Aiyesha Dey - Faculty & Research - Harvard Business School
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Aiyesha Dey

Høegh Family Associate Professor of Business of Administration

Accounting and Management

Aiyesha Dey has been part of the Accounting and Management unit at the Harvard Business School as an associate professor of accounting since July 2017. She started her career as an accounting faculty at the Booth School of Business, University of Chicago, after which she joined the accounting group at the Carlson School of Management, University of Minnesota. During the 2016–2017 academic year, she was a visiting scholar at the Division of Economic and Risk Analysis (DERA) at the United States Securities and Exchange Commission, where she was involved in several policy initiatives. Aiyesha earned her bachelor's degree with honors in Mathematics in 1996, for which she received the National Scholar Award from the government of India for her performance. In 1999 she graduated with an MBA in Accounting and Finance. She continued her graduate studies at Kellogg School of Management, Northwestern University, and graduated in 2005 with a PhD in Accounting.

She conducts research in the areas of corporate governance, behavioral finance and financial reporting and disclosures. She serves on the Editorial Advisory and Review Board of The Accounting Review and Contemporary Accounting Research, and is a reviewer for several leading journals.

Journal Articles
  1. Bank CEO Materialism: Risk Controls, Culture and Tail Risk

    Robert Bushman, Robert Davidson, Aiyesha Dey and Abbie Smith

    We investigate how the prevalence of materialistic bank CEOs has evolved over time and how risk management policies, non-CEO executives’ behavior, and tail risk vary with CEO materialism. We document that the proportion of banks run by materialistic CEOs increased significantly from 1994 to 2004, that the strength of risk management functions is significantly lower for banks with materialistic CEOs, and that non-CEO executives in banks with materialistic CEOs insider trade more aggressively around government intervention during the financial crisis. Finally, we find that banks with materialistic CEOs have significantly more downside tail risk relative to banks with non-materialistic CEOs.

    Keywords: Management; Personal Characteristics; Behavior; Risk Management; Organizational Culture; Banks and Banking; Banking Industry;


    Bushman, Robert, Robert Davidson, Aiyesha Dey, and Abbie Smith. "Bank CEO Materialism: Risk Controls, Culture and Tail Risk." Journal of Accounting & Economics 65, no. 1 (February 2018): 191–220.  View Details
  2. Disproportional Control Rights and the Bonding Role of Debt

    Aiyesha Dey, Valeri Nikolaev and Xue Wang

    We examine the governance role of debt in the context of U.S.-based dual class ownership structures. We hypothesize that the use of debt alleviates the conflict between shareholder classes by balancing the power of controlling insiders. We document that dual class firms have higher leverage and a greater propensity to issue private debt; they also more frequently use cash sweeps and performance-based covenants. Dual class firms with greater agency conflicts and a greater need to access the capital market appear to rely more extensively on debt. These findings are consistent with controlling insiders bonding against the agency costs associated with dual class ownership. The governance role of debt is further corroborated by the valuation effect of debt for dual class companies. Private debt issuances trigger greater positive market reactions to the inferior dual class stock in relation to both the superior dual class stock and a matched sample of single class firms. Further, leverage attenuates the previously documented adverse effect of dual class status on Tobin’s q. Taken together, our analyses suggest that dual class firms use debt as a complementary governance mechanism.

    Keywords: dual class; capital structure; private debt; Debt Covenants; bonding mechanisms; Ownership Type; Capital Structure; Borrowing and Debt;


    Dey, Aiyesha, Valeri Nikolaev, and Xue Wang. "Disproportional Control Rights and the Bonding Role of Debt." Management Science 62, no. 9 (September 2016): 2581–2614.  View Details
  3. Executives' 'Off-the-Job' Behaviors and Financial Reporting Risk

    Robert Davidson, Aiyesha Dey and Abbie Smith

    We examine how executives' behavior outside the workplace, as measured by their ownership of luxury goods (low “frugality”) and prior legal infractions, is related to financial reporting risk. We predict and find that chief executive officers (CEOs) and chief financial officers (CFOs) with a legal record are more likely to perpetrate fraud. In contrast, we do not find a relation between executives' frugality and the propensity to perpetrate fraud. However, as predicted, we find that unfrugal CEOs oversee a relatively loose control environment characterized by relatively high and increasing probabilities of other insiders perpetrating fraud and unintentional material reporting errors during their tenure. Further, cultural changes associated with an increase in fraud risk are more likely during unfrugal (vs. frugal) CEOs' reigns, including the appointment of an unfrugal CFO, an increase in executives' equity-based incentives to misreport, and a decline in measures of board monitoring intensity.

    Keywords: Management Teams; Behavior; Personal Characteristics; Crime and Corruption; Governance Compliance; Financial Reporting; Organizational Culture;


    Davidson, Robert, Aiyesha Dey, and Abbie Smith. "Executives' 'Off-the-Job' Behaviors and Financial Reporting Risk." Journal of Financial Economics 117, no. 1 (July 2015): 5–28.  View Details
  4. Corporate Governance Reform and Executive Incentives: Implications for Investments and Risk-Taking

    Daniel Cohen, Aiyesha Dey and Thomas Lys

    We investigate the mechanism through which the Sarbanes Oxley Act (SOX) was associated with changes in corporate investment strategies. We document that the passage of the governance regulations in SOX was followed by a significant decline in pay‐performance sensitivity (Delta) and incentives to take risk (Vega) in CEOs' compensation contracts. These changes in compensation contracts are related to a decline in investments, including research and development expenditures, capital investments and acquisitions. Moreover, consistent with the rules in SOX directly affecting CEOs' incentives to take risk, we document that the decline in investments exceeds the amount that would be expected from changes in compensation packages alone. Finally, we also find evidence that the changes in investments are related to lower operating performances of firms, suggesting that these changes were costly to investors. Our evidence speaks to the debate on how corporate governance regulation interacts with firms' and managers' incentives, and ultimately affects corporate operating and investment strategies. Our study suggests that one indirect cost of such regulations in SOX is the significant reductions in corporate risk‐taking activities in the post‐SOX period. The changes in investments were in part due to changes in executive compensation contracts and in part related to increased executives' personal costs of engaging in risky activities.


    Cohen, Daniel, Aiyesha Dey, and Thomas Lys. "Corporate Governance Reform and Executive Incentives: Implications for Investments and Risk-Taking." Contemporary Accounting Research 30, no. 4 (Winter 2013): 1296–1332.  View Details
  5. CEO and Board Chair Roles: To Split or Not to Split?

    Aiyesha Dey, Ellen Engel and Xiaohui Liu

    We examine the performance and compensation implications of firms' decisions to combine the roles of CEO and board chairman (duality). We document that firms that split the CEO and chairman positions due to investor pressure have significantly lower announcement returns and subsequent performance, and lower contributions of investments to shareholder wealth. Further, these performance outcomes are more negative for firms with higher predicted probabilities of duality based on a model of economic determinants of board leadership structure. We also find that pay-performance sensitivity in CEO compensation contracts are significantly lower following a split in the CEO and chairman positions, and significantly higher following a combination in these positions. Our evidence suggests that on average, board leadership choices by firms and market responses are consistent with efficiency arguments, and recent proposals for all firms to separate the CEO and chairman roles warrant more careful consideration.

    Keywords: CEO duality; corporate governance; board chairman; firm performance; pay-performance sensitivity; Corporate Governance; Governing and Advisory Boards; Leadership; Performance Efficiency;


    Dey, Aiyesha, Ellen Engel, and Xiaohui Liu. "CEO and Board Chair Roles: To Split or Not to Split?" Journal of Corporate Finance 17, no. 5 (December 2011): 1595–1618.  View Details
  6. Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes Oxley Periods

    Daniel Cohen, Aiyesha Dey and Thomas Lys

    We document that accrual‐based earnings management increased steadily from 1987 until the passage of the Sarbanes‐Oxley Act (SOX) in 2002, followed by a significant decline after the passage of SOX. Conversely, the level of real earnings management activities declined prior to SOX and increased significantly after the passage of SOX, suggesting that firms switched from accrual‐based to real earnings management methods after the passage of SOX. We also document that the accrual‐based earnings management activities were particularly high in the period immediately preceding SOX. Consistent with these results, we find that firms that just achieved important earnings benchmarks used less accruals and more real earnings management after SOX when compared to similar firms before SOX. In addition, our analysis provides evidence that the increases in accrual‐based earnings management in the period preceding SOX were concurrent with increases in equity‐based compensation. Our results suggest that stock‐option components provide a differential set of incentives with regard to accrual‐based earnings management. We document that while new options granted during the current period are negatively associated with income‐increasing accrual‐based earnings management, unexercised options are positively associated with income‐increasing accrual‐based earnings management.

    Keywords: Earnings Management; Governing Rules, Regulations, and Reforms; Outcome or Result;


    Cohen, Daniel, Aiyesha Dey, and Thomas Lys. "Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes Oxley Periods." Accounting Review 83, no. 3 (May 2008): 757–787.  View Details
  7. Corporate Governance and Agency Conflicts

    Aiyesha Dey

    I investigate whether corporate governance is associated with the level of agency conflicts in firms. I employ exploratory principal components analysis on 22 individual governance variables to obtain seven factors that represent the different dimensions of governance for a firm. I measure the level of agency conflicts in firms based on seven proxies for agency conflicts used in the literature. I find that firms with greater agency conflicts have better governance mechanisms in place, particularly those related to the board, audit committee, and auditor. I also find that the composition and functioning of the board, the independence of the auditor, and the equity‐based compensation of directors are significantly associated with firm performance, but primarily for firms with high agency conflicts. Overall, the results support the theory that the existence and role of various governance mechanisms in a firm are a function of the level of agency conflicts in the firm.

    Keywords: Corporate Governance; Agency Theory;


    Dey, Aiyesha. "Corporate Governance and Agency Conflicts." Journal of Accounting Research 46, no. 5 (December 2008): 1143–1181.  View Details
  8. Earnings Announcement Premia and Limits to Arbitrage

    Daniel Cohen, Aiyesha Dey, Thomas Lys and Shyam Sunder

    We examine the factors underlying the presence of earnings announcement premia. We find that the premia persist beyond the sample period examined in prior studies (ending in 1988), although they decline in magnitude after 1988. Further, premia are lower on the expected than the actual earnings announcement dates. We document that increases in voluntary disclosures result in lower premia, despite the increase in return volatility over time. Finally, our evidence suggests that the premia are not completely eliminated because of the costs of arbitrage.

    Keywords: Business Earnings; Announcements; Corporate Disclosure;


    Cohen, Daniel, Aiyesha Dey, Thomas Lys, and Shyam Sunder. "Earnings Announcement Premia and Limits to Arbitrage." Journal of Accounting & Economics 43, nos. 2-3 (July 2007): 153–180.  View Details
Cases and Teaching Materials
  1. The Whistleblower at International Game Technology

    Aiyesha Dey, Jonas Heese and James Weber

    Robert Mayhem, a senior manager at International Game Technology, had filed a whistleblower report with the U.S. Securities and Exchange Commission alleging that the company had misstatements in its financial reports. Mayhem’s report involved IGT’s practice of refurbishing used parts in one of its reporting segments and then transferring those parts to another reporting segment. Mayhem indicated that IGT’s method of determining the costs of the refurbished parts was inaccurate and resulted in profits being shifted from one segment to another. Prior to his report to the SEC, Mayhem had reported his concerns to his managers and to the company’s internal compliance hotline. At about the same time, IGT announced that it had accepted an offer to be acquired by another large player in the industry, which would soon move its incorporation out of the U.S. and into the UK. What should IGT do regarding the whistleblower and his report?

    Keywords: whistleblower; Financial Reporting; Governance Compliance; Ethics;


    Dey, Aiyesha, Jonas Heese, and James Weber. "The Whistleblower at International Game Technology." Harvard Business School Case 118-061, April 2018.  View Details
  2. Whistleblower Legislation in the Context of Financial Reporting

    Aiyesha Dey, Jonas Heese and James Weber

    This note provides an overview of U.S. federal legislation relating to whistleblowing, Sarbanes-Oxley, Dodd-Frank (including the Office of the Whistleblower), and the False Claims Act.

    Keywords: whistleblower; Sarbanes-Oxley; Dodd-Frank; False Claims Act; Securities and Exchange Commission; Government Legislation; Financial Reporting; United States;


    Dey, Aiyesha, Jonas Heese, and James Weber. "Whistleblower Legislation in the Context of Financial Reporting." Harvard Business School Technical Note 118-090, April 2018.  View Details