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Accounting Division

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Prof. Shivaram Rajgopal

Letter from the Chair

The pivotal role of accounting in society

Accounting is essential to the functioning of the economy and, indeed, society in general. Accounting is the means by which we monitor our governments, our corporations, and our non-profit organizations. For business firms, so much the focus in business schools, accounting not only monitors the managers, but also informs the investors in these firms of the potential payoffs, the risk to those payoffs, and the consequent valuations. This “financial accounting,” determines the allocation of investment to its most efficient use in the economy and promotes well-functioning capital markets with transparent pricing. “Managerial accounting,” the accounting to managers rather than about managers, promotes decision making and efficiency within the firm.

The accounting area and its emphasis on theory meets practice

The Accounting Area at Columbia Business School epitomizes the school’s long-standing emphasis on bridging theory with practice and policy. Our Center for Excellence in Accounting and Security Analysis (CEASA) also takes that research to practice in White Papers and Occasional Papers that offer policy prescriptions.

Columbia Business School has a reputation as the leading school in value investing, going back as far as the days of Benjamin Graham, the so-called father of fundamental analysis. Fundamental investing involves the analysis of accounting numbers, so the Accounting Division is very much aligned with this activity, in research, teaching, and bringing research to practice. “Price is what you pay, Value is what you get” is very much part of our mantra. We thus engage with the Heilbrunn Center for Graham & Dodd Investing in the School. Our teaching electives in the MBA program have this focus, in courses titled Fundamental Analysis and Earnings Quality, Fundamental Analysis for Investors, Managers, and Entrepreneurs, Financial Statement Analysis and Valuation, and Accounting for Value, for example, along with courses on financial modeling. Our Masters of Science in Accounting and Fundamental Analysis is a unique specialty masters’ program bringing accounting analysis to fundamental analysis.

Regular faculty research seminars, an active PhD program, and outreach activities to practitioners and regulators stimulate our inquiry into the absorbing questions of accounting. I am so happy to be associated with a distinguished senior faculty, an energetic junior faculty, and dedicated PhD students in the pursuit of the answers.

Since 1981, the Accounting Division at Columbia Business School has hosted the annual Burton Conference in honor of Professor Sandy Burton who served as the Chief Accountant at the SEC, the Deputy Mayor of Finance in New York and as the dean of Columbia Business School. Prof. Burton earned considerable respect for attempting to bridge the gap between accounting practice and academia. In keeping with that spirit, the conference aims to assemble an accomplished group of scholars and practitioners to discuss new research findings, ideas, methodologies and trends.

 

Shivaram Rajgopal, Roy Bernard Kester and T.W. Byrnes Professor of Accounting and Auditing

Our Faculty

Faculty in the CBS Accounting Division are experts on both the design of financial analysis--how investors, analysts, managers and regulators should extract insights from accounting information--and prescriptions for better accounting that enhances such analysis. 

The accounting group thrives under the tone set by Stephen Penman’s path breaking work on finding fundamental accounting motivated links to explain asset prices and Trevor Harris’ pioneering work at Morgan Stanley that brings a back-to-basics fundamentals-based inquiry into the financial sustainability of businesses.

Tim Baldenius specializes in modeling the complex interaction between incentives, taxes and capital budgeting in the world of transfer prices. Most of Tim’s new work emphasizes the subtle implicit and explicit incentives underlying how corporate boards work. Jonathan Glover studies the role of accounting measurements in both formal and relational contracts. The topics he has worked on include earnings management, accounting conservatism, and management control systems.

Doron Nissim specializes in how financial data is reported and presented with a view to making quant-based models of capturing accounting performance more intelligent by incorporating detailed ground-level knowledge of how financial statements work. Shiva Rajgopal’s work has highlighted the prevalence of corporate myopia and the importance of corporate culture and governance mechanisms to address shareholder and stakeholder concerns about the role that companies play in society. Amir Ziv’s research deals with the effects of accounting regimes and alternatives on economic environments.

Our vibrant group of emerging scholars is world-class. Wei Cai specializes in field work that document the incentive effects of effective corporate culture. Thomas Bourveau’s studies how corporate disclosure by oligopolists aids collusion. Matthias Breuer works on rigorous application of sound econometric techniques to identify the intended and unintended consequences of mandatory disclosure on resource allocation and investment decisions of firms.

Anne Heinrichs works on investor access to corporate management via one-on-one meetings and in conference calls. Sehwa Kim studies reporting issues of banks and insurance companies. Lisa Liu’s work emphasizes the economic consequences of financial regulations. Sang Wu, who has just joined the group from Carnegie Mellon University, focuses on empirical anomalies in accounting practices and institutions that contradict conventional wisdom.

Meet Our Faculty

In the Media

Date
June 12, 2023
Faculty Member
Takatoshi Ito

Columbia University's Ito on BOJ Policy

Bloomberg
Date
May 7, 2023
Faculty Member
Laura Veldkamp Sehwa Kim Harry Mamaysky

First Republic Bank Acquired by JPMorgan: CBS Experts Weigh In on the Implications for the Banking System, Fed

CBS Insights
Date
March 29, 2023
Faculty Member

Office Real Estate Is Getting Kind of Ugly

Axios
Date
March 29, 2023
Faculty Member
Mark Cohen

Bloomingdale’s CEO to Replace Macy’s Chief Jeff Gennette Next Year

Retail Dive

Research

Connecting Book Rate of Return to Risk and Return: The Information Conveyed by Conservative Accounting

Authors
Stephen Penman and Xiao-Jun Zhang
Date
Forthcoming
Format
Journal Article
Journal
Review of Accounting Studies

This paper investigates how book rate of return under GAAP relates to risk and the required return for investing. A standard view sees the book rate of return as a measure of profitability to be compared to the required return to evaluate the success of an investment. A contrasting view sees the book rate of return as indicative of the required return, consistent with the standard risk-return tradeoff. There clearly is some sorting out to do.

Read More about Connecting Book Rate of Return to Risk and Return: The Information Conveyed by Conservative Accounting

Appendix to "A Framework for Identifying Accounting Characteristics for Asset Pricing Models, with an Evaluation of Book-to-Price"

Authors
Stephen Penman, F. Reggiani, S. Richardson, and I. Tuna
Date
Forthcoming
Format
Working Paper
Read More about Appendix to "A Framework for Identifying Accounting Characteristics for Asset Pricing Models, with an Evaluation of Book-to-Price"

Evidence on Contagion in Earnings Management

Authors
Simi Kedia, Kevin Koh, and Shivaram Rajgopal
Date
Forthcoming
Format
Working Paper

We examine contagion in earnings management using 2,376 restatements announced during the years 1997-2008. Controlling for industry and firm characteristics, firms are more likely to begin managing earnings after the public announcement of a restatement by another firm in their industry or neighborhood. Such contagion is absent when the restating firm is disciplined by the SEC or class action lawsuits, suggesting deterrent effects of enforcement activity.

Read More about Evidence on Contagion in Earnings Management

Were Information Intermediaries Sensitive to the Financial Statement-based Leading Indicators of Bank Distress prior to the Financial Crisis?

Authors
Hemang Desai, Shivaram Rajgopal, and Jeff Yu
Date
Forthcoming
Format
Working Paper

In this paper we address two questions that emerged in the aftermath of the 2008 financial/banking crisis. First, did the financial statements of bank holding companies provide an early warning of their impending distress? Second, were the actions of four key financial intermediaries (short sellers, equity analysts, Standard and Poor's credit ratings and auditors) sensitive to the information in the banks' financial statements about their increased risk and potential distress?

Read More about Were Information Intermediaries Sensitive to the Financial Statement-based Leading Indicators of Bank Distress prior to the Financial Crisis?

Valuation Models: An Issue of Accounting Theory

Authors
Stephen Penman
Date
Forthcoming
Format
Chapter
Book
Routledge Companion to Financial Accounting Theory

This paper lays out alternative valuation models and evaluates their features. Three themes underlie the discussion. First, we require that the models be consistent with the theory of finance. Second, valuation involves accounting, so accounting theory as well as finance theory comes into play. Third, valuation models are a tool for practical valuation, so the respective models are judged on how they perform or do not perform (as a practical matter), with the emphasis is on caveat emptor.

Read More about Valuation Models: An Issue of Accounting Theory

Ideas

Economics & Policy
Innovation
Strategy
Value investing
Date
November 30, 2022
n/a
Economics & Policy
Innovation
Strategy
Value investing

Value Investing: How CBS is Staying Ahead of the Curve

Learn how Columbia Business School is updating its acclaimed value investing curriculum to align with a rapidly changing financial landscape.

  • Read more about Value Investing: How CBS is Staying Ahead of the Curve about Value Investing: How CBS is Staying Ahead of the Curve
Economics & Policy
Date
September 24, 2010
Economics & Policy

Encounters in the Global Experience Economy: Matsuhisa Athens

A first-hand account of experiencing the global economy.

  • Read more about Encounters in the Global Experience Economy: Matsuhisa Athens about Encounters in the Global Experience Economy: Matsuhisa Athens
Business and society
Business Economics and Public Policy
Economics & Policy
Energy
Strategy
World Business
Type
Digital Future Insights
Date
October 20, 2022
Business and society
Business Economics and Public Policy
Economics & Policy
Energy
Strategy
World Business

What Will Drive the Global Markets in 2023?

Columbia Business School Professor Abby Joseph Cohen recently joined former Dean Glenn Hubbard to discuss the forces that could shape the economy and markets in the year ahead.

  • Read more about What Will Drive the Global Markets in 2023? about What Will Drive the Global Markets in 2023?
Economics & Policy
Date
September 24, 2010
CBS Template Placeholder Image
Economics & Policy

Encounters in the Global Experience Economy: Matsuhisa Athens

A first-hand account of experiencing the global economy.

  • Read more about Encounters in the Global Experience Economy: Matsuhisa Athens about Encounters in the Global Experience Economy: Matsuhisa Athens
Economics & Policy
Future of work
Organizations
Real Estate
Type
Columbia Business
Date
October 10, 2022
Economics & Policy
Future of work
Organizations
Real Estate

How Will Working From Home Impact Office Real Estate?

Stijn Van Nieuwerburgh, the Earle W. Kazis and Benjamin Schore Professor of Real Estate at Columbia Business School, discusses his new research on the impact of remote work on the New York City commercial real estate sector.

  • Read more about How Will Working From Home Impact Office Real Estate? about How Will Working From Home Impact Office Real Estate?

Pagination

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