The Third Annual Conference at Temple University on the Convergence of Managerial and Financial Accounting Research was held Aug. 7-9.
Co-hosted by the Merves Center for Accounting and Information Technology, and the Accounting Department at Temple’s Fox School of Business, the conference has received additional sponsorship support allthree years from the Chartered Institute of Management Accountants (CIMA) UK, the world’s largest professional body of management accountants. Each year, the Accounting Conference explores state-of-the-art practices in how the understanding of financial reporting is and can be informed by considering managerial accounting issues, while showcasing important cutting-edge research by scholars in both managerial and financial accounting.
More than 80 leading experts gathered at Alter Hall, home to the Fox School of Business, including keynote speakers Jacob Thomas, Rajiv Banker, Eva Labro, Paul Zarowin, Sudipta Basu, Ranjani Krishnan and Lawrence Brown.
A co-organizer of this and other accounting conference series, Banker said this particular series attracted 50 percent more participants than last year, and is hopeful for continued growth in the years to come.
“Convergence of managerial and financial accounting is an exciting and expanding new field of research,” said Banker, a Professor of Accounting at Fox. “The Fox School of Business at Temple University, our faculty, and our PhD students are seen as emerging leaders in this new field of inquiry.”
Presentations featured research work by academics, revealing how managerial behavior influences financial reporting, and covered topics like Analyst Forecasts, Performance Evaluations, Earnings Behavior, International Financial Reporting, and Taxation. Presenters and attendees came from around the world, including representatives from universities such as Harvard, Northwestern, New York University, the London Business School, Yale, Columbia and Tilburg University.
In addition to presentations from professors and leading academic experts, 12 PhD students presented their research work during the conference.
Assistant Professor of Accounting at the Fox School and a co-organizer of this year’s conference, Lucas Threinen said he was impressed by the PhD students who had been accepted as presenters, noting “these students represented themselves very well, and I believe they were able to get valuable feedback about their work.”
Providing PhD students with an opportunity to present their research at an academic conference builds upon the mission of the Fox School’s PhD Program to educate, train and mentor PhD students in a supportive research environment with the aid of Fox faculty to generate and publish ground-breaking research in top journal outlets, and place them in peer and aspirant research institutions around the world.
Next year’s conference on the Convergence of Managerial and Financial Accounting will be held at the University of Calgary, in Canada, which Banker hopes will expand the scope of already-growing attendance, and will be co-sponsored again by the Merves Center for Accounting and Information Technology at the Fox School of Business. The Merves Center has more exciting events in the works for the upcoming academic year, bringing a new academic conference series focusing on Accounting Information Systems to Temple. Banker will co-organize this conference series with newly appointed Assistant Professor of Accounting Hilal Atasoy.
More information on conferences sponsored by the Accounting Department at the Fox School of Business at Temple University can be found by visiting their departmental website.
A new study of 365 sell-side financial analysts shows that private phone calls with managers remain an essential source of analysts’ earnings forecasts and stock recommendations – even in light of regulations limiting businesses’ selective disclosure of financial information.
More than half of the analysts surveyed by a team of accounting researchers said they make direct contact with executives of companies they cover five or more times per year. The direct contact with management is so important that one analyst said his company hired an FBI profiler to train analysts “to read management teams, to tell when they’re lying, to tell when they were uncomfortable with a question. That’s how serious this whole issue has become.”
“Everyone who reads our paper comes away with something, but one key takeaway is the importance of private conversations between analysts and managers even in a post-Regulation Fair Disclosure (FD) world,” said Lawrence D. Brown, the Seymour Wolfbein Distinguished Professor of Accounting at Temple University’s Fox School of Business, who conducted the study with professors at Arizona State University, University of Texas at Austin and Texas A&M.
The survey also finds that accurate earnings forecasts and profitable stock recommendations have relatively little direct impact on analysts’ compensation. These findings are derived from a study titled Inside the Black Box of Sell Side Financial Analysts, which presents results of a 23-question survey focused on analysts’ incentives, as well as 18 detailed follow-up interviews.
The study offers insights into an area that is understudied by researchers of the financial industry. While hundreds of articles have sought to predict financial analysts’ choices using models and statistics, few have peered into the “black box” of the organizational contexts and personal psychologies that drive analysts’ decision-making.
The study’s findings also serve as a potential commentary on the Securities and Exchange Commission’s Regulation Fair Disclosure (Reg FD), launched in 2000 to limit selective disclosure of market-moving information to analysts or other key stakeholders prior to the general public.
But respondents noted that companies’ public conference calls discussing quarterly earnings are often followed by one-on-one conversations between analysts and chief financial officers. According to one analyst: “We’re almost back to where we were pre-Reg FD, but not quite because that backroom chatter is shut down. It’s just now it’s not in the backroom; it’s everywhere.”
More insights from the survey include:
- Approximately one quarter of analysts feel pressured by supervisors to lower their earnings forecasts, presumably because outperforming forecasts pleases investors.
- Approximately one quarter of analysts feel pressured by supervisors to raise their recommendations, presumably because it is easier to get their clients to buy rather than to sell the stocks they recommend.
- While only 35 percent of analysts said the profitability of their stock recommendations were a very important determinant of their compensation, 67 percent cited “standing in analyst rankings or broker votes” as central to their compensation.
- Only half of analysts considered primary research “very useful” in forecasting earnings or recommending stocks.
The study was conducted by Lawrence D. Brown, Seymour Wolfbein Distinguished Professor of Accounting at Temple University’s Fox School of Business; Andrew C. Call, Assistant Professor at Arizona State University’s W. P. Carey School of Business; Michael B. Clement, Professor at the University of Texas at Austin’s McCombs School of Business; and Nathan Y. Sharp, Assistant Professor at Texas A&M University’s Mays Business School. The full text is available on Social Science Research Network at http://ssrn.com/abstract=2228373.