In a post-pandemic world, accounting research has proven essential to helping businesses navigate uncertain times and build a stronger future. During an unprecedented era such as this, researchers lead the charge in understanding how Covid-19 has changed how we do business and what the new normal will look like.
For starters, quality research helps unveil insights into how businesses operate and how they can be improved. Moreover, key studies can provide valuable information about economic and societal trends, which empowers policymakers and business leaders to make informed decisions about the direction of the economy.
The SMU School of Accountancy (SoA) is uniquely positioned to provide the highest quality accounting research to contribute to the advancement of financial practices. Ranked first in the world for Citation Rankings, Archival Research (All Topics) and Archival Research (Financial Accounting) by the latest BYU Accounting Research Rankings, the School's research faculty is widely published in the most prestigious journals, and scholars around the world frequently cite their work.
“Accounting research plays an important role in connecting educators, industry practitioners, and regulators to shape the future of the accounting profession,” says Associate Dean (Research) of School of Accountancy, Lee Kong Chian Professor Zhang Liandong.
“At SMU School of Accountancy, we are committed to taking the lead in accounting research and translating this knowledge into innovative approaches to teaching and practice. Our strong performance at this year’s BYU Rankings signals that we are moving closer to achieving this mission.”
This ranking is based on classifications of peer-reviewed articles in 12 accounting journals since 1990, which determines university ranking based on authors’ affiliation.
How research impacts the real world in uncertain times
Today, accounting research is essential because it can help businesses make integral decisions about sustainability, growth, and overall success. By tapping into the analysis by the discipline’s thought leaders, companies can develop better growth strategies and understand the impacts of their financial decisions on their bottom line.
“During uncertain times like our current economy, it is extremely critical for regulators, entrepreneurs, and various market participants to have access to high-quality information about the performance and prospects of business enterprises in the economy,” says Professor Zhang.
“One major role of accounting research is to evaluate the quality of business information and potential factors influencing the quality, which helps improve decision-making quality and policy designs.”
For example, companies tend to increase the use of alternative metrics to represent their performance when faced with elevated economic uncertainty. During the pandemic, a growing number of companies adopted the EBITDAC (earnings before interest, taxes, depreciation, amortisation and coronavirus) metric in financial disclosures.
However, recent SoA research revealed that companies have turned to alternative performance metrics to divert investors’ attention away from other organisational problems and inflate their perception of firm performance.
“This finding serves as a caution to market participants who should be more discerning when they encounter these alternative metrics,” adds Professor Zhang.
“Moreover, regulators should pay attention to such behaviours, particularly during uncertain times, and take necessary regulatory actions to protect financial markets' efficiency and market participants' welfare.”
Putting a number on bits and bytes
The increased use of digital technologies has brought about a fundamental change in how business is conducted. In particular, it has allowed for the development of new financial technologies, such as blockchain, that have the potential to revolutionise how businesses operate. However, this innovation presents a challenge for accountants in their efforts to accurately represent its value.
“Blockchain technology is increasingly used in the business world as a tool for financing. However, the degree of success and the true value of such financial technology remain largely elusive,” remarks Professor Zhang. He adds that an SoA research team has recently examined how securities issued through blockchain technology are valued in the market.
There is no question that Covid-19 has had a lasting impact on every aspect of our lives. One of the most notable impacts has been the acceleration of the adoption of digital tools and technologies.
There is a growing realisation that traditional methods of doing things are no longer adequate in a globalised, interconnected world. And as more and more businesses move online, there is an increasing demand for digital solutions to meet these needs.
For example, in the capital market, companies and market participants have increased their reliance on social media to acquire and disseminate information, says Professor Zhang.
“However, due to the largely unregulated nature of social media, the reliability of information is a big challenge. At SOA, our faculty are working on several important projects to understand the quality of information on social media and how regulations can help improve the quality,” he explains.
Adding a tech touch to research
As with all other industries, technology has revolutionised the accounting profession, perhaps most profoundly through the advent of data analytics and FinTech instruments. With ever-growing mountains of data at our fingertips, accountants can conduct detailed analyses that were once impossible.
“The accounting research and practice should keep up with these technological changes to remain relevant, in terms of understanding the performance implications of digital technologies for business, utilising efficiently the large quantity of digital information generated by business processes, and adopting digital tools in various accounting functions,” says Professor Zhang.
Conversely, regulatory bodies have to rapidly transform to monitor the adoption of digital technology in the capital market, such as blockchain financing, in the post-pandemic era.
As Professor Zhang observes: “I would expect accounting research to make a meaningful contribution to developing and evaluating these new regulations.”