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Associate Professor of Accounting Jeffrey Hales helps "standard setters and regulators decide what rules would be most useful to investors in capital markets.”

Faculty Profile: Jeffrey Hales Contributing to the Setting of Financial Reporting Standards

As Jeffrey Hales was finishing his doctorate at Cornell University in 2003, Wall Street was still nursing serious wounds inflicted by corrupt accounting practices at industry leaders such as Enron and Worldcom. Those scandals got him interested in playing a role in strengthening accounting standards.

“Seeing crises taking place as I began my research career got me interested in policy issues,” says Hales, now an associate professor of accounting at Scheller College. “My research helps standard setters and regulators decide what rules would be most useful to investors in capital markets.”

Hales, who joined Tech in 2008, served as a fellow with the Financial Accounting Standards Board from 2009 to 2010. Earlier this year, he presented his research on the direct method of cash flow reporting to the International Accounting Standards Board.  

“The direct method is easier to understand in terms of seeing where cash is produced and used in corporations’ day-to-day operations, while the indirect method (involving accrual accounting) doesn’t provide as much transparency,” he explains.

“Some firms complain that providing financial statements with the direct method would be costly, so most standard setters have not required it,” Hales says. “But the evidence we reviewed suggests that the recurring benefits that many firms derive from providing the direct-method information likely exceed recurring costs. The direct method could also improve the ability of investors to forecast companies’ future operating performance.”

Ongoing Debates

Hales says his experience teaching the rules and principles of Financial Reporting and Analysis to undergraduate and MBA students has enhanced his interest in fundamental issues facing accounting. “Some of the ongoing debates in the world of standard setting are rooted in the failure of coming to a clear understanding of what measurement objectives ought to be,” he says.

Hales, who minored in social psychology and behavioral science during his doctoral studies, is also interested in how personality factors affect performance in the accounting arena. For example, he’s now researching how narcissism might influence individuals to engage in the over-reporting of earnings because of self-serving motives.

His preliminary findings show that those who score higher on narcissism surveys do tend to over-report, but sometimes more out of a drive for status than monetary gain.

“Previous research suggests that individuals who are high in narcissistic characteristics rise to high levels in organizations making them an interesting group to study,” Hales says. “What is leading to their success and what are the potential consequences? There can be an upside to narcissistic traits if people are driven to succeed, as long as they are not win-at-all-cost types.”

Optimistic Attitude

Hales is also studying how firms can use compensation packages to attract a different profile of employee. For example, those who score high for dispositional optimism may be more inclined to view stock-based compensation as favorable because they expect good things to happen to them, he explains.

Hales credits his own optimism for helping drive his success to date. In 2012, he was ranked in the top 10 for publication activity among peers who earned their doctorates the same year he did (2003), according to Issues in Accounting Education.

He has published research in such leading publications as The Accounting Review, Journal of Accounting Research, Journal of Financial Economics, and Journal of Accounting and Economics. He also is an editor and regular contributor for the Financial Accounting Standards Research Initiative, and he chairs the Standards Council of the Sustainability Accounting Standards Board.

In 2012, he won the Scheller College’s Linda and Lloyd L. Byars Award for Faculty Excellence, and he also recently became the PhD coordinator for Scheller College’s Accounting Group. “My goal is for the doctoral program to grow and to help our graduates succeed at landing good jobs at top research institutions,” he says.

Personal Path

Raised in Midland, Texas, Hales realized an academic career would be part of his own path while completing a joint bachelor’s/master’s program in accountancy at Brigham Young University. He had positive experiences there working as a research assistant and teaching a class the summer he graduated.

In 2012-2013, Hales had the opportunity to expand his cultural horizons as a visiting professor at INSEAD in Fontainebleau, France, where he taught financial accounting to MBA students. “It was a very enriching experience living abroad,” he says. “INSEAD has a very international student body with 80 different countries represented in one cohort. So it was a challenge from a teacher’s perspective to provide a global context.”

Hales concluded his year there with a marathon through Bordeaux. Even though he’d never run more than 13 miles at once, his optimism helped propel him to the finish line, along with motivation from his girlfriend, an experienced marathon runner. “I hadn’t trained for it so it was tough, but it was really fun running past vineyards and chateaus,” he says.


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