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Thirty Years of Pioneering Accounting Research Honored at 75th Anniversary

Charles Horngren, considered the world over to be the man who pioneered modern day management accounting, was one of several faculty members honored during the Stanford GSB’s 75th anniversary celebration on May 19. The tribute was part of a larger panel discussion entitled “Thirty Years of Accounting,” in which several current and former faculty members and alumni examined how research at Stanford has helped turn accounting into the vital managerial tool that it is today.

Horngren, Edmund W. Littlefield Professor of Accounting, emeritus, pioneered the use of accounting data for managerial decision making in the early 1960s, thus transforming the way accounting would thereafter be used and taught. Joel Demski, a member of Stanford GSB’s faculty from 1968 to 1984, commented, “Chuck’s footprints and fingerprints can be seen over every aspect of the important changes that have gone on both at Stanford GSB and in accounting.” Demski, now a professor at the University of Florida, noted that under Horngren’s tutelage Stanford faculty and graduate students were encouraged to keep expanding the way accounting was perceived, used, and taught. “The clear pattern we learned from Chuck,” he said, “was to be unrelenting champions of innovation, change, risk-taking, and the pushing forward of the staunch foe called ‘the status quo.’”

Demski was also saluted by panelists for his significant contributions to the field, Gerald Feltham, a former faculty member now a professor of accounting at the University of British Columbia, talked about the years in which he and Demski collaborated to create evaluation models based on accounting data that were designed to help managers make informed decisions. Highlighting Demski’s role in the work, he noted, “Joel recognized that there was a distinction between the economic implications of failure to implement a plan and failure to predict correctly, for example. He worked on integrating the management science perspective with the traditional accounting process.” Like Horngren, Demski played an important role in mentoring PhD students, many of whom went on to make impressive contributions in the field.

William Beaver, Joan E. Horngren Professor of Accounting, described research during the past 30 years at the school that focused on four areas: the information content of earnings, market efficiency with respect to accounting data, the relation between earnings and stock prices, and the information content of prices with respect to future earnings. Mary Barth, associate professor of accounting described more recent work being done at Stanford on other kinds of information that accountants provide, such as components of earnings, variety of assets and liabilities, and footnote disclosures.

“From a capital markets perspective, we want to know how investors incorporate these pieces of information and if these items reflect what the accounting standard setters think they do,” Barth explained. “We’re also beginning to study how these accounting analyses and disclosures are reflected in share prices.” Other growing areas of research at Stanford, she said, center on fair value accounting models and the analysis of differences in international accounting standards.

In closing the panel, Beaver returned to the topic of Charles Horngren’s tremendous role in encouraging innovative research at Stanford. “It’s fitting that we honor him on the occasion of the school’s 75th anniversary,” Beaver said. “Chuck Horngren is a precious treasure of our heritage.”