Research seminars

ESSEC/HEC - Why Bad Numbers Can Be Hard to Tame: The Effects of Rankings in Higher Education

Accounting & Management Control

Speaker: Wendy ESPELAND
Northwestern University Evanston

24 March 2015 - HEC Champerret - Amphi Marco Polo - From 2:00 pm to 4:00 pm

Rankings express the status of universities as a specific number on a shared metric. This commensuration of quality renders status precise and relative. Each university now bears a specific and public relationship to every other school; is bound to each other in an explicit status system; and the ascent of one requires the descent of others. Rankings make obvious a university’s standing and trajectory, with numbers that circulate easily, are enveloped in the authority of science, and seem easy to interpret. Rankings offer a new form of scrutiny, one accessible to outsiders. Because we are reflective, reflexive beings measures are, in the language of social science, reactive. And rankings have been powerfully reactive. People scrutinize them, invest in them, and act differently because of them, transforming the institutions that rankings evaluate, producing consequences no one anticipated. As highly visible symbols of quality, rankings have changed how educators make decisions, allocate resources, and think about themselves and others. For these reasons, they are hard to tame.

A Sociology of Algorithms: High-Frequency Trading and the Shaping of Markets

Accounting & Management Control

Speaker: Donald MACKENZIE
University of Edinburgh

20 March 2015 - HEC Campus, room T017 - From 2:00 pm to 4:00 pm

Computer algorithms are playing an ever more important role in financial markets. This paper proposes and exemplifies a sociology of algorithms that is (i) historical, in that it demonstrates path-dependence in the development of automated markets; (ii) ecological (in Abbott’s sense), in that it shows how automated high-frequency trading (HFT) is both itself an ecology and also is shaped by other linked ecologies (especially those of trading venues and of regulation); and (iii) “Zelizerian,” in that it highlights the importance of boundary work, especially of efforts to distinguish between (in effect) “good” and “bad” actors and algorithms. Empirically, the paper draws on interviews with 43 practitioners of HFT, and on a wider historical-sociology study (including interviews with a further 44 people) of the development of trading venues. The paper investigates the practices of HFT and analyses (in historical, ecological, and “Zelizerian” terms) how these differ in three different contexts (two types of share trading and foreign exchange).

Does corporate governance make financial reports better, or just better for equity investors?

Accounting & Management Control

Speaker: Dan SEGAL
IDC Herzliya

13 March 2015 - HEC Campus, room T022 - From 2:00 pm to 4:00 pm

Financial reports should provide useful information to shareholders and creditors. Directors, however, normally have fiduciary duties toward equity holders, not creditors. We examine whether this slant in governance affects the likelihood firms will bias financial reports and circumvent debt covenants that protect creditors. We use a regime change in fiduciary duties that required directors in Delaware firms to protect creditors’ interests, as a research setting. We test the effect of fiduciary duty on a specific action to circumvent debt covenants, namely, the issuance of structured debt that can be reported as equity in financial reports, and we examine the general propensity of managers to avoid covenant violation using the distribution of covenant slack. Results of both tests show that firms are less likely to circumvent covenant restrictions when directors have fiduciary duties toward creditors. We also show that board quality lowers the probability that firms would bias reports and avoid covenants only when directors have a legal fiduciary duty toward creditors. Collectively, our results suggest firms are more likely to bias their financial reports and circumvent debt covenants when corporate governance is designed to protect equity holders and not creditors.

Do Client Characteristics Really Drive the Big N Audit Quality Effect?

Accounting & Management Control

Speaker: Mark DeFond
USC Marshall School of Business

10 February 2015 - ESSEC La Défense - From 2:30 pm to 4:30 pm

Audit Partner Performance: A Network Perspective

Accounting & Management Control

Speaker: Irem TUNA

12 December 2014 - Room T017 - From 2:00 pm to 4:00 pm

We provide a partner level analysis on the association between the social capital of an audit partner and their audit quality and fees. We use social capital theory and techniques developed in social network analysis to measure the audit partner’s level of connectedness and investigate whether these connections provide information advantages and enhance their social influence. Both of these potential network benefits we argue support the audit partner attributes - personal capabilities and level of independence - necessary to provide high quality audits. Using a sample of French listed firms we construct a network consisting of 4,159 board directors and 734 audit partners, mapping the connections between audit partners and directors, between directors and between audit partners, we find that better-connected (better-networked) audit partners provide higher quality audits and are associated with higher audit fees. The level of an audit partner’s social capital decreases if they have higher levels of tenure and greater levels of economic bonding with their clients.

The Higher Moments of Future Earnings

Accounting & Management Control

Speaker: Woo-Jin CHANG

21 November 2014 - Room T017 - From 2:00 pm to 4:00 pm

We use quantile regressions to evaluate the higher moments of future earnings. First, we evaluate the in-sample relations between current firm-level attributes and the moments of lead return on equity, ROE. We show that: (1) as current ROE increases lead ROE tends to increase, become more disperse, and more leptokurtic; (2) loss firms tend to have lower, more disperse, and more left-skewed lead ROE; (3) as accruals increase lead ROE tends to decrease and become more disperse; and, (4) firms with higher leverage and/or lower payout ratios tend to have greater dispersion in lead ROE. Second, we show that the in-sample relations generate reliable out-of- sample estimates of the standard deviation, skewness, and kurtosis of lead ROE. Moreover, when compared to estimates obtained via alternative approaches, our out-of-sample estimates: always contain incremental information content and are typically more reliable. Finally, we evaluate the relation between higher moments and market-based variables. These analyses demonstrate that equity prices are increasing in the variance and skewness of lead ROE but decreasing in the kurtosis of lead ROE. Credit spreads are increasing in the variance and kurtosis of lead return on assets, ROA, and decreasing in the skewness of lead ROA.

Flexibility in cash flow classification under IFRS: Determinants and consequences

Accounting & Management Control

Speaker: Bjorn Jorgensen

7 November 2014 - Room T004 - From 2:00 pm to 4:00 pm

While U.S. Generally Accepted Accounting Principles (U.S. GAAP) require interest paid, interest received, and dividends received to be classified as operating cash flows (OCF) within the statement of cash flows, International Financial Reporting Standards (IFRS) allow more flexibility in classifying these items within operating, investing, or financing activities. Studying IFRS-reporting firms in 13 European countries, we document firms' cash-flow classification choices vary, with about 76%, 60%, and 57% of our sample classifying interest paid, interest received, and dividends received, respectively, in OCF. Reported OCF under IFRS tends to exceed what would be reported under U.S. GAAP. We find the main determinants of OCF-enhancing classification choices are capital market incentives and other firm characteristics, including greater likelihood of financial distress, higher leverage and accessing equity markets more frequently. In analyzing the consequences of reporting flexibility, we find that the market's assessment of the persistence of operating cash flows and accruals varies with the firm's classification choices, and the results of certain OCF prediction models are sensitive to classification choices.

Annual Earnings Guidance and the Smoothing of Analysts’ Multi-Period Forecasts

Accounting & Management Control

Speaker: Joshua Ronen
Stern School of Business, New York University

12 September 2014 - Room T004 - From 2:00 pm to 4:00 pm

This paper examines the effect of management annual earnings guidance on the volatility of analysts’ multi-period earnings forecasts and on the volatility of subsequent reported earnings. We conjecture that, facing the pressure to meet and beat analysts’ forecasts and driven by the perceived capital market benefits of reporting a smooth earnings path, managers issue annual guidance to smooth the time-series path of analyst forecasts, a strategy we term “expectation smoothing.” Our empirical results support our conjecture: the volatility in analysts’ multi-period forecasts is smoothed by annual guidance, which in turn results in smoother actual earnings and higher likelihood of meeting and beating analyst forecasts. We provide evidence that issuing quarterly guidance does not affect the smoothness of analysts’ earnings expectations and that managers with longer horizons are more likely to issue annual guidance, consistent with the unique longer term effects of annual earnings guidance.

Financial Statement Comparability and the Efficiency of Acquisition Decisions

Accounting & Management Control

Speaker: Daniel W. Collins
University of Iowa

4 July 2014 - Room S210 - From 2:00 am to 4:00 am

This study examines whether acquirers make better acquisition decisions when target firms’ financial statements exhibit greater comparability with industry peer firms. We predict and find that acquirers’ make more profitable acquisition decisions when targets’ financial statements are more comparable—as evidenced by higher merger announcement returns, higher acquisition synergies, and better future operating performance. We also find that post-acquisition goodwill impairments and post-acquisition divestitures are less likely when target firms’ financial statements are more comparable. Finally, we find the effect of targets’ comparability is more pronounced when acquirers’ ex-ante information asymmetry is higher and when acquisitions are accomplished via tender offers to target shareholders. In total, our evidence suggests targets’ financial statement comparability helps acquirers make better acquisition-investment decisions and fosters more efficient capital allocation.

Performance Management in UK Higher Education Institutions: The Need for a Hybrid Approach

Accounting & Management Control

Speaker: Monica Franco-Santos
Cranfield University

20 June 2014 - Room X118 - From 2:00 am to 4:00 am

This research investigates current practice and trends in the institutional performance management of UK Higher Education Institutions (HEIs).
We adopt a holistic view of institutional performance management – we understand it as a package or a system of the formal and informal mechanisms an institution uses to facilitate the delivery of its mission. Individual performance development reviews or appraisals are just one small component of an institutional performance management system.
• Traditionally, HEIs have seen themselves as stewards of knowledge and education, focusing on long-term scholarly goals comprising the development of knowledge and the greater good for society at large.
• This view of HEIs is changing, as they are currently becoming more short-term and results/outputs driven due to the increased pressures to perform (e.g., international competition, reduced financial resources, research assessment frameworks, rankings).
• HEIs are intensifying their use of performance management mechanisms at all levels to facilitate the delivery of their goals.
• Nevertheless, we know little about the type of performance management mechanisms used in UK HEIs and the influence these mechanisms have on the wellbeing of staff and the performance of HEIs as a whole. This research was designed to address these gaps in our knowledge.
Research methods
• We used case studies to look at the performance management mechanisms in six universities. Three Russell Group and three post-1992 universities were involved and the research focused on both academic and administrative staff. This included interviewing 110 key informants from across institutions, from vice chancellors to front line staff in central services and in four schools/faculties (Education, Math, Business & Management, and Art).
• We also surveyed staff working in 162 UK HEIs through an online survey obtaining over 1000 usable responses. The results from the survey were combined with other publicly available data, from the National Student Satisfaction survey, the last Research Assessment Exercise, the Higher Education Statistics Agency (HESA), and the Universities and College Union’s (UCU) academic staff wellbeing survey.
• The performance management mechanisms UK HEIs use can be classified into two categories: stewardship-based and agency-based.
• Stewardship approaches focus on long-term outcomes through people’s knowledge and values, autonomy and shared-leadership within a high trust environment.
• Agency approaches focus on short-term results or outputs through greater monitoring and control.
• Most UK HEIs adopt a combination of stewardship and agency performance management mechanisms but most institutions are moving towards an increased adoption and greater use of agency mechanisms.
• Institutions with a mission that is focused on long-term and highly complex goals, which are difficult or very costly to measure (e.g., research excellence, contribution to society) are likely to benefit from relying on stewardship performance management mechanisms to convey their mission.
• Institutions with a mission that is focused on short-term and low complex goals, which are often easy or economical to measure (e.g., cost-reduction, surplus maximization) are likely to benefit from relying on agency performance management mechanisms to convey their mission.
• Institutions with a diverse mission including goals with various degrees of complexity and time orientation will benefit from relying on a hybrid performance management approach.
• Most people in professional, administrative and support roles find agency performance management mechanisms helpful as they provide greater clarity and focus.
• Most people in academic roles find agency performance management mechanisms such as individual performance reviews as unhelpful and dysfunctional.
• Institutions’ use of stewardship mechanisms is associated with higher levels of staff wellbeing as well as higher student satisfaction.
• Institutions’ use of agency mechanisms is associated with lower levels of staff wellbeing as well as lower levels of institutional research excellence.
• High staff wellbeing is associated with higher HEI’s research excellence, students’ satisfaction, students’ employability, and financial results.
The report suggests that there is not a ‘once size fits all’ performance management approach for all institution and for all staff. Institutions need to adopt and use those performance management mechanisms that are ‘fit for purpose’. The current missions of HEIs are highly diverse comprising long-term outcomes as well as short-term results/outputs. The roles in their own context required for delivering the different HEIs missions require the co-existence of both stewardship and agency mechanisms. Thus the challenge for UK HEIs is to craft a hybrid performance management approach that will allow them to deliver across the breadth of their mission.

Trust and Corporate Social Responsibility:Evidence from the 2008-2009 Financial Crisis

Accounting & Management Control

Speaker: Ane TAMAYO
LES London School of Economic

6 June 2014 - From 2:00 am to 4:00 am

We study whether the intensity of a firm’s corporate social responsibility (CSR) activities affects valuation during the 2008-2009 financial crisis. We find that high-CSR firms experience significantly higher crisis-period stock returns than low-CSR firms. Further, while in the booming-economy years leading up to the crisis high-CSR firms underperformed low-CSR firms, the difference in return performance between the high and low-CSR firms disappears in the post-crisis period, suggesting that either CSR activities are now fairly priced by investors or that, in recovering economic times, the benefits of CSR are commensurate with the costs. Overall, our evidence is consistent with a theme in which the perceived value of CSR investment depends upon the prevailing economic conditions and investors’ assessment of risk. Firms’ investments in, and positive attitudes toward, a broad set of stakeholders are not viewed as value-enhancing by investors when firms are delivering high performance in aggregate. However, when firms are subject to a shock that arguably threatens their very own survival, CSR activities are viewed positively by investors as a signal that (i) the company can be trusted as not being fraudulent, and (ii) stakeholders will trust and support the company throughout the crisis as a reward for its broader social objectives.

Explaining the changing properties of GAAP earnings: Insights from comparing GAAP to NIPA earnings

Accounting & Management Control

Speaker: Ilia D. Dichev
Goizueta Business School Emory University

16 May 2014 - Room T304 - From 2:00 am to 4:00 am

The U.S. Bureau of Economic Analysis produces a measure of aggregate corporate profits (NIPA earnings), which is an integral component of the accounting for GDP. The key advantage of NIPA earnings is rigorous determination with no earnings management and no political meddling; other advantages include double-checks from independent sources and consistent rules over time. Thus, NIPA earnings provide a useful benchmark for corporate profitability, especially in examining the reasons for the great temporal increase in volatility and decrease in persistence of GAAP earnings. Using a sample of aggregate GAAP and NIPA earnings over 1950-2010, the main findings are as follows. GAAP and NIPA earnings are in remarkable sync in the early years, with similar means and standard deviations, and with earnings changes correlating at 0.89 during 1950-1980. This close relation substantially deteriorates, however, during the second half of the sample, 1981-2010. While the behavior of NIPA earnings remains roughly the same, the volatility of GAAP earnings increases ten-fold, and the correlation between GAAP and NIPA earnings changes falls to 0.35. Additional tests reveal that the increase in the volatility of GAAP earnings is mostly due to rapid earnings reversals, and especially the effect of large transient items during economic downturns. The frequency and severity of such downturns, however, are roughly the same across the two examined periods. Overall, this evidence points to little change in economic fundamentals over time, and suggests that changing GAAP rules and perhaps changing managerial behavior are significant factors in the changing properties of GAAP earnings.

Accounting and Taxation: Conjoined Twins or Separate Siblings?

Accounting & Management Control

Speaker: Prem SIKKA
University of Essex

28 March 2014 - Room T004 - From 2:00 am to 4:00 am

Accounting technologies play a key role in the estimation of taxable corporate profits. In the neoliberal world marked by mobility of capital and competition, they are also mobilised by transnational corporations to shift profits to low/no tax jurisdictions and erode the tax base of a country. Transnational corporations use transfer pricing, royalty and management fees to shift profits and avoid taxes. The loss of tax revenues is a source of crisis for governments as without this they cannot meet social mandates. The efforts to check erosion of tax base and shifting of profits have become a major issue in international politics. Historically, accounting and taxation had a closer relationship as both shared elements of historical costs and realisation principle. However, in recent years the trajectories of the two have diverged. With their emphasis on economic values, valuation models and the assumed needs of capital markets, international financial reporting standards (IFRSs) have diluted the usefulness of conventional accounting numbers for taxation purposes. The pressures to arrest profit shifting have resulted in two broad proposals for reform. The first advanced by the Organisation for Economic Co-operation and Development (OECD) proposes to primarily tweak transfer pricing practices. This paper argues that this cannot address the fault lines of corporate tax avoidance. The second approach under the general heading of ‘unitary taxation’ advocates a fundamental reform of the way taxable profits are ascertained. It holds out possibilities of negating arbitrary shifting of profits. However, it too relies on accounting logics. As traditional accounting logics have been contaminated by IFRSs, basic elements of accounting for the purposes of calculating taxable profits and tax liabilities will probably need to be redefined.

Geographic Proximity and Analyst Coverage Decisions: Evidence from IPOs

Accounting & Management Control

Speaker: Patricia O'BRIEN
Geographic Proximity and Analyst Coverage Decisions: Evidence from IPOs , University of Waterloo

7 March 2014 - Room at HEC Champerret - From 2:30 am to 4:00 am

We study how geographic proximity influences analysts’ decisions to cover firms, and how
local analyst coverage influences firm visibility, using hand-collected data on locations of 4,986 analysts covering 3,108 U.S. firms that went public during 1996 – 2009. We find analysts 80% more likely to cover local firms than non-local ones. Local non-underwriter analysts initiate coverage one to three weeks earlier than distant ones. These effects are more prominent for smaller, less visible firms. Because early analyst coverage helps attract other analysts and new institutions to newly public firms, less visible firms may use local coverage as a stepping-stone to increased visibility

Geographic Proximity and Analyst Coverage Decisions: Evidence from IPOs

Accounting & Management Control

Speaker: Patricia O'BRIEN
University of Waterloo

7 March 2014 - Room 281 at HEC Champerret - From 2:00 am to 4:00 am

We study how geographic proximity influences analysts’ decisions to cover firms, and how
local analyst coverage influences firm visibility, using hand-collected data on locations of 4,986 analysts covering 3,108 U.S. firms that went public during 1996 – 2009. We find analysts 80% more likely to cover local firms than non-local ones. Local non-underwriter analysts initiate coverage one to three weeks earlier than distant ones. These effects are more prominent for smaller, less visible firms. Because early analyst coverage helps attract other analysts and new institutions to newly public firms, less visible firms may use local coverage as a stepping-stone to increased visibility

Contact Us  

Accounting & Management Control Department

Campus HEC Paris
1, rue de la Libération
78351 Jouy-en-Josas cedex

Featured Faculty  


Accounting and Management Control

Consult résumé