Professor Pae of SKK GSB Selected as the 54th Maeil Business Newspaper Economist Award Winner
Professor Suil Pae, from SKK GSB at Sungkyunkwan University, published a paper titled "Career Concerns, Investment, and Management Forecasts" in the prestigious academic journal "Accounting Review". The paper analyzed the impact of managers' general managerial abilities and their specific expertise in certain industries or businesses on investment decisions and voluntary earnings forecasts using sophisticated mathematical models.
Professor Jung Jae-ho from the Department of Business Administration at Korea University, who reviewed the paper, remarked that "Managers typically have concerns about their reputation or career." He evaluated Professor Pae's theoretical proof that managers with such concerns tend to assess which abilities, either their expertise or general managerial skills, they should emphasize to benefit their future careers and make investment decisions or earnings forecast disclosures accordingly.
According to Professor Pae's analysis, managers with general managerial abilities tend to underinvest, whereas those with specialized expertise tend to overinvest. Additionally, compared to managers with specialized expertise, those with general managerial abilities tend to refrain from disclosing earnings forecasts in situations where their contribution to increasing the company's value is unclear.
Professor Pae's paper focused on a dilemma many companies face when selecting professional managers. The conclusion drawn is that when there is an extreme inclination towards either specialized or general managerial tendencies, companies tend to make inefficient investment decisions, thereby undermining the company's value. Both overinvestment and underinvestment pose problems, as they hinder prompt responses to the need for factory expansions or establishments, ultimately causing companies to lag behind in competition.
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