Ryan Casey
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Ryan Casey is an associate professor in the School of Accountancy. His research interests include the interpretation and use of financial data (mainly through analysis of published financial statements), investigating external auditor performance, and the causes and consequences of financial analysts’ earnings forecast errors.
What do you study?
My main area of research is in the assessment of financial reporting quality. Something that not many people realize is that there is a lot of choice that goes into what public companies disclose in their SEC-required financial reports. Companies can make a lot of decisions in terms of what they put into and what they leave out of the reports (and what gets consolidated and obscured). So, I try to distill a very large amount of information and a large amount of choice into metrics that can be used to assess the overall quality of these reports.
I also measure the performance of a company, which is different from their reporting quality. For example, in one paper I looked at, let’s call it a core set of accounts that a company has. Those companies have discretion in terms of how much detail they want to include in the financial statements versus how much information they want to consolidate. In simple terms, we studied how many accounts different companies reported on and found that the more information that a company reports on, the higher the performance of the company tends to be, and the better you can predict future performance of that company.
What are you working on currently?
I’m working with my colleague George Ruch to look at what parts of the accrual accounting process add value to predicting a company’s future performance, versus those of that methodology that don’t add as much value. Cash accounting is a much simpler system than accrual accounting, but it’s always been taken for granted that accrual accounting is better or adds more value. Take, for example, the purchase of a fixed asset for, say, $100,000. A financial accountant might spread that expense across 10 years at $10,000 per year, which is a part of the accrual process. But we find that that type of process, for instance, does not add much value in terms of information helpful in predicting future performance. We’re spending billions of dollars a year on auditors doing accrual accounting and so we’re trying to assess where the accrual accounting process adds value.
How do you bring your research into the classroom?
I’m always getting the “why” questions from my MBA and master’s level students: Why are things done this way? Why can’t we do them a different way? They push back, they question the status quo, which is great. One thing that I do with those students is have them do a mini empirical financial accounting research module. They look at statistical approaches where we might do a regression or a correlation. I have them pull data related to the financial accounting paradigm—audit fees, or something along those lines—and they must come up with a research question. From that I ask them to build a simple empirical research design and test their hypotheses in the same way that we do in real-world research. So, teaching really ties directly into what I do with my research.
How would you like to see your work impact the business world, the academic world and your students?
The short answer is that what I’m trying to do is figure out this multibillion-dollar industry: how companies can improve their reporting to be more beneficial to them and add more information to stakeholder decisions.
As for my students, my approach is to give them tools and skills that they’ll need to succeed in the real world. I try to avoid outdated academic exercises that have no relation to what students will encounter in their careers; I try to keep up to date with complex issues being faced in the profession and then expose the students to materials intended to prepare them for their future careers. I engage in a case-based approach and encourage communication skills. Technical skills are a given; you need those. But being able to communicate your findings and ideas effectively is essential to be successful in a professional environment.