Master in Professional Accounting Admissions Blog

Insider Information for Prospective Texas McCombs MPA Students

Tag: accounting research

Three Steps to Better Investing

Advice on selecting mutual funds, listening to CEOs, and considering climate change, courtesy of Texas McCombs research, including our very own accounting professor Jeff Hales.

Better Investing
If you’re looking to make better investment decisions, it’s a good idea to listen to the experts. And who’s more of an expert than a business researcher who studies investing and the stock market.

With that in mind, consider applying these practical research findings from Texas McCombs to your investments:

Seek low taxes on mutual funds. A study by finance professor Clemens Sialm showed that funds with lower tax burdens had higher-than-average returns. That’s why Sialm urges fund shoppers to look beyond past performance and check out taxes as well. “You have to dig deeper in the prospectus, but the information is there,” he says. Research websites such as Morningstar can help. They list the taxable distributions along with the performance of a fund.

Bet on big-talking CEOs. When executives use extreme language on quarterly earnings calls — words such as “astonishing,” “incredible,” and “exceptional” — it can benefit capital markets, according to research from accounting professor Jeff Hales. For executives who speak in superlatives, their words can produce a stronger reaction in stock prices, increased trading volume, and adjusted analyst forecasts. CEO language can even foreshadow a company’s future earnings.

Read the entire article on Big Ideas.

Making an Impact: Professor Steven Kachelmeier

The Department of Accounting’s research is making headlines. Take Steven Kachelmeier’s recent study with Laura Wang (UT PhD ’14) and Michael Williamson (former UT faculty member). Their research shows how incentives and rest can combine to improve creativity. Find out more about their paper, “Incentivizing the Creative Process: From Initial Quantity to Eventual Creativity” (The Accounting Review, March 2019) below.

HOW DO YOU COME UP WITH YOUR RESEARCH IDEAS?
In a sense, coming up with new research ideas is one part preparation, in terms of becoming familiar with the literature, and one part inspiration, in terms of identifying important questions that have been neglected in the literature. In the particular case of my research on creativity, my coauthors and I were aware of decades of management accounting research on how different kinds of incentives affect performance on routine, straightforward tasks, but there was essentially nothing in the accounting literature on how incentives affect the more open-ended, creative tasks that characterize contemporary business. We sought ways to fill that gap.

HOW DID THE IDEA FOR THIS STUDY COME TO YOU?
Our latest study of creativity continues a much longer program of study that dates back to a 2008 article in the Journal of Accounting Research I coauthored with Bernhard Reichert and Michael Williamson. In both that study and in a subsequent follow-up study (again with Michael) published in a 2010 issue of The Accounting Review, we found that the right kind of monetary incentives can result in a greater quantity of ideas without harming creativity. But at the same time, we did not find evidence that incentives can actually improve creativity. In the research that led to our 2019 article, Laura Wang, Michael, and I explored the reasoning that incentives might not improve creativity right away, but could possibly improve creativity after some rest. Sure enough, we found that a rest period as long as ten days or as little as 20 minutes between experimental sessions helped participants provided with monetary incentives generate not just a greater quantity of ideas but also more creative ideas.

WHAT WAS IT LIKE WORKING WITH LAURA AND MICHAEL?
Laura and Michael are great, not only professionally, but also at a personal level. Research is much more enjoyable when research colleagues are also friends. Laura, Michael, and I developed an effective and efficient working relationship by identifying the things each of us does best, while also capturing insights from joint conversations to plan our next steps. We achieved a joint outcome that would have been very difficult for any of us to have produced individually.

TELL US WHAT THIS PARTICULAR STUDY IS ABOUT.
Is creativity something that results from hard work or from pure inspiration? Our study predicts and finds that both elements are necessary. That is, monetary incentives are necessary to motivate people to come up with lots of ideas, even if those ideas are not particularly creative right away. Then, after taking a break from the task, those who are motivated by incentives to work hard initially become more creative after they return. As a practical example, professionals at successful companies like Google and Indeed clearly work hard. But these companies also provide ample opportunities for breaks from hard work that allow creative “incubation” to take place.

WHAT DOES IT MEAN TO CONDUCT AN “EXPERIMENT” IN ACCOUNTING?
Experimentation tests whether something matters by trying it both ways and observing the difference. For example, as every elementary school student has observed, plants grow better with ample watering (one experimental condition) than with little watering (another condition, often referred to as the “control” condition). Accounting experiments follow the same principle. Specifically, in our latest experiment, we provide monetary incentives that depend on the quantity of “rebus puzzle” ideas our participants produce in one condition, while providing fixed pay independent of production in another, control condition. We then ask separate panels of creativity raters to evaluate the creativity of the rebus puzzles our participants produce, both at the time of our initial experiment and in a second-stage task in which we ask the same participants to generate additional rebus puzzles either ten days later (in one study) or as little as 20 minutes later (in a second study). Just as the elementary school student finds that plants grow better with additional water, we find that participants’ creativity ratings are higher when they operate under monetary incentives that depend on the number of ideas they produce. Importantly, however, this difference arises only after the rest period, indicating that both incentives to work hard and some time away from the task are necessary for creativity.

WHO ARE THE “PARTICIPANTS” IN AN EXPERIMENT?
Different kinds of participants are needed for different kinds of research questions. In the particular case of this creativity research, the question did not require any particular experience or expertise, so we recruited undergraduate students as compensated volunteers. Other research questions require specific expertise, such that researchers might seek out professionals such as auditors, financial analysts, or attorneys. As one might imagine, these more experienced participants are more difficult to access, but they provide a valuable service by helping academic researchers investigate important questions that bear directly on their real-life challenges.

DO YOU EVER NEED TO RERUN AN EXPERIMENT?
Yes, absolutely! An experiment can simply fail, in which case one goes back to the drawing board and tries again. More often, an experiment does not fail, but it leaves some important questions unanswered. In our case, we found a statistically significant effect of incentives on creativity in one study after bringing participants back ten days after they participated in the first-stage experiment. This finding led us (and our journal reviewers) to wonder if it was necessary to wait a full ten days, or if a much shorter rest period could achieve the same effect. That is why we reran a different variation of our experiment with a rest period of just 20 minutes, which produced a similar finding.

YOUR LATEST ARTICLE HAS BEEN CITED MANY TIMES IN THE POPULAR PRESS. WHY DO YOU THINK THAT IS?
Who is not interested in creativity? Although our accounting backgrounds added some perspective for looking at creativity through a management accountant’s lens, a broader interest in creativity is part of everyday life for nearly everyone. Simply put, lots of people are interested in ways to become more creative, so our attempt to answer that question generated curiosity well beyond the boundaries of accounting.

Read more on Steven’s latest research here.

Texas McCombs MPA Ranked No. 1 for 11th Straight Year

Texas McCombs has once again taken first place in Public Accounting Report’s (PAR) undergraduate, master’s, and doctoral rankings. PAR ranks U.S. academic accounting institutions every year by surveying nearly 1,000 accounting faculty members across U.S. colleges and universities.

Medium_Rankings No.1_PAR_2019

Master’s Ranking: No. 1
Texas McCombs has led the nation at the master’s level (Master in Professional Accounting) in 25 out of the past 26 surveys. This is also the 11th straight year the MPA program has clinched the top spot. BYU jumped ahead of Illinois to take second place this year, leaving Illinois in third.

Explore the undergraduate, graduate, and PhD rankings, as well as further accolades, on the Texas McCombs News blog.

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One reason the Department of Accounting and its programs continue to rank so high is due to our faculty (along with their research and curriculum). Read on to learn more about recent research and curriculum from our Department’s faculty.

Move Donors to the Head of the Transplant Line?
Accounting research demonstrates how a simple rule change could boost the number of usable organ donations — and save lives. Based on the research of Ronghuo Zheng.

zhengAwaiting an organ transplant for yourself or a loved one means delays that can be agonizing — and costly. Every day, 20 patients on U.S. waiting lists die before an organ becomes available, according to the U.S. Department of Health and Human Services.

In a sense, it’s a classic accounting problem of supply and demand, says Ronghuo Zheng, assistant professor of accounting at Texas McCombs. While 113,759 U.S. patients languished on lists last year, only 17,554 donors, living and deceased, provided organs.

How can the U.S. expand its supply? In new research, Zheng finds that with one important modification to a Nobel laureate’s proposed rule, it could swell the pool of donors while ensuring that patients get usable organs.

The proposal, known as the donor priority rule, would hold out a carrot to potential registered donors. If one of them gets sick themselves and needs a transplant, they’ll be able to cut in line, taking priority over those who aren’t registered.

>> Continue reading on Big Ideas

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Patrick Badolato, Senior Lecturer at Texas McCombs, recently posted an article on LinkedIn regarding his Financial Statement Analysis class and how it correlates to real world companies. 

An Update on Uber, Financial Accounting, Financial Statement Analysis and Cash Flow Bros
In addition to the Uber commentary at the end, I offer this post as a quick update for any interested former students or colleagues (I hope you are doing well!) and as some quick thoughts for anyone who just started or may take any of these classes at the University of Texas’s McCombs School of Business.

BadolatoThis Fall our Department asked me to teach the four classes of the (introductory) Financial Accounting class to our Full-time MBAs in addition to six sections of Financial Statement Analysis (across 5 of our graduate programs). While this uniquely high course load will be an incredible challenge, I am absolutely excited to have this opportunity, which began this past week.

As my former students and colleagues know, the course I have focused on and developed over the past many years is not introductory accounting, but Financial Statement Analysis (FSA). I have had the pleasure of teaching this upper-level class in all of the McCombs graduate programs that include accounting classes. In this class we have covered Starbucks, JCPenney, Nordstrom, Apple, Ford, Tesla, Amazon, Netflix, Walmart, Whole Foods, Facebook, Priceline, Southwest, Coca-Cola, Disney, ToysRUs, Theranos, Groupon, Square, Blue Apron, GoPro, Yeti, Exxon, Beyond Meat, Lyft, etc. After taking FSA, students note that they appreciate how the class helps them: (1) see how and why valuation and analysis are more than mindless mechanical processes; (2) understand the importance of stepping back and understanding the business; and (3) offers the opportunity to see that there is a ton of information in financial reports, once we gain comfort working past the fluff and filler and focus on holistically using the financial statements and other information.

Learn more about the FSA class by reading Patrick Badolato’s full article

Latest Accounting Research: More Corporate Cash Flows into the U.S. than Out

Based on the research of Texas McCombs Accounting Professor Lillian Mills: Despite popular belief, all U.S. firms haven’t been sending most of their earnings abroad to dodge taxes, finds a study using IRS data.

BigIdeas1In recent years, one of the major exports of U.S. businesses has been cash. Several reports, such as one by Bloomberg News, have tallied more than $2 trillion of earnings stashed in foreign subsidiaries in countries with lower corporate tax rates.

So it might come as a surprise that over a decade, American businesses brought more money into the country than they shipped out. That’s one conclusion from new research by Lillian Mills, accounting professor at Texas McCombs, and two recent McCombs doctoral accounting graduates, Lisa De Simone and Bridget Stomberg.

Analyzing corporate returns filed with the Internal Revenue Service, the researchers found that U.S. multinationals imported $1 trillion from offshore affiliates, while they exported $830 million. Close to two-thirds of all returns showed more money coming in than going out.

Those businesses tended to be older and larger ones, which built U.S. factories and headquarters decades ago.

Read the full article in Big Ideas: Research and insights from Texas McCombs here.