Financial Accounting Standards Research Initiative

There is a lot in that question! Here are a few thoughts.

Research can be categorized on three dimensions: the institutions you are studying (managerial accounting, financial reporting, tax compliance….); the method (experimental, archival, modeling…) and the theory you are testing (psych, econ, finance, sociology…). Your dissertation will require you to understand your institutions, know the tools underlying your method inside and out, and have a theory that interests you and lies within the tastes of your colleagues.

Many people specialize in one point in this 3-D space (e.g., studying auditing using experiments based on psych theory, or studying earnings management using archival methods based on financial economics theory). That is not a bad way to go.

Some people will relax one dimension. For example, my early research was entirely experiments based on economic theory, but I addressed auditing, market microstructure and earnings management.

Bill Kinney is famous for studying one institution (auditing), but using a variety of methods and theories. Kids, don’t try this at home! These days it is very difficult to master more than one method. If you look around, few people who conduct experiments also write archival papers, and vice versa. If they do, they are collaborating with someone who brings that method to the table.

Which brings me to my final point: to succeed in this career, you need good at many things, but truly excellent at one. You might be excellent at understanding some complicated institution (e.g., Cathy Shakespeare and securitization, Kathy Petroni and insurance). You might be a whiz at econometrics, like more people I can name. You might have a great understanding of some part of psych theory (e.g., Kathryn Kadous or Molly Mercer). You will work with other people who will complement your own particular strength.

A final word on ‘what is hot now.’ It is hard to know what will be hot in five years, but my impression is that real-world events are a leading indicator of academic fads. Studies on fair value in financial institutions are hot now because of what happened over the last few years.

So read the press and blogs for indications of the next big issue, and get yourself ahead of the large number of students who don’t!

Of course, the obligatory last point is: do what you love! This job is way to painful otherwise.