adam Greiner that looks at whether companies that are targeted by shareholder activists end up delivering more linguistically complex disclosure. That could be a mechanical product of the fact that they have to address activist causes, such as climate change, disparity in compensation, or a lot of other things that are not related to day-to-day business operations. We are looking at earnings calls, that are less scripted than mandatory disclosure, to see if being a target of shareholder activists actually ends up hurting shareholders, because it leads to disclosure that’s so complicated that it’s very hard to process. Complex language can also be opportunistic, as companies can try to obfuscate the truth. We also consider the political ideology of the CEO, and we initially find that Republicans tend to exacerbate the complexity of the disclosure as a response to shareholder activism. I think we have some interesting findings and we’re looking forward to getting this research published.
I’m working on a paper with Adam Greiner that looks at whether companies that are targeted by shareholder activists end up delivering more linguistically complex disclosure. That could be a mechanical product of the fact that they have to address activist causes, such as climate change, disparity in compensation, or a lot of other things that are not related to day-to-day business operations. We are looking at earnings calls, that are less scripted than mandatory disclosure, to see if being a target of shareholder activists actually ends up hurting shareholders, because it leads to disclosure that’s so complicated that it’s very hard to process. Complex language can also be opportunistic, as companies can try to obfuscate the truth. We also consider the political ideology of the CEO, and we initially find that Republicans tend to exacerbate the complexity of the disclosure as a response to shareholder activism. I think we have some interesting findings and we’re looking forward to getting this research published.