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.
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.
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.
Your question is, by nature, very general: It basically is about the high forecasting uncertainty for young companies. In principle, this is nothing new or specific to digitalisation. In my view, it is important to distinguish: Is the company about classical product or service innovation, or is it about process innovation “only“? In the first case, additional uncertainty stems from the problem that the “market” or the necessity of this new product or services is hard to assess, exactly because it is so innovative. In the latter case, the focus can be directed to the estimation of a realistic market penetration. At the same time, it is important to acknowledge that higher chances generally come with more risk. Therefore, it is not possible to say which case would achieve higher values in the eyes of investors.
Deriving general lessons for all eternity and across all investment classes would be unusual, to say the least. Business ideas, companies and general circumstances evolve over time and are often too distinct for general conclusions.
In my view, the research focus of the Department is well established. This needs to be maintained and hopefully even extended. Accordingly, Frankfurt School needs to become an even more attractive employer for both established and aspiring researchers.
At the same time, as Department, we want to better showcase our research. On the one hand, this is achieved through top publications. On the other hand, research needs to play a key role in teaching as well. Especially our Department researches many interesting questions of high relevance for practice. To me, our research can play an important role in differentiating our academic programmes in the market for education. In addition, we are making strides in establishing a successful PhD programme by attracting young researchers for the subject and helping them to a good start into their careers.