In this Approach blog post, the news team spoke with Rensselaer Lally School of Management Associate Professor Qiang Wu’13 about the value of experiential learning, development, and community in research and the classroom.
Q: What drew you to becoming an empirical researcher? How has this driven the discovery process in your research and teaching in finance and accounting?
I completed my Ph.D. program at Rensselaer and while doing so, I realized how to understand, examine, and analyze transformations in different fields that affect our lives. I chose to be an empirical researcher as the discovery process is guided by more than just theory alone; rather, it builds a foundation for new insights and awareness through verifiable observation or experience. This process allows me to stretch a given notion about why something may occur, and give it a real-life platform for it to be studied.
As a faculty member at the Rensselaer Lally School of Management, I find these methods translate to the classroom in giving our students an enhanced experience that involves not just textbook learning and exams, but also the intellectual agility that comes from practical hands-on application of the topics we cover. I have them use what they’ve learned in projects with other schools on campus, in new software programs, case studies, company visits, with expert speakers, and in financial workshops and competitions. This multidimensional strategy reflects, The New Polytechnic, a great crossroads for collaboration—working with partners and resources across disciplines, sectors, and geographic regions to gain even further understanding and exploration of societal challenges.
Q: The areas of finance and accounting are very large domains. What specific areas do you tend to focus your research around?
Generally, I am conducting research on the determinants and consequences of various corporate policies. Those corporate policies include corporate tax avoidance, financial reporting quality, debt contracting, corporate governance, etc.
In the real world, corporate decision-making is far more complicated than what we learn from classical financial and accounting theories. So I am very interested in exploring research questions beyond the traditional boundary and considering different factors that may impact the outcomes found. This method of research parallels the transformative student experience at Rensselaer that allows students to challenge the information and conclusions they come across in their fields of study or the greater world they encounter.
Q: Can you give us further understanding on how you’ve examined corporate decision-making in a different way?
One particular perspective that I think is interesting and important is the role of individual people in corporate decision-making. Neoclassical economic theory suggests that top managers are homogeneous and rational optimizers. It assumes they have very limited capacity in exercising their individualistic influence on the process of corporate outcomes or decisions. Therefore, corporate policies are basically determined by firm fundamentals, as taught in the classical textbooks and traditional classrooms.
In reality, however, any corporate decision is ultimately made by individual people, and individuals have their own styles and characteristics, such as their experience, values, beliefs, culture, and personalities. This diversity of style and character in leaders should not only be recognized and valued, but explored for its influence. Thus, I am very interested in exploring the incremental effects of individuals on corporate decisions that are beyond traditional firm fundamentals.
Q: What are some of the factors you study that may impact the role of individual top managers on corporate decision-making?
Two factors in corporate decision-making that I am working on are 1) the gender of executives, and 2) the social environment where executives reside.
My motivation of looking at the gender of executives is that over the past decade, more and more female executives hold positions of power in corporate America. Along with this increase, it has become more important to better understand women leadership styles and how they impact corporate decisions differently from men. Borrowing from various gender difference theories from sociology, psychology, and economics literatures (e.g., female are more risk averse, are more transformational, and face discrimination in the labor market), I have, along with my coauthors, examined how female executives affect accounting conservatism—the exercise of caution in the recognition and measurement of income and assets in financial reports.
We found that female executives are more conservative than their male counterparts in corporate accounting decision-making. This paper was published in 2015 in Contemporary Accounting Research. I am currently working on four other gender-related projects: (1) whether hedge funds are more likely to target women-led firms; (2) how CFO gender affects internal control weakness; (3) how CFO gender affects corporate social responsibility; and (4) the impact of female CTOs on corporate innovation.
Q: What is social capital and how does it affect corporate decision-making?
Social capital has been a subject of extensive research in sociology, political science, and economics. A central theme is that social capital—captured by shared common beliefs (i.e., civic norms) and dense networks associations—facilitates norm-consistent behaviors and constrains norm-deviant behaviors. However, there is little evidence relating a community’s social capital to decisions of corporations headquartered in the community.
A collection of my recent papers introduces social capital construct into accounting and finance domains and examines how social capital surrounding firms affects their residents (e.g., executives and employees) and consequently their corporate decision-making. In the paper “Social Capital and Bank Loan Contracting,” I and my coauthors examine whether banks value social capital when making their lending decisions. We find that banks give more favorable contracts (e.g., lower price and less covenant requirements) when lending to firms located in higher social capital area. The paper is forthcoming in the Journal of Financial and Quantitative Analysis.
Other ongoing topics that my coauthors and I are working on now include how social capital affects corporate tax avoidance, M&A decisions, insider-trading, trade credits, and CEO compensations.
Q. What advice would you give for students interested in a career in finance or accounting?
I would say to not be afraid to explore your true academic interests and hunches. Any field can benefit greatly from critical thinking and analysis. Society evolves forward from dedicated study and challenge of existing academic disciplines and fields of work—whether your interest is organizational risk management, to quantitative finance, to accounting or beyond—you can contribute to bettering the world with your curiosity, innovation, and openness to work with others.
The Lally School has a comprehensive and customized plan for study in these areas at the undergraduate, graduate, and doctoral levels. I encourage you to think big and pursue a program that appeals to you and can prepare you well for either in your next job or research endeavor.