Presentation Slides - American Accounting Association

Creativity & Innovation in Research
Personal Observations for Junior Scholars
Presentation by
Greg Waymire
AAA International Section Meeting
Savannah, GA
February 22, 2013
Goal for Today
Goal: Offer some (hopefully) useful thoughts on the
main problem faced by young scholars, which is
developing a successful and fulfilling career that will
span decades
Perspective: My personal experience over the course
of nearly 35 years since I first entered a PhD program
Primary Takeaway: Creativity and differentiation are
the keys to long-run success & happiness
Organization of Talk
Back to the Future
Why do we do research?
Imagination and creativity in research
Going off the deep end to discover the passion
and life of a scholar
5. Parting thoughts
Back to the Future
A Survey of 1955 Accounting Review
Littleton, A. C., “The Logic of Accounts.”
Trueblood, Robert and W. W. Cooper, “Research and Practice
in Statistical Applications to Accounting, Auditing, and
Management Control.”
White, John Arch (AAA Director of Research), “Lists of
Research Projects in Accounting: 1953-1954.”
De Roover, Raymond, “New Perspectives on the History of
Horngren, Charles, “Security Analysts and the Price Level.”
(Yes Virginia, even the most famous of all textbook authors once wrote a
Fast Forward
to 1968
Takeaways from the State of Accounting
Research in the mid-1950s
Would have been nearly impossible to see the magnitude
of change coming less than 15 years later. (Horngren’s thesis
was ahead of its time.)
Change in scholarly research is discontinuous and rapid
when it comes. (Thomas Kuhn)
Specific nature of change cannot be predicted.
Thus, the issue becomes:
How can you survive in response to change, uncertainty,
and the new opportunities created?
Why do we conduct research?
1) Private value – Provide understanding (&
income) for ourselves.
2) Social Value - Provide understanding for
3) Passion – Explore issues because of inherent
curiosity (or perhaps because of obsessivecompulsive disorder).
Competitive Advantage Should be Defined by
Distinctive Agendas & Enduring Issues
1980 - 1993
1990 - 2004
2002 - Present
Earnings Forecast
Historical Analysis of PreSEC U.S. Financial
Foundations of
Economics of
Voluntary Disclosure
Evolution of Financial
Reporting Choices in the
Absence of Regulation
Why do basic features
of accounting take the
form they do?
Unique handcollected data on
disclosure choices
Knowledge of history of
accounting institutional
evolution and historical
data sources
Knowledge of
accounting history & a
willingness to explore
areas out of my
comfort zone.
Source of
My initial foray out of the mainstream
Papers with Kumar Sivakumar in early 1990s on earnings
disclosure and stock prices in 1905-1910 period
Motivation: Two post-WW II regularities
Income & price changes positively associated (Ball & Brown)
Voluntary disclosure favored good news (Patell & Penman)
Thought experiment: Would these regularities
replicate in an unregulated setting?
Why 1905-1910?
NYSE allowed “unlisted” trading pre-1910. No listing agreements
stipulating annual financial statement disclosure.
What did I learn by doing research that looked at
settings other than today’s U.S?
1) Context matters! (Get close to the data and institutional details!)
a) Time consuming, but you learn a lot.
b) The value of a small sample
2) Uncharted territory is fun to explore - new data.
a) Got closer to my (naïve?) vision of what a scholar does.
3) It was easier to publish this work than it was my earlier
“mainstream” work!!
What is the value of international or
historical research?
Fuel/Fodder for “thought experiments”
that fuel the IMAGINATION and allow
one to see counterfactuals based on
worlds that differ from our own
Imagination & Creativity in Research
• Research begins by “telling a story” or doing a “thought
• “Few things should be more interesting to a civilized economic
theorist than the opportunity to observe the interplay between
social institutions and economic behavior over time and place.”
(Nobel Laureate Robert Solow)
• Consequences:
– Better informed as to context.
– Can better envision the counterfactual and deconstruct
modern institutions. (“Some see things as they are and say
why while others dream things that never were and say why
not.” G. B. Shaw)
Seeing the Counterfactual
‘07 Annual Report of General Electric
R&D fully expensed
And, intangibles written down to $1!
Conservatism in asset valuation not restricted to intangibles
From the Auditor’s Opinion
So, what is learned from GE in 1907?
• Fact: GE was one of the most highly valued common
equities among early 20th century NYSE industrials. This
implies that high stock valuations do not require
“representational faithfulness” in financial statements.
• Lack of mandatory disclosure and required audits
doesn’t imply zero disclosure or financial reports
subject to overstatement
Going off the Deep End
• Discovering true passion for Research
• I spent two years of my life past the age of 45
where I posed the same question the moment my
feet hit the floor every morning: Why do humans
record exchange transactions?
How did I come to consider this question?
• 2002 AAA-FASB Conference
– Fair Value Accounting for Revenue – Why would this have economic value
beyond historical cost? Is this consistent with the historical evolution of
• Is it due to more “current” price data based on hypothetical transactions?
• What information about the decision to trade is embedded in the
record created at the time of exchange? (Accounting records reflect
transaction price AND endogenous choice to consummate exchange.)
• Evolution – What do other disciplines have to say?
– Anthropology, economics, political science, sociology?
– Cognitive neuroscience, evolutionary biology?
• Path
– Formulate issues based on historical knowledge & readings from other
– Develop hypotheses & gather evidence.
I learned that following your interests
can lead one to some surprising places
Some questions that I never thought I would
consider when I got my PhD in 1984
And now for something completely
E. coli bacterium &
Homo accounticus
E coli has memory-like functions
E. Coli responds to environmental signals
about the presence of food resources and
toxins. The organism moves away from
toxins and towards food resources. In this
sense, E. Coli has memory-like functions
that process environmental information
and guide behavior (Allmen 2000,
Evolving Brains).
The ability to remember past
interactions within one’s environment
and adjust behavior within that
environment is crucial to survival.
Accounting is a feedback mechanism
that allows people to alter behavior in
an adaptive fashion. Do we routinely do
accounting in our brains?
Homo accounticus is a primate possessing…
A large brain “selected by” Nature for evaluating the
consequences of, and communicating with others about,
social exchange, and
A complex culture characterized by extensive
impersonal exchange, complex division of labor, & a
network of institutions that support economic
One of these institutions is called “accounting.”
What can homo accounticus do?
Quantify & calculate
Compare & evaluate
All co-evolved as part of
Remember & learn
Strategize & simulate
Are we homo accounticus?
Neuronal Activation in the Ventral Tegmental Cortex Reported by Fiorillo et al. (2003)
Based on Single Cell Recording for Two Macaque Monkeys in Response to Probabilistic
Signals about Forthcoming Rewards
Sale Made
Cash Collected
Firing at actual receipt of
reward when
probability low
Sale Made
Cash Collected
Firing at signal of future
reward when
probability high
Parting Thoughts In Two Areas
1) Developing specific projects
2) More general suggestions on long-term
scholarly development
Developing Specific Projects
Discipline is critical. Think first, compute second.
Write your introduction early and often.
Make sure you get the right data for the job you intend to do.
Carefully define the scope of the project. Corollary is to not subdivide the land before you know whether anyone will buy any of
the lots you’ll be selling.
5) Avoid a checklist mentality in dealing with referee reports. Ask what
is driving the comments and fix them, which isn’t always what the
referee suggests you do
6) Be patient with yourself and don’t get discouraged.
General Suggestions: Long-Term Development
1) Your opportunities will be determined by the quality of your work.
Focus on the substance of what you’re doing.
2) Product differentiation “sells” research and sustains long-run
success. Distinctiveness is critical to long-run growth.
3) Prepare for creativity by reading broadly in areas outside the
accounting literature.
4) Work on important enduring issues rather than chasing fads.
5) “Networking” is costly and subject to rapidly diminishing marginal
6) Take calculated risks on new project selection within a portfolio
7) Happiness is the goal. You have no obligation to be what others
want you to be!
Thank You!

similar documents