Jan Bouwens

Thomas Henry Carroll-Ford Foundation Visiting Professor of Business Administration

Unit: Accounting and Management

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(617) 495-6378

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Jan Bouwens is Professor of Accounting at Tilburg University, The Netherlands and is appointed as a visiting professor at Harvard Business School. He will be working full time at HBS from 1 July 2013- 1 July 2014.

His research focuses on the working of accounting systems in firm. Specifically he studies how accounting practices in firms support or impede cooperation and coordination between units making up a firms. He has done research studying the retail sector, banks, and the transportation sector.

Among his findings in the retail sector were studies on store managers who are doing very well compared to the sales target. These managers had a tendency to mute their efforts by the end of the year so as to prevent their subsequent targets from being too difficult to achieve.

In the banking sector his studies found that lower-level decision makers as compared to higher-level decision makers charge on average a higher interest rate to firms, while it is less likely that the loan they granted needs to be downgraded at some point.

He is currently investigating how accounting systems help to re-direct the emphasis of sales managers from selling tangible products to a mix of tangible and intangible products in a B2B environment. He also examines how organizational structure affects the use of decision-making information in the insurance industry. In another study he examines how people identify with the firm and whether this affects their inclination to manipulate accounting numbers.

Jan Bouwens has advised the Dutch parliament on education, finance and compensation topics. He also advised the Dutch Ministry of Finance and the AFM (Dutch equivalent of the SEC).

He writes editorials for Dutch newspapers on a regular basis. He -for instance- wrote an editorial on why and how a close relation between the auditor and the audited firm may affect auditor independence. This idea was adopted by the national accounting organization in The Netherlands.

He holds his doctorate from Tilburg University and has published in several top academic journals, including Accounting, Organizations and Society, The Accounting Review, and Journal of Accounting Research, and recently in the Journal of Accounting & Economics. In his research he administers survey as well as archival methods to examine how accounting choices affect the synergy potential residing between organizational units making up the firm. He has taught both financial and managerial accounting at Melbourne, Nyenrode, and Tilburg University. On behalf of the Dutch Inter-University Limperg Institute he organizes the Limperg Ph.D. courses in accounting. He serves on the board of Contemporary Accounting Research, and he serves on the editorial board of JMAR.

    Publications

    Journal Articles

    1. Decisions of Business Unit Managers

      Citation:

      Bouwens, J. "Decisions of Business Unit Managers." Contemporary Accounting Research (forthcoming).
    2. The Role of Performance Measures in the Intertemporal Decisions of Business Unit Managers

      Accounting performance measures are often argued to lead to short-sighted behavior by managers facing intertemporal decisions. We assess the association between different types of performance measures and the time horizon of business unit managers who have profit responsibility. Our results, based on a sample of 105 managers, indicate that accounting return measures direct business unit managers' attention toward longer-term activities. Non-financial measures similarly direct managerial attention toward longer-term activities, although not to the same degree as accounting return measures. We conclude that accounting return measures can balance out potential congruity problems associated with the profit measures by directing managerial attention to activities that have longer-term consequences on firm performance.

      Keywords: Management Practices and Processes; Performance Evaluation;

      Citation:

      Bouwens, Jan, Margaret A. Abernethy, and Laurence van Lent. "The Role of Performance Measures in the Intertemporal Decisions of Business Unit Managers." Contemporary Accounting Research 30, no. 3 (Fall 2013): 925–961.
    3. Target Ratcheting and Effort Reduction

      In this paper, we examine how retail store managers reduce their sales activity in response to target ratcheting. We find that managers with favorable sales performance in the first three quarters reduce their sales activity in the final quarter. We also document that managers who engage in sales reducing activities enhance their likelihood of meeting their next-year sales target, which is based on their current sales. That is, managers who reduce their sales activity in the final quarter are more likely to beat their next-year sales targets than managers who refrain from reducing their final-quarter sales.

      Keywords: target-setting; ratchet effect; manipulating real economic activities; Goals and Objectives; Strategy; Performance Evaluation; Sales;

      Citation:

      Bouwens, J., and Peter Kroos. "Target Ratcheting and Effort Reduction." Journal of Accounting & Economics 51, nos. 1-2 (February 2011): 171–185.
    4. Assessing the Performance of Business Unit Managers

      Using a sample of 140 managers, we investigate the use of various performance metrics in determining the periodic assessment, bonus decisions, and career paths of business unit managers. We show that the weight on accounting return measures is associated with the authority of these managers, and we document that both disaggregated measures (expenses and revenues), and nonfinancial measures play a greater role as interdependencies between business units increase. The results suggest separate and distinct roles for different types of performance measures. Accounting return measures are used to create the proper incentives for managers with greater authority, while disaggregated and nonfinancial measures are employed in response to interdependencies.

      Keywords: Business Units; Managerial Roles; Performance Evaluation;

      Citation:

      Bouwens, J., and Laurence van Lent. "Assessing the Performance of Business Unit Managers." Journal of Accounting Research 45, no. 4 (September 2007): 667–697.
    5. Performance Measure Properties and the Effect of Incentive Contracts

      Using data from a third-party survey on compensation practices at 151 Dutch firms, we show that less noisy or distorted performance measures and higher cash bonuses are associated with improved employee selection and better-directed effort. Specifically, (1) an increase in the cash bonus increases the perceived selection effects of incentive contracts, but does not independently affect the perceived amount and direction of effort that employees deliver, and (2) performance measure properties directly impact both effort and the selection functioning of incentive contracts. These results hold after controlling for an array of incentive contract design characteristics and for differences in organizational context. Our estimation procedures address several known problems with using secondary datasets.

      Keywords: Motivation and Incentives; Data and Data Sets; Problems and Challenges; Performance Evaluation; Compensation and Benefits; Netherlands;

      Citation:

      Bouwens, J., and L. van Lent. "Performance Measure Properties and the Effect of Incentive Contracts." Journal of Management Accounting Research 18 (2006): 55–75.
    6. Determinants of Control System Design in Divisionalized Firms

      We investigate two determinants of two choices in the control system of divisionalized firms, namely decentralization and use of performance measures. The two determinants are those identified in the literature as important to control system design: (1) information asymmetries between corporate and divisional managers and (2) division interdependencies. We treat decentralization and performance measurement choices as endogenous variables and examine the interrelation among these choices using a simultaneous equation model. Using data from 78 divisions, our results indicate that decentralization is positively related to the level of information asymmetries and negatively to intrafirm interdependencies, while the use of performance measures is affected by the level of interdependencies among divisions within the firm, but not by information asymmetries. We find some evidence that decentralization choice and use of performance measures are complementary.

      Keywords: Design; Organizational Design; Business Divisions; Management Systems; Performance Evaluation;

      Citation:

      Abernethy, Margaret A., Jan Bouwens, and Laurence van Lent. "Determinants of Control System Design in Divisionalized Firms." Accounting Review 79, no. 3 (July 2004): 545–570.
    7. The Consequences of Customization on the Use of Management Accounting Systems

      The understanding of the antecedent conditions influencing the design of management accounting systems (MASs) is very limited. In recent years, significant research attention has been devoted to understanding how different strategic priorities influence these systems. However, the results of these studies have been, at best, equivocal and numerous calls have been made for further research to "unravel" the conflicts that have emerged in the literature. The purpose of this study is to examine not only the relation between strategy and MAS but also to develop a theoretical model to explain how and why this relation exists. The model draws on Galbraith [Galbraith, J. (1973). Designing complex organisations. Reading: Addison-Wesley] to develop a theoretical argument concerning the inter-relations among customization, interdependence and MAS. We are particularly interested in assessing whether the relation between customization and MAS is a direct one or whether the relation operates via interdependence. The results indicate that customization affects MAS via interdependence, rather than directly. The study of 170 production and sales managers further revealed little difference in MAS use between production and sales managers facing similar amounts of customization or interdependence.

      Keywords: Organizational Design; Management Systems; Accounting; Customization and Personalization;

      Citation:

      Bouwens, J., and Margaret A. Abernethy. "The Consequences of Customization on the Use of Management Accounting Systems." Accounting, Organizations and Society 25, no. 3 (April 2000): 221–241.

    Working Papers

    1. The Effect of Management Control Elements on Coordination

      This study examines how control elements of a firm affect coordination among profit centers. The firm operates a network of 59 profit centers. It uses a transfer-pricing system designed to account for interdependencies between profit centers and to induce coordination. Further, profit center managers are incentivized with own-level residual income measures. The use of the latter measure would lead managers to make decisions benefiting their performance irrespective of whether these decisions negatively affect other profit centers. However, the firm implemented a third system that would potentially lead managers to benefit other profit centers. The firm established regional clusters of profit centers that meet at least once every quarter. The creation of these clusters creates proximity as profit centers perform complementary activities, making it more beneficial for them to coordinate. Our findings suggest that self-centered choices by profit centers are mitigated as proximity within a cluster increases. Additionally, we find evidence that proximity is positively associated with coordination and overall performance.

      Keywords: Business or Company Management; Organizational Structure; Performance;

      Citation:

      Bormann, Sara, Jan Bouwens, and Christian Hofmann. "The Effect of Management Control Elements on Coordination." Harvard Business School Working Paper, No. 14-092, March 2014.
    2. Putting Skin in the Game: Managerial Ownership and Bank Risk-Taking

      This paper examines the relation between managerial ownership and bank risk exposure for a large sample of international financial institutions. We seek empirical evidence suggested by theories concerning conflicts between managers and owners over risk-taking. We argue that managers holding equity of their bank take less risk because they have fewer opportunities to diversify risk compared with outside shareholders. Our findings are consistent with this idea. We document lower risk levels for banks that employ bank managers with higher equity stakes. We also demonstrate that regulation hardly affects the risk-taking of bank managers holding on their bank's shares. This contrasts with outside shareholders who are more likely to expose their bank to higher risk levels when regulation protects the bank against default. Managerial equity incentives may, therefore, serve as a risk reduction instrument.

      Keywords: Managerial equity ownership; financial risk; corporate governance; banks; Motivation and Incentives; Risk Management; Employee Ownership; Corporate Governance; Banks and Banking; Banking Industry;

      Citation:

      Bouwens, Jan, and Arnt Verriest. "Putting Skin in the Game: Managerial Ownership and Bank Risk-Taking." Harvard Business School Working Paper, No. 14-070, February 2014.
    3. Organization Identity and Accounting Choices

      Citation:

      Bouwens, J., and P. Kroos. "Organization Identity and Accounting Choices." Working Paper, 2013. (Tilburg University.)
    4. Full-cost Transfer Pricing and Cost Management

      Citation:

      Bouwens, J., and B. Steens. "Full-cost Transfer Pricing and Cost Management." Working Paper, 2013. (Tilburg University.)
    5. Performance Measures and Intra-Firm Spillovers: Theory and Evidence

      Citation:

      Bouwens, J., and L. van Lent. "Performance Measures and Intra-Firm Spillovers: Theory and Evidence." Working Paper, 2013. (Tilburg University.)
    6. The Effect of Delegation of Decision Rights and Control: The Case of Lending Decisions for Small Firms

      Citation:

      Bouwens, J., and P. Kroos. "The Effect of Delegation of Decision Rights and Control: The Case of Lending Decisions for Small Firms." Working Paper, 2013. (Tilburg University.)
    7. Trust or Dare: Is there a Role for Accounting when Delegating Decisions?

      Citation:

      Bouwens, J., and E. Cardinaels. "Trust or Dare: Is there a Role for Accounting when Delegating Decisions?" Working Paper, 2013. (Tilburg University.)
    8. The Interplay between Subjective Performance Assessments and Target Setting

      Citation:

      Bouwens, J., and P. Kroos. "The Interplay between Subjective Performance Assessments and Target Setting." Working Paper, 2012. (Tilburg University.)