Biography

A three-time recipient of the American Accounting Association’s Notable Contributions to Management Accounting Research Award and a winner of the 2020 Management Accounting Research David Solomons Prize, Sedatole brings a synthesis of business acumen and academic expertise to her role as Asa Griggs Candler Professor of Accounting. She previously served as the Interim John H. Harland Dean of Goizueta Business School from May 2020 through June 2022.

Karen’s pioneering research into the field of performance measurement and reward systems, the role of forecasting and budgetary systems within organizations, and control in interorganizational collaborations have added enormous value across academic and business spheres. In her research, she places emphasis on the role of trust, positive motivation, and systems thinking in the workplace. In tackling these issues, she has partnered across industries – health care, tech, automotive, and more – generating business-relevant research and earning her the Impact on Management Accounting Practice Award twice. Karen’s research has merited grants from the PwC Charitable Foundation, the American Institute of Certified Public Accountants, the Institute of Internal Auditors Research Foundation, the Chartered Institute of Management Accountants, and the Institute of Management Accountants. She has also demonstrated her commitment to Goizueta’s core value of principled leadership, serving as Faculty Director for Emory Executive Education’s Executive Women’s Leadership Forum.

Prior to joining the Emory faculty in 2017, Karen was the Russell E. Palmer Endowed Professor of Accounting at Michigan State University. She has also held academic appointments at the University of Texas at Austin and the Stephen F. Austin State University.

She has presented her research at numerous national and international conferences. Her effective forecasting and performance measurement articles have been published in a number of leading journals, including The Journal of Accounting Research, The Accounting Review, and the Harvard Business Review. Karen previously served as senior editor of the Journal of Management Accounting Research.

Karen holds a PhD in business administration from the University of Michigan, a masters of business administration from the University of Texas at Austin, and a bachelor of science in engineering from Baylor University.

Education

  • PhD in Business Administration
    University of Michigan
  • MBA in Business Administration
    University of Texas at Austin
  • BS in Engineering
    Baylor University

The immunization effect of internal control system transparency following a supplier’s violation of buyer trust

2024 Journal of Management Accounting Research
Cianci, A., B. Reichert, K. L. Sedatole, and G. Tsakumis
June 22, 2025
In this study, we show that a supplier’s internal controls (IC) that lead to either falling short of or to exceeding buyer expectations play an important role in the trust a buyer has in its supplier. In a 12-round repeated trust game, we examine the impact of supplier ICs and the transparency of those ICs to the buyer on buyer trusting behavior across three phases of the buyer-supplier relationship: (1) trust formation, (2) trust violation, and (3) trust repair. We find that, while a supplier’s trust violation reduces buyer trusting behavior, the least amount of damage to trusting behavior occurs for suppliers whose ICs led to supplier actions that fell marginally short of buyer expectations prior to the violation and when the IC was transparent to the buyer. We refer to this as the IC transparency “immunization effect.” We show suppliers can benefit from making IC choices known to partners.

Making the most of supplier industry competition through incentive contracting

2021 Journal of Accounting and Economics 71 (2-3).
Carter, M. E., J. Choi, and K. L. Sedatole
June 22, 2025
We examine how supplier industry competition affects CEO incentive intensity in procuring firms. Using Bureau of Economic Analysis data to compute a weighted supplier industry competition measure, we predict and find that higher supplier competition is associated with stronger CEO pay-for-performance incentive intensity. This effect is incremental to that of the firm's own industry competition previously documented and is robust to alternative measures of supplier competition and to exogenous shocks to competition. Importantly, we show that performance risk and product margin act as mediating variables in the relation between supplier competition and CEO incentive intensity providing support for the theory underpinning our finding. We document that CEO compensation contracts are used as a mechanism to exploit the market dynamics of upstream industries to a firm's benefit. Our findings are economically important as suppliers provide, on average, 45 percent of the value delivered by procuring firms to the market (BEA, 2016).

The folly of forecasting: The effects of a disaggregated demand forecasting system on forecast error, forecast positive bias, and inventory levels

2021 The Accounting Review 96 (2): 127–152
Bruggen, A., I. Grabner, and K. L. Sedatole
June 22, 2025
Periodic demand forecasts are the primary planning and coordination mechanism within organizations. Because most demand forecasts incorporate human judgment, they are subject to both unintentional error and intentional opportunistic bias. We examine whether a disaggregation of the forecast into various sources of demand reduces forecast error and bias. Using proprietary data from a manufacturing organization, we find that absolute demand forecast error declines following the implementation of a disaggregated forecast system. We also find a favorable effect of forecast disaggregation on finished goods inventory without a corresponding increase in costly production plan changes. We further document a decline in positive forecast bias, except for products whose production is limited owing to scarce production resources. This implies that disaggregation alone is not sufficient to overcome heightened incentives of self-interested sales managers to positively bias the forecast for the very products that an organization would like to avoid tying up in inventory.

When one size does not fit all: Mitigating heterogeneous compensation risk through subjective evaluations

2020 Management Accounting Research 49: 1-12
Anderson, S. W., H. Dekker, K. L. Sedatole, and E. Wiersma
June 22, 2025
Winner of the Management Accounting Research 2020 David Solomons Prize.

Firms typically use a ‘one-size-fits-all’ (OSFA) compensation contract that specifies a common formulaic relation between performance and compensation (i.e., a performance bonus) for non-executive managers in similar jobs. However, a contract that is appropriate on average, may be suboptimal for individual managers if heterogeneity in the operating environment creates varying compensation risk. We use field data from a retail firm that introduced an OSFA bonus compensation plan for its store managers. The common bonus formula is based on a weighted sum of objective measures of performance and a subjective rating made by supervisors. The firm intended the supervisors’ discretionary subjective rating to evaluate performance on dimensions that are difficult to measure (e.g., store appearance). We test and find that supervisors give uniformly higher subjective ratings to managers whose objective measure of sales performance is measured with greater noise, and to managers who face higher performance target difficulty, the latter assessed both prior to (ex ante) and subsequent to (ex post) the evaluation period. These results obtain after controlling for manager ability and performance, and for alternative mechanisms to mitigate differences in compensation risk (e.g., salary changes, sales target changes, and bonus adjustments). The evidence suggests that supervisors use discretion in subjective ratings to provide manager-specific risk premiums for non-executive managers who are subject to an OSFA contract.

The role of calibration committees in subjective performance evaluation systems

2019 Management Science 65 (4): 1562-1585
Demere, W., Sedatole, K. L. and A. Woods
June 22, 2025
Winner of the 2020 AAA Notable Contributions to Management Accounting Literature Award.
Featured in Harvard Business Review, November-December 2018.

We provide the first empirical evidence of the role that calibration committees play in subjective performance evaluation systems. Using proprietary data from a large multinational organization, we begin by showing that calibration committees adjust ratings sparingly (i.e., 25% adjustment rate), but when they do, downward adjustments are significantly more frequent and of greater magnitude than upward adjustments. Calibration committees tend to downward (upward) adjust ratings of supervisors who give higher (lower) than average initial ratings. Taken together, calibration committees improve the consistency of ratings across supervisors and mitigate leniency bias, but exacerbate centrality bias. We also show that calibration committees facilitate the appropriate allocation of decision rights by deferring rating decisions to supervisors who possess a relatively greater information advantage. That is, calibration committees are less likely to adjust the rating of a subordinate who is further removed from committee members in the organizational hierarchy. Finally, we show that calibration committees promote supervisor learning about organizational performance rating expectations through calibration adjustments. This study contributes to the literature on performance evaluation by providing new insights regarding the organizational dynamics of subjective performance evaluation systems when decision rights span hierarchical levels of the organization.

The implicit incentive effects of horizontal monitoring and team member dependence on individual performance

2016 Contemporary Accounting Research 33 (3): 889–919
Sedatole, K. L., A. Swaney, and A. Woods
June 22, 2025
This study examines the implicit incentive effects of horizontal monitoring and team member dependence for individuals working in teams but facing explicit incentives based solely on measures of individual performance. We combine proprietary performance data with survey data for 133 internal auditors. We show that the social influences of relatively high levels of both horizontal monitoring and team member dependence provide implicit incentives that motivate individual performance, making the provision of team rewards unnecessary to ensure individual and team productivity. We conclude that horizontal monitoring and team member dependence are complementary control mechanisms whose effectiveness helps explain the observed practice of organizing work into teams without explicit team based rewards.

Do the incentive effects of relative performance measurement vary with the ex ante probability of promotion?

2016 Management Accounting Research 30: 18-31.
Demere, W., Krishnan, R., K. L. Sedatole, and A. Woods
June 22, 2025
This study examines performance effects arising from the use of relative performance measurement (RPM) for promotion decisions in the organizational labor market. We use proprietary archival and survey data from the internal audit department of a large organization to document that the use of RPM positively interacts with the ex ante probability of promotion to influence performance. Thus, our study shows that while RPM may benefit employees by reducing uncertainty in incentive compensation as predicted by theory, the incremental performance benefits derived from the use of RPM as a promotion mechanism depend on the employee’s promotion prospects. Specifically, we find greater (lower) performance benefits associated with the use of RPM when an employee’s probability of promotion is greater (lower). Our findings suggest that RPM may be more effective in firms where there are opportunities for promotion at each organizational level.

Do extant management control frameworks fit the alliance setting? A descriptive analysis

2015 Industrial Marketing Management, special issue on Accounting and Marketing Perspectives of Value Creation in Inter-firm Collaboration in Industrial Markets 46: 36–53
Anderson, S. W., M. H. Christ, H. C. Dekker, and K. L. Sedatole
June 22, 2025
see journal

The use of management controls to mitigate risk in strategic alliances: Field and survey evidence

2014 Journal of Management Accounting Research 26 (1): 1-32
Anderson, S. W., M. H. Christ, H. C. Dekker, and K. L. Sedatole
June 22, 2025
see journal

The use of contract adjustments to lengthen the CEO horizon in the presence of internal and external monitoring

2013 Journal of Management Accounting Research 25 (1): 199-229
Dikolli, S. S., S. L. Kulp, and K. L. Sedatole
June 22, 2025
Winner of the 2014 Journal of Management Accounting Research Best Paper Award.
see journal

Evidence on the cost hierarchy: The association between resource consumption and production activities

2013 Journal of Management Accounting Research 25 (1): 119-141
Anderson, S. W., and K. L. Sedatole
June 22, 2025
see journal

Sticks and carrots: An experimental investigation of contract frame and effort in agency relationships

2012 The Accounting Review 87 (6): 1913-1938
Christ, M. H., K. L. Sedatole, and K. L. Towry
June 22, 2025
Presented at the 2012 Experimental Economics, Accounting and Society: A Conference in Memory of John Dickhaut, Economic Science Institute, Chapman University.
Winner of the 2010 AAA MAS Research Conference Outstanding Paper Award.
see journal

The use of management control mechanisms to mitigate moral hazard in the decision to outsource

2012 Journal of Accounting Research 50 (2): 553-592
Sedatole, K. L., D. Vrettos, and S. K. Widener
June 22, 2025
Presented at the 2011 Journal of Accounting Research Conference.
see journal

The use of collaborative interfirm contracts in the presence of task and demand uncertainty

2011 Contemporary Accounting Research 28 (4): 1397–1422
Krishnan, R., F. Miller, and K. L. Sedatole
June 22, 2025
see journal

Integrated information systems and alliance partner trust

2011 Contemporary Accounting Research 28 (3): 1018-45
Nicolaou, A., K. L. Sedatole, and N. Lankton, N
June 22, 2025
see journal

Employees’ subjective valuations of their stock options: Evidence on the distribution of valuations and the use of simple anchors

2011 Contemporary Accounting Research 28 (3): 747–93
Farrell, A., S. Krische, and K. L. Sedatole
June 22, 2025
Winner of the 2016 AAA MAS Impact on Management Accounting Practice Award.
see journal

Drivers and consequences of short-term production decisions: Evidence from the auto industry

2011 Contemporary Accounting Research 28 (1):83-123
Bruggen, A., R. Krishnan, and K. L. Sedatole
June 22, 2025
Winner of the 2012 AAA MAS Impact on Management Accounting Practice Award
see journal

An empirical examination of goals and performance-to-goal following the introduction of an incentive bonus plan with participative goal-setting

2010 Management Science 56 (1): 90-109
Anderson, S. W., H. C. Dekker, and K. L. Sedatole
June 22, 2025
Winner of the 2012 AAA Notable Contributions to Management Accounting Literature Award.
Winner of the 2006 AAA MAS Research Conference Outstanding Paper Award.
see journal

Transient institutional ownership and CEO contracting

2009 The Accounting Review 84 (3): 737-770
Dikolli, S. S., S. L. Kulp, and K. L. Sedatole
June 22, 2025
see journal

Improvements in the information content of non-financial forward-looking performance measures: A taxonomy and application

2007 Journal of Management Accounting Research 19: 71-104
Dikolli, S. S. and K. L. Sedatole
June 22, 2025
see journal

Measuring customer relationship value: The role of switching cost

2007 Contemporary Accounting Research 24 (1): 93-132
Dikolli, S. S., W. R. Kinney, and K. L. Sedatole
June 22, 2025
see journal

The effect of control systems on trust and cooperation in collaborative environments

2005 The Accounting Review 80 (2): 477-500
Coletti, A. L., K. L. Sedatole, and K. L. Towry
June 22, 2025
Winner of the 2009 AAA Notable Contributions to Management Accounting Literature Award
see journal

Relating e-satisfaction to behavioral outcomes: An empirical study

2004 Journal of Services Marketing 18 (4): 290-302
Bansal, H. S., S. S. Dikolli, S. S., G. McDougall, and K. L. Sedatole
June 22, 2025
see journal

Management accounting for the extended enterprise: Performance management for strategic alliances and networked partners

2003 In Management Accounting in the Digital Economy, A. Bhimani, Ed., London: Oxford University Press
Anderson, S. W. and K. L. Sedatole
June 22, 2025
see book

The effect of measurement alternatives on a non-financial quality measure’s forward-looking properties

2003 The Accounting Review 78 (2): 555-580
Sedatole, K. L.
June 22, 2025
see journal

Sourcing parts of complex products: Evidence on transactions costs, high-powered incentives and ex-post opportunism

2000 Accounting, Organizations & Society 25 (8): 723-749
Anderson, S. W., D. Glenn, and K. L. Sedatole
June 22, 2025
see journal

Designing quality into products: The use of accounting data in new product development

1998 Accounting Horizons 12 (3): 213-233
Anderson, S. W. and K. L. Sedatole
June 22, 2025
see journal