Background
We have witnessed a series of collapses of large companies which had shortly before been considered to be sound and well managed, and we have seen one of the largest accounting firms disappear from the scene within a very short time. In Denmark the audit exemption threshold has been raised so that small companies no longer require an audit, but at the same time the Danish Securities Council finds errors in many financial statements that have been audited by renowned accounting firms. The accounting model – which is largely based on historic cost – is thus being challenged and a substantial amount of resources is spent on improving it. Strong arguments are raised in favour of a valuation of assets at market value and also of strengthening the corporate governance of businesses. On the financial scene, the focus is on capital markets and on the invention of new financial instruments, most recently covered bonds. These are some of the starting points for the modern research in Accounting and Finance.
Financial statements are central in all of the above contexts. To this must be added an increasingly complex interconnection among economics, organisation and society. This complexity is partly explained by the widespread use of modern finance instruments, and the problems occurring in the reporting thereof in the financial statements. Another part of the explanation is that an ever increasing share of assets is made up of knowledge and other intangibles. The fact that modern society is an information society where news spreads fast and through many different channels is a third explanation. Moreover, agent incentives play an important role for business activities, just as these incentives are influenced by extensive use of various types of incentive pay systems. Therefore the role of financial statements has changed, as has the interpretation of their contents. In modern accounting research the financial statement as a source of information has thus been brought into focus, and the relevant aspects of the organisational context have been included. The financial statement measures the financial standing of the business, and this measure is used to create incentives in the organisation. In this way there is a dynamic link between accounting and activities in the organization.
A point of departure for Accounting research is modern microeconomics in which information, uncertainty and incentives are key terms. Within this area of Accounting research the Accounting Group has attracted attention from all over the world. The research unit consists of two full professors, two associate professors, one assistant professor and one Ph.D. student. The focus is on basis research and in the period 1999 to 2004 researchers from the unit were the source of more than one in four of the articles by researchers from European universities that were published in the three leading American journals in accounting. Thus, the University of Southern Denmark tops the European ranking, along with London Business School and the London School of Economics and Political Science. Moreover, the Accounting Group has been involved as co-author on an advanced textbook in the field, published by the renowned company McGraw-Hill, and the book has recently been translated into both Chinese and Japanese.
Finance research at the University of Southern Denmark likewise takes its starting point in modern microeconomics. The central topics are investments by businesses and individuals, financing and risk management. The research revolves around an understanding of valuation in capital markets and the risks associated with investment in financial assets. The Finance Group conducts research in private consumption, savings and investments over the life cycle, the link between stock and bond prices and e.g. economic growth, demographic changes and house prices, and in valuation of the assets and liabilities of a business. The group has published numerous articles in good international journals and has attracted substantial external funding. Due to the departure of outstanding researchers in recent years, the group is currently rebuilding and at present consists of one full professor, one associate professor, one assistant professor and one Ph.D. student.
Accounting and Finance are closely related research areas, both dealing with a number of relevant issues that share a theoretical basis in modern economic theory. Historically, the interfaces between Accounting and Finance have been utilized to create the international standing of the two groups because it has been possible to establish extensive collaboration concerning the education of Ph.D. students, concrete research projects and internal collaboration between the groups. Both groups are highly visible in the international arena and – in spite of the relatively small research environments – have published extensively in leading journals. By national standards the international exposure of the Accounting Group is unique, as are the close relations with the Finance Group.
Networking
Modern microeconomics, in which game theory and information are basic factors, is the theoretical foundation for research in Accounting and Finance. The Department of Business and Economics has strong research expertise within these fields, and with regard to empirical studies the research environment in econometrics is important. From the research in management accounting there are close links to production planning and logistics, which is a central theme in the department’s research activities in the field of Management Science. Outside the department there are apparent opportunities for collaboration with the group in organizational theory which is currently being established at the Department of Marketing & Management. Similarly, there are close relations between financial accounting and auditing and the research in finance law and company law which is being carried out in the Department of Law.
Inherently the research communities in the various disciplines of business and economics are relatively small, e.g. because research based teaching is being offered at undergraduate, graduate, Ph.D., and master’s levels in all disciplines. This – combined with the distinct goal of publishing articles in highly esteemed international journals – means that the focus has been on establishing and enhancing relations with the best international research communities. An infusion of resources would also result in a strengthening of the internal collaboration for the benefit of both research and education.
Alliances
The two research groups in Accounting and Finance have benefited from informal strategic alliances in their work to strengthen research and the education of Ph.D. students. This approach has worked well and has been a deciding factor for the achievement of the international rankings held by the groups today. Currently there is a development towards formalized doctoral schools and research networks, which makes it important at present to add formalized networks to the informal ones. Professor John Christensen will continue on as President of European Accounting Association (EAA) for the next two years, and he has been chairman of the EAA Doctoral Colloquium in Accounting for five years and faculty member for 10 years.
Both groups are active participants in the Danish network D-CAF (Danish Center for Accounting and Finance) which is funded by the Danish Social Sciences Research Council, Nykredit and The Institute of State Authorized Public Accountants in Demarks (FSR) (FSR’s Studie- og Understøttelsesfond). The Finance Group has an active role in the Danish Doctoral School of Finance, which collaborates with other Nordic universities and doctoral schools in the Nordic Finance Network, and members of the group have taught Ph.D. courses in Germany and Finland. The Accounting Group is actively involved in the work to establish a Nordic doctoral school in accounting, which is to begin activities in the autumn of 2007. Furthermore, the Accounting Group has taught courses in the European Institute for Advanced Studies in Management’s EDEN program, which is a European doctoral education network. All these networks are characterized by being strategic alliances that fulfil a vital demand to ensure that doctoral education programmes have the necessary versatility and depth. John Christensen’s affiliation with the University of Manchester as Honorary Professor creates unique opportunities for a strategic alliance relating to the Ph.D. program and other areas of interest for the Faculty of Business and Social Sciences.
Education perspectives
The Finance Group constitutes the academic basis for the Master of Science profile in Finance, and correspondingly the Accounting Group is the academic basis for both the profile in Accounting and Management Control and the Master of Science in Business Administration and Auditing. The profiles to which the Accounting and Finance Groups are the central contributors and also – and perhaps more importantly – profiles with interfaces to the priority area will be strengthened. In a larger perspective all profiles in the MSc programme are the result of collaboration among research groups, and increased emphasis on this collaboration will contribute to the creation of more comprehensive education programmes in business and economics.
The Department of Business and Economics has fostered a large number of highly qualified Ph.D. candidates in the fields of Accounting and Finance, who have moved on to jobs in the academic world – in Denmark and abroad – and in the private business sector. In recent years, the financial sector has seen an increasing demand for Ph.D. candidates, a trend which is expected to continue and to increase. Increasing the focus on Accounting and Finance is likely to result in an increased production of Ph.D. candidates.
Research perspectives
Examples of research themes in relation to the priority area, to which the research groups at the Department of Business and Economics are in a special position to deliver both academically interesting and highly relevant results, are:
• Accounting based valuation of a business and its stocks; a theme that requires the unique combination of competencies in Accounting and Finance which are present at the University of Southern Denmark
• Decisions regarding savings and investments, and their influence on valuation in the capital markets
• Management accounting in supply chains
• Housing economy and financing
• Micro credits and microfinance
The above is a selection of examples. The activities in the priority area will evidently depend on the research profiles and spheres of interest of the academic staff that will join the area.
Accounting and Finance as priority area
The selection of Accounting and Finance as priority area will benefit both research and teaching at the Faculty of Business and Social Sciences:
• The notoriously strong environment in the two areas will be maintained,
• an increase in the number of faculty members will strengthen the two fields, their mutual synergy and their interfaces to other disciplines,
• the creation of networks and alliances will constitute the basis for improved collaboration with other research environments both internally and externally,
• the creation of more cohesive education programmes at the University of Southern Denmark,
• the production of Ph.D. candidates will be stepped up in academic areas with high demand.
On this basis, Accounting and Finance at Campus Odense is recommended as a candidate for the appointment as priority area at the University of Southern Denmark.