Dear Professor Ecker, congratulations to the new position as Head of Accounting Department. Can you tell us some basics about this Department?
The Accounting Department currently consists of eight professors, representing the subfields of internal and external accounting in research and teaching. Eight full-time students are currently part of the PhD programme in Accounting.
Meanwhile, the Department´s research output reaches top rankings in Europe. With regard to our teaching, we offer a huge spectrum of courses, ranging from applied training of future auditors to the preparation for top jobs in investment banking or consulting, to method-focused courses for our PhD candidates. At the same time, the Department also participates in tailored Executive Education. On a personal note, I appreciate the collegiality and transparency in the Department: The distance between offices is short and the doors are (almost) always open.
Your research on financial reporting from the viewpoint of capital market participants, e.g., on information risk in IPOs, was published in top journals. Can you briefly summarize this field of research?
In principle, the question boils down to how efficient the stock market really is and how market efficiency can be achieved even if the information cannot be precise and therefore fully relied upon. I studied this question using the example of IPOs, especially because they do not have a long information history with the market and therefore the initial uncertainty for investors is high.
The results show that an average IPO does not outperform the market in the long run. That said, there are substantial cross-sectional differences within the sample: Firms with unexpectedly high information quality show significantly outperform for a brief period after the IPO, after which they are correctly priced by the market. On the other hand, firms with unexpectedly low information quality underperform the market for an extended period of time. These results indicate that the quality of information plays a large role form market efficiency.
What is your current field of research?
I am currently looking into two topics. The first area deals with the question of how far “aggressiveness“ in management is associated with “aggressiveness“ in financial reporting. An example: Suppose a company completed an acquisition last year with a large amount of capitalized goodwill. This can be construed as a sign of a high acquisition price and therefore “aggressiveness” in the bidding process. The question becomes if this aggressiveness in real activities translates into how managers use their discretion on different items of the financial report. Will they be true to their nature or instead try to report conservatively in order to create an offsetting adjustment.
The second area is the validation of different measures for the cost of equity capital. This topic is seems important, especially because the literature paints a rather bleak picture of extant measures.