Joanne (Juan)  Chen 

I am an Assistant Professor of Finance at Questrom School of Business, Boston University. I hold a Ph.D. in Finance From London School of Economics. I am a member of the Finance Theory Group. (Download CV. )

Research Interests:


Email: joanchen@bu.edu      

Office: 522F, Rafik B. Hariri Building, 

            595 Commonwealth Avenue, 

            Boston, MA 02215, USA

Working Papers

Optimal Managerial Authority  ( Revise and Resubmit, the Journal of Finance)

Abstract: This paper formulates a dynamic agency framework to explore optimal managerial authority and compensation over a manager's career in a firm: Initially, authority is assigned independently of the manager's outside options or recruitment costs, unlike compensation, which increases in both. Over time, managerial authority and compensation rise after good performance and decline otherwise.  Authority-performance sensitivity decreases with increased authority — reflecting rational entrenchment — while pay-performance sensitivity grows. Moreover, costly authority adjustment causes inefficient self-dealing, and early-career luck followed by late-career misfortune can lead to massive self-dealing; this analysis underscores early-career luck's disproportionate impact on a manager's authority and lifetime utility.

Presentations: EFA 2023, CICF 2023, WFA 2023, Paris December 2022, BU Economics Micro Theory workshop 2022, Finance Theory Webinar 2022, NFA 2022, Cambridge Corporate Finance Theory Symposium 2022, Finance Theory Group Summer Meeting 2022,  SFS Cavalcade North America 2022, FMCG PhD Symposium, Queen Mary University of London, Northwestern University (Kellogg), UNC-Chapel Hill (Kenan-Flagler), Erasmus University Rotterdam, Boston University (Questrom), UT Dallas (Naveen Jindal), Warwick Business School, Copenhagen Business School, Shanghai Advanced Institute of Finance, University of Amsterdam, EWMES 2021, Toulouse School of Economics Brownbag, EFA Doctoral Tutorial 2021, World Finance Conference 2021, London School of Economics


Corporate AI Backfire and Potential Remedies,  with Brandon Han 

Abstract: Predictive artificial intelligence (AI) has dramatically transformed corporate decision-making by augmenting human judgment with advanced data analysis and predictive algorithms. This paper explores the potential for AI to backfire in corporate decision-making, particularly in the presence of agency conflicts. While AI enhances managers' ability to predict project success probabilities, it can lead to suboptimal decisions that reduce shareholder profits when managerial incentives are misaligned. The study introduces the concept of "corporate AI backfire'' and proposes AI-contingent contracts as a remedy. These contracts align managerial compensation with AI predictions, minimizing the risks of AI-driven inefficiencies. By addressing both the benefits and pitfalls of AI adoption, this research offers a framework for optimizing corporate decision-making in an AI-augmented environment.

Presentations: FTG Asian Meeting (Scheduled), BU Economics Micro Theory Workshop (Scheduled), BU Questrom Brownbag (Scheduled)


Platform Enterprises: Financing, Investment, and Network Growth   

Abstract: I develop a tractable micro-founded dynamic platform model featuring cross-group network effects. Networks are analogous to capital assets, and the platform enterprise invests in the networks by making subsidies to users. The paper characterizes the entrepreneur's optimal financing and investment strategies. The main findings are: 1) making highly aggressive subsidies by using up available funds is optimal; 2) per-transaction subsidies decrease as the network grows; 3) the platform with stronger network effects has a propensity to make more subsidies at initial stages; 4) staged financing mitigates the limited enforcement problem, and ceteris paribus, the number of funding rounds decreases with the profitability of the platform and increases with required profits by financiers; 5) the value of funds raised each round increases and the financing frequency decreases over time. 

Presentations:  Owners as Strategists Conference 2022, FMA 2020, AFA poster 2020, KWC Conference in Entrepreneurial Finance , LSE Brownbag


Corporate Governance Time Bombs, with Martin Oehmke  

Why are “corporate time bombs’’ (festering problems that can lead to extreme losses for a firm) often kept unsolved? We show that, if the manager’s tenure is uncertain, it can be optimal to provide only low-powered incentives to defuse corporate time bombs, so that procrastination is a rational response. If the problem remains unsolved after the incumbent manager’s departure, incentives given to successive managers to defuse the time bomb are even lower, due to the principal’s belief updating. The model implies that time bombs have to be defused within a certain time frame and shows that frequent managerial turnover leads to missed opportunities for solving the problem. 

Presentations:  BU Economics Micro Theory Workshop 2023, Yale Junior Finance Conference 2023, WFA-ECWCF 2023, BU Questrom Brownbag 2023




Teaching

Boston University:

Lecturer:    FE449 Corporate Financial Management   


London School of Economics (2016-2022):

Class Teacher:    FM250 Finance     

Class Teacher:    FM101 Finance   

Class Teacher:    FM212 Principles of Finance    

Teaching Assistant:    FM421 Applied Corporate Finance  

Teaching Assistant:    FM422 Corporate Finance

Teaching Assistant:    FM445 Portfolio Management 



Conference Discussions

By Kosta Koufopoulos, Giulio Trigilia, and Pavel Zryumov, Colorado Finance Summit 2023

By Michele Bisceglia, Alessio Piccolo, and Jan Schneemeier, 2nd Annual Holden Conference at Indiana University

By Amil Dasgupta and Richmond Mathews, WFA 2023

By Roman Inderst and Marcus Opp,  FIRS 2023

By Huang Sheng,  Paris December Finance Meeting 2022

By Nina Baranchuk and Michael Rebello,  EFA 2022

By Edward Altman, Rui Dai, and Wei Wang,  CICF 2022

By John G. Matsusaka and Chong Shu,  FIRS 2022

By Antoine Hubert de Fraisse,  FIRS PhD Session 2022

By Van Diem Nguyen and Reda M Moursli,  WFC 2021

By Panagiotis Couzo, Shantanu Banerjee, and Grzegorz Pawlina,  FMA 2020

By Spyros Terovitis,  KWC Conference in Entrepreneurial Finance 2019


Refereeing:

Journal of Economic Dynamics and Control, Review of Corporate Finance Studies, Review of Financial Studies (*3)