Booth Accounting Conference Attracts Pre-Eminent Academics
June 26, 2015
Fifty years ago, papers by Booth professors put the school on the map as a center for serious academic research in accounting. In May, more than 100 accounting experts from across the globe spent three days in Chicago discussing financial reporting requirements, the stability of the financial system, and other accounting concerns at the 50th annual conference of the Journal of Accounting Research (JAR). Not surprisingly, this year’s proceedings were infused by a sense of history.
In 1963, JAR published its first issue, becoming the first private journal focused on accounting research. The impact was great. Before JAR, there was little rigorous research in accounting, and best practices in research were often a matter of opinion. The genesis of the annual conference, held for the first time in 1966, was similar. In the early 1960s, most accounting research was prescriptive, with little use of data. The goal of the annual conference was to foster empirical research in accounting, and for the first ten years that was its focus.
“Other journals were sponsored by membership organizations and were limited to those concerns,” Douglas Skinner, Eric J. Gleacher Distinguished Service Professor of Accounting and deputy dean for faculty, said in an interview. “Further, the JAR conference was the first to call for empirical testing of accounting hypotheses, the need to look for evidence as well as authorities.”
When JAR launched, it proclaimed its intention to be “neither distracted by the need to deal with non-research matters nor subject to limitations of research interest,” according to a foreword written by then-dean George P. Shultz, and London School of Economics director Sir Sydney Caine.
It was no accident that JAR came out of the University of Chicago, where the creation and dissemination of ideas has been a core value, and porous boundaries promoted the cross-fertilization of ideas. Skinner, a JAR editor, noted that Booth accounting faculty saw opportunities to use the disciplines such as finance, management, behavioral science, and statistics, as tools that could be directed at accounting research. Early on, Booth had developed a strong reputation in managerial accounting, a discipline that merges accounting with management knowledge to inform managerial decision-making.
James O. McKinsey, a onetime accounting professor at Booth, wrote the first textbook in management accounting in 1924 before going on to launch the global consulting firm that bears his name
JAR established its influence on the accounting profession early on when it published Stanford University emeritus professor William H. Beaver’s 1966 paper “Financial Ratios as Predictors of Failure.” That paper, written when Beaver was an assistant professor at the University of Chicago, was the first study of whether financial ratios such as leverage and return on assets predict whether companies were at risk of default. In addition to spurring a large research literature internationally, it was the precursor to the sophisticated credit default models that would be used by rating agencies such as Moody’s and Standard and Poor’s.
In 1968, Ray Ball, Sidney Davidson Distinguished Service Professor of Accounting, and University of Western Australia emeritus professor Philip Brown published “An Empirical Evaluation of Accounting Numbers,” the first paper to study the impact of earnings on share prices. Still widely cited, it is credited with revolutionizing research on how accounting information is used in capital markets, and with reshaping the direction of accounting research. Prior to the paper, accounting researchers compared existing thought—such as the ability of capital markets to quickly and efficiently react to new information—to theoretical models. But after the paper’s publication, researchers were more likely to check a theory’s predictions against observed behavior.
Since its inception in the 1960s, JAR has continued to publish path-breaking research on a broad range of accounting topics that span financial accounting, managerial accounting, auditing, corporate governance, and corporate disclosure practices. And JAR continues to encourage research that uses a large spectrum of methods, including empirical, analytical, and experimental. Indeed, the goal of the 2015 conference was to encourage accounting researchers to continue to push the boundaries. For example, professor John List from the university’s economics department gave a talk on how field experiments—now widely used in economics—could be used to address accounting questions.
The research papers presented at this year’s conference explored a number of critical topics.
Christian Leuz, Joseph Sondheimer Professor of International Economics, Finance and Accounting, and Peter Wysocki of the University of Miami, presented a paper that discussed the large literature on accounting and disclosure regulation, drawing on evidence from the US as well as internationally.
A paper by Haresh Sapra, professor of accounting, and Chandra Kanodia of the University of Minnesota, focused on how the accounting measurement and reporting process affects real decisions made by firms and other actors in the economy, an important issue for policy makers.
The conference closed with a paper by Hans B. Christensen, Valeri Nikolaev, and Regina Wittenberg Moerman, all associate professors of accounting, which examines how accounting can help facilitate transactions between lenders and borrowers, particularly the way lending agreements are structured and how accounting numbers are used in those agreements.
JAR, which publishes five times a year, remains a forum for innovative research that uses a variety of empirical and qualitative methods, Ball said. “At the time it was conceived, JAR was considered to be a huge gamble, because no one was sure that there would be sufficient good research papers by people who would prefer it,” he said. “But JAR continues to be an important outlet for accounting research.”—Marty Daks