Office Hours next week will feature a conversation with Anthony Hopwood about what the financial crisis means for accounting (and finance) researchers.  We will be changing our schedule a little bit:  the session will be at 11am ET, Tuesday, July 14th. Information about getting to the session can be found here.

Anthony has a most impressive biography, starting with his background as a Fulbright Scholar at U. of Chicago and his decade at London School of Economics.  He is perhaps best known as the longtime Editor-in-Chief of Accounting, Organizations and Society.  In recent years, perhaps inspired by his six years as Dean of Said Business School at Oxford, Anthony has been a vocal and insightful critic of the narrowing boundaries of accounting research, with plenty of ideas on what has gone wrong and how it might be changed.

I have posted previously about Anthony’s remarks on the distance between traditional research and the real activities of business, accounting and policy making.  More recently, Anthony has been thinking and writing more about the implications of the financial crisis.  From an introduction to a recent issue of AOS on the financial crisis, Anthony writes the following:

The current economic and financial crisis has significant implications for accounting, both for practice and for the research community. In the areas of financial accounting, auditing, management accounting and the regulatory institutions that oversee accounting and auditing practices there are genuine worries that the crisis has revealed numerous problems and inadequacies. In the academic and research community it certainly has illuminated issues that are in need of serious research attention. More than that, however, the crisis also points to the rather limited focus of much current accounting research. Too much intellectual inquiry in the area of accounting seems to operate within the parameters set by practice rather than questioning and challenging these, at least from time to time. Although the implications for research in accounting may not be so great as that within the finance research community where the serious lack of critical research is much more visible, a more detailed consideration of the implications of the crisis for accounting research nevertheless points to the need for a more rigorous investment in diverse research perspectives rather than an unquestioned following of a singular mainstream view.

So, for example, the move to fair value accounting is already being hotly debated, embroiling not only national accounting regulators but also the already increasingly challenged International Accounting Standards Board. Whilst one strand of research has most certainly encouraged moves in this direction, there is now an emerging interest in looking at the actual ways in which the changes were realised. How, in other words, have very abstract conceptual ideas been realised in practice, how have the inherent ambiguities been operationalised in calculative terms, and with what wider consequences? This is indeed an area where focussed empirical investigation, both quantitative and qualitative, has the possibility of casting some light on an issue of current policy significance.

Note that Anthony implies that finance research has even more severe problems illuminiated by the crisis.  Here is an elaboration on that view, in an editorial opening a book on the topic:

The current economic crisis has cast some interesting light not only on the adequacy of our knowledge of financial institutions and practices but also on the state of the world of finance research.

Making numerous inquires in the early days of the crisis, the feedback from non finance faculty on their finance colleagues was most interesting. Many reported a state of disarray, with bemused colleagues with very uncertain understandings of what was going on. One person even reported a senior and respected colleague who admitted to not knowing what “sub-prime” was! Continuing the dialogue, that state of affairs did not last long, however. Perhaps not surprisingly, a new confidence soon emerged, sometimes with finance colleagues even saying that they had predicted the crisis. Existing theories and understandings were soon used to illuminate the new situation, almost as if it was part of the conventional terrain. Equally interesting has been what has not happened. There appears to have been no recognition of the growing distancing of the academic finance knowledge base from the complexities of practice and practical institutions. Many finance faculty seem to have a very limited understanding of finance in practice, even those parts of it that have been shaped and possibly even constructed on the basis of the conceptual and calculative creations of the academic community – although there are signs of a similar separation of research and practical knowledge in the accounting academy as well, particularly where accounting has almost become a sub-branch of finance. Not only has a great deal of finance research become focussed on more abstract considerations but it also is as if a diversity of research perspectives and traditions cannot be tolerated.

Anthony has made similar points about accountants at an address to the Management Accounting Section of the AAA:

What worries me is not the preservation of what we have achieved but rather our ability and willingness to address the multitude of issues and problems that still characterise the realms of accounting ideas and practice. My concern is therefore future oriented. It is in this context that I am troubled by what I see as an increasing narrowness of outlook, the careerist rather than the curiosity orientated nature of an increasing amount of the research, the growing domination of what are characterised as “mainstream” tendencies that prioritise particular conceptual and methodological approaches to the research task, and an associated growth in intolerance towards different but equally valid and equally rigorous approaches. As I see it, we are living in changing times and some of the changes that I see underway are not conducive to advancing our understandings of the functioning and continued development of the management accounting craft.

I am increasingly convinced that a complex of other factors also play important roles in sustaining what has come to be seen as the “mainstream approach”. The hierarchical organization of the academic community provides incentives for the contagious spread of the intellectual approaches of the elite from above and the discouragement of innovation being generated from below. So much could be done by non-elite institutions, but there seemingly is a fear of the consequences of stepping out of line.  I have said for a long time that only a very limited number of people have a license to innovate in the North American academic accounting community.

Anthony’s thoughts on these issues have obvious relevance to FASRI, which seeks to support any and all research methods that can help the FASB in its deliberations.  Read the documents linked above, and join us for what promises to be a fascinating discussion about the state and future of accounting research.