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Executive Interviews: Interview with K Ramesh on Management Guru
October 2010
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By Dr. Nagendra V Chowdary
K Ramesh K Ramesh Professor of Accounting,
Jones Graduate School of Business
Rice University
Economic and litigation consulting
provides challenging opportunities
for people with academic-type
training to help solve real-world
problems. Unlike management
consulting, economics-based
litigation consulting involves largely
postmortem work, but that's exactly
what academics engaged in archival
research do on a daily basis. For
example, did a company earn excess
profits given the risks it took? The
answer to this question may be an
important determinant of damages in
an antitrust matter. How much of the stock price decline reflects the effects
of accounting shenanigans
perpetrated by a company? The
company's audit firm may be
interested in knowing the answer to
this question. What is the economic
value of a lost business opportunity?
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Did a parent company use unfair
transfer prices to extract value from
the minority shareholders of a
subsidiary? What are the damages
from wrongful termination of a
business executive? These and
many other questions that arise from
contractual frictions and lack of
regulatory compliance can be
answered using rigorous methods
from finance, economics, and
accounting. Moreover, the ability to
focus on the big picture is a key to
success in litigation consulting. A
mentor of mine used to say that
when slicing a pizza, focus on the
pizza slices and not on what's
sticking to the knife! Academics
constantly struggle with the
principle of Occam's razor and try to communicate their ideas in a
succinct fashion, which is an
important trait for success in
economics-based litigation
consulting.
My consulting experience has helped
me with both my research and
teaching. On the teaching side, I am
even more aware of the real-world
issues. In fact, after I returned to
academics, I took on the task of
developing the course on corporate
governance and accounting that I
teach now to MBAs. My current
research efforts on corporate
disclosures environment is at least
partially due to my consulting
experience. My research focus was
further strengthened by my visit to
the US Securities and Exchange
Commission as an academic fellow at
the Office of the Chief Accountant
during 2007-08. The current fair
value debate started to resurface in a
vigorous fashion during that time,
which is also impacting my research
agenda. Overall, interacting with
standard setters, regulators, law
firms, and business corporations has
always been a two-way street, with
me benefitting as much, if not more,
as I hope I am giving back.
Can you explain how your
research on informational
intermediaries is providing new
insights on the impact of
globalization of the modern business
world on the capital markets of even
developed countries? Do you see a
role for India in the global
information revolution that is
sweeping the world capital markets?
More than 30 years ago, Nobel
Laureate, Robert Merton said that,
"The acquisition of information and
its dissemination to other economic
units are, as we all know, central
activities in all areas of finance, and
especially so in capital markets."
Over the last four decades, there has
been extensive academic research on
immediate market reaction to public
disclosures of accounting
information.
However, there have been limited
attempts at examining the process
through which publicly-disclosed
accounting information gets fully
impounded in stock prices. The
analogy is squeezing an orange to get
juice. The first squeeze gives us a lot
of juice, but we can continue to get
juice when the orange is squeezed a
second or third time. I view the initial
market reaction as the juice from the
first squeeze; there is more juice to be
had, but who is doing the second and
third squeezes? Here come the pure
information intermediaries such as
data aggregators and newswire
services to assist the capital market
participants by digging through
public-released accounting
disclosures to provide data in a timely
fashion and in forms suitable for
investor needs. Obviously, the
benefits of squeezing the orange a
second or a third time must outweigh
the costs. While even large
institutional investors might find it
costly to squeeze the information
orange a second or third time on their
own, they can collectively delegate
data collection efforts to information
intermediaries such as newswires
and data aggregators.
1.
The Multi-Branding Strategy Case Study
2. ICMR
Case Collection
3.
Case Study Volumes
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