Catherine Schrand

Professor Catherine Schrand’s research primarily focuses on risk management and disclosure. Her research has been published in toptier academic journals including Journal of Accounting and Economics, The Accounting Review, Journal of Finance, Journal of Financial Economics, Review of Accounting Studies, and Contemporary Accounting Research. She is an associate editor of Journal of Accounting and Economics, Journal of Accounting Research, and Journal of Financial Services Research. She is the author (along with Patricia Dechow) of Earnings Quality, and of Understanding earnings quality: A review of the proxies, their determinants and their consequences (with Weili Ge and Patricia Dechow).

In addition to doctoral level courses, she teaches an undergraduate elective on Financial Accounting. She has been actively involved in the accounting standard setting process through her past service on the Financial Accounting Standards Committee of the American Accounting Association and her involvement with the AAA/FASB Financial Reporting Issues Conference.

She received her PhD from the University of Chicago in 1994 and her BBA from the University of Michigan. Before attending graduate school, Professor Schrand was a staff auditor and audit manager at KPMG Peat Marwick in Chicago and she is a Certified Public Accountant in Illinois.

Karthik Balakrishnan, Catherine M. Schrand, Rahul Vashishtha (Working), Analyst recommendations, traders’ beliefs, and rational speculation.

Jonathan Rogers, Catherine M. Schrand, Sarah Zechman (Working), Do managers tacitly collude to withhold industrywide bad news?.

Kathryn Dewenter, Catherine M. Schrand, Clare Wang (Working), The impact of currency risk on US MNCs: New evidence from returns and crossborder investment around currency crises.

Christian Leuz and Catherine M. Schrand (Working), Voluntary disclosure and the cost of capital: Evidence from firms’ responses to the Enron shock.

Bernadette A. Minton and Catherine M. Schrand (2016), Institutional investments in pure play stocks and implications for hedging decisions, Journal of Corporate Finance, 37, pp. 132151.

Abstract: We show that institutions invest in stocks within an industry that maintain exposure to their underlying industry risk factor. These “pure play” stocks have greater numbers of institutional investors and institutions systematically overweight them in their portfolios while underweighting low industryexposure stocks of firms in the same nominal industry. Pure play stocks also have greater liquidity measured by stock turnover and price impact. An implication of these results is that catering to these preferences could be an important variable in firms' risk management decisions, potentially offsetting incentives to reduce volatility via hedging. We further characterize institutions' investments for pure play stocks across institution type, industries, and over time.

Catherine M. Schrand (2014), Discussion of “Cash flow asymmetry: Causes and implications for conditional conservatism research”, Journal of Accounting and Economics, 58 (23), pp. 201207.

Abstract: Accounting researchers should not view CHT?s analysis as the solution to our collective problem of being able to measure conditional conservatism. CHT provide evidence about earnings asymmetric timeliness and an accrualsbased measure of asymmetric timeliness that is useful for evaluating construct validity. In some cases, CHT?s evidence will translate directly to another researcher?s setting. In other cases, CHT provide useful guidance for researchers to follow in conducting their own construct validity analysis. But it is ultimately the responsibility of each researcher to conduct his own construct validity analysis specific to his research question and sample.

Catherine M. Schrand and Sarah Zechman (2012), Executive overconfidence and the slippery slope to financial misreporting, Journal of Accounting and Economics, 53, pp. 311329.

Abstract: A detailed analysis of 49 firms subject to AAERs suggests that approximately onequarter of the misstatements meet the legal standards of intent. In the remaining three quarters, the initial misstatement reflects an optimistic bias that is not necessarily intentional. Because of the bias, however, in subsequent periods these firms are more likely to be in a position in which they are compelled to intentionally misstate earnings. Overconfident executives are more likely to exhibit an optimistic bias and thus are more likely to start down a slippery slope of growing intentional misstatements. Evidence from a hightech sample and a larger and more general sample support the overconfidence explanation for this path to misstatements and AAERs.

Patricia Dechow, Weili Ge, Catherine M. Schrand (2010), Understanding earnings quality: A review of the proxies, their determinants and their consequences, Journal of Accounting and Economics, Forthcoming. 10.1016/j.jacceco.2010.09.001

Abstract: Researchers have used various measures as indications of “earnings quality” including persistence, accruals, smoothness, timeliness, loss avoidance, investor responsiveness, and external indicators such as restatements and SEC enforcement releases. For each measure, we discuss causes of variation in the measure as well as consequences. We reach no single conclusion on what earnings quality is because “quality” is contingent on the decision context. We also point out that the “quality” of earnings is a function of the firm’s fundamental performance. The contribution of a firm’s fundamental performance to its earnings quality is suggested as one area for future work.

Katherine Schipper, Catherine M. Schrand, Terry Shevlin, T. J. Wilks (2009), Reconsidering Revenue Recognition, Accounting Horizons, (March).

Abstract: This commentary summarizes the materials presented and some of the discussion at the November 2007 AAA/FASB Financial Reporting Issues Conference. The topic of the conference was revenue recognition, and the IASB/FASB were considering two new models: the customer consideration model and the measurement model. This commentary provides some background on revenue recognition, discusses the need for a new model, and presents the two models. The conference discussion highlighted that the two proposed models are based on a single conceptual approach but differ in measurement issues. Key aspects in both models are the identification of contractual performance obligations between the seller and customer (which gives rise to a contract liability) and determining when the performance obligation is satisfied (equivalently, when the contract liability is extinguished) and revenue is recognized.

Christopher C. Géczy, Bernadette A. Minton, Catherine M. Schrand (2007), Taking a View: Corporate Speculation, Governance, and Compensation, Journal of Finance, (October).

Abstract: Using responses to a wellknown confidential survey, we study corporations' use of derivatives to “take a view” on interest rate and currency movements. Characteristics of speculators suggest that perceived information and cost advantages lead them to take positions actively; that is, they do not speculate to increase risk by “betting the ranch.” Speculating firms encourage managers to speculate through incentivealigning compensation arrangements and bonding contracts, and they use derivativesspecific internal controls to manage potential abuse. Finally, we examine whether investors reading public corporate disclosures are able to identify firms that indicate speculating in the confidential survey; they are not.

Past Courses

ACCT101 PRINCIPLES OF ACCOUNTING

This course is an introduction to the basic concepts and standards underlying financial accounting systems. Several important concepts will be studied in detail, including: revenue recognition, inventory, longlived assets, present value, and long term liabilities. The course emphasizes the construction of the basic financial accounting statements the income statement, balance sheet, and cash flow statement as well as their interpretation.

ACCT201 FINANCIAL ACCOUNTING I

This course revisits topics covered in Introductory Financial Accounting (Accounting 101), with a focus on the asset side of the balance sheet: Cash, accounts and notes receivable, inventory, marketable securities, equity investments, PPE, and intangibles. The course also covers revenue and expense recognition issues, and generally accepted accounting principles that affect the format and presentation of the financial statements.

ACCT921 EMPIRICAL RES IN ACCT I

The course covers empirical research design and provides students with a perspective on historically important accounting research. Topics covered such as research on the timeseries and crosssectional properties of financial accounting measures, capital markets behavior, financial intermediaries, and international accounting research.

ACCT922 EMPIRICAL RES IN ACCT II

The course covers empirical research design and provides students perspective on historically important accounting research. Topics covered such as research on the timeseries and crosssectional properties of financial accounting measures, capital markets behavior, financial intermediaries, and international accounting research. Topics covered may include corporate governance, executive compensation, debt contracting, accounting regulation, tax, and management accounting.

WH 150 EVALUATING EVIDENCE

WH 150 provides an introduction to all stages of the research process for business topics. In the first third of the course, we discuss theory building, hypothesis development, and research design choices particularly in casual research. In the second third, we discuss data collection methods (e.g., surveys, experiments, case studies and fieldwork) and the use of archival databases. This part of the cours emphasizes the interplay between research design and sampling/data collection methods. In the final third of the course, we introduce data analysis and interpretation, including methods for converting raw data into measurable constructs suited to statistical analysis.

WH 399 J W SCHOLAR SR RES SEM

This seminar takes place over two semesters and provides students with the skills to perform their own research under the guidance of a Wharton faculty member. At the conclusion of the fall semester, students will produce a thesis proposal including literature review, significance of the research, methodology, and exploratory data if relevant. Throughout the fall semester faculty guests from a range of disciplines will present on their research in class, highlighting aspects that are relevant to the work students are engaging in at that point. During the second semester, students will collect and analyze data and write up the results in close collaboration with their faculty mentor. At the end of the spring semester, each student will present their research in a video presentation. Throughout the course, students will work individually, in small groups, and under the mentorship of a Wharton faculty member. The goal is to becomes capable independent researchers who incorporate feedback and critical (self) analysis to take their research to the next level.

• American Accounting Association’s Financial Accounting and Reporting Section (FARS) Best Paper Prize, 2015
• GARP Risk Management Research Grant, 2007
• Caesarea Award for the Best Paper in Risk Management (WFA meetings), 2004
• University of Pennsylvania Research Foundation award, 1995
• Arthur Andersen & Co. Foundation Doctoral Dissertation Fellowship, 1993
• University of Chicago Big Ten Doctoral Consortium representative, 1993
• KPMG Peat Marwick Doctoral Scholarship, 1992
• AAA Doctoral Consortium Fellow, 1992
• AICPA Doctoral Fellow, 1990

Accounting Fraud Targeted: With CrisisRelated Enforcement Ebbing, SEC Is Turning Back to Main Street, Wall Street Journal 05/27/2013

Knowledge @ Wharton

• What the BoA Settlement Means for the Bank – and for Banking, Knowledge @ Wharton 09/09/2014
• Should Companies Hedge Currency Risk?, Knowledge @ Wharton 06/12/2013
• When Currency Fluctuations Flatten Profits, Knowledge @ Wharton 02/06/2013
• Loss Leaders for Banks?, Knowledge @ Wharton 03/23/2011
• Are ‘Marktomarket’ Accounting Rules on the Mark?, Knowledge @ Wharton 04/01/2009
• Are Overconfident Executives More Inclined to Commit Fraud?, Knowledge @ Wharton 03/05/2008
• The Role of Derivatives in Corporate Finances: Are Firms Betting the Ranch?, Knowledge @ Wharton 01/11/2006
• Accounting for the Abuses at AIG, Knowledge @ Wharton 04/20/2005
• Accounting Games Companies Play (Especially With Revenues and Costs), Knowledge @ Wharton 07/14/2004