Baruch Accounting Professor's Research Receives National Honor
Photo by Jerry Speier.
New York, NY – September 11, 2007 –The American Accounting Association’s Financial Accounting and Reporting Section has recognized research co-authored by Baruch Accounting Professor Carol Marquardt and University of Waterloo Professor Christine Wiedman with their 2007 “Best Paper Award.” This award is given annually to a published work that best reflects the tradition of academic scholarship, readability, and relevance to problems facing the accounting profession and standard-setters. The professors received the award during the American Accounting Association’s Annual Meeting, which was held August 5-8 in Chicago, Illinois.
Professor Marquardt’s and Wiedman’s paper, “Earnings Management Through Transaction Structuring: Contingent Convertible Debt and Diluted Earnings per Share,” which appeared in the May 2005 issue of Journal of Accounting Research, examined the financial reporting effects of contingent convertible bonds, or “COCOs,” as they were more commonly known on Wall Street. Their research conclusively demonstrated that firms’ decisions to issue COCOs rather than traditional convertible bonds were not economically motivated but rather an exploitation of a loophole in the accounting standards. Essentially, firms were able to inflate earnings per share figures by issuing a COCO rather than a traditional convertible bond, though the two securities are virtually identical economically. Because this inconsistency in accounting treatment is potentially misleading to investors, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board later closed the loophole. Not incidentally, the COCO market, which had surpassed $100 billion in total issues, disappeared quickly after the rule change.
Scott Taub, former deputy chief accountant at the Securities and Exchange Commission who brought the professors’ paper to the attention of the EITF, stated in his nominating letter that “not only did the research contribute directly to an improvement in financial reporting but it convinced us at the SEC that we should look to the academic community more often in seeking to solve financial reporting problems. I hope that others follow in the footsteps of the authors of this paper by analyzing specific, real-life issues facing the reporting community.”
“It’s our small contribution toward greater honesty and accuracy in financial reporting.”
Professor Marquardt joined Baruch in 2006 after holding academic appointments at New York University and Washington University in St. Louis. She teaches advanced financial accounting to undergraduates, as well as a seminar in empirical research in financial accounting to doctoral students. Her research focuses on corporate financial reporting strategy and has been published in The Accounting Review, Journal of Accounting Research, Review of Accounting Studies, Contemporary Accounting Research, Journal of Business Finance and Accounting, and Accounting Horizons.
Contact: Zane Berzins