Catherine M. Schrand

Catherine M. Schrand
  • Celia Z. Moh Professor
  • Professor of Accounting
  • Vice Dean of Wharton Doctoral Programs

Contact Information

  • office Address:

    1316 Steinberg Hall-Dietrich Hall
    3620 Locust Walk
    Philadelphia, PA 19104-6365

Research Interests: disclosure, earnings quality, risk management

Links: CV

Overview

Professor Catherine Schrand’s research primarily focuses on risk management and disclosure. Her research has been published in top-tier academic journals including Journal of Accounting and Economics, The Accounting Review, Journal of Finance, Journal of Financial Economics, Review of Accounting Studies, and Contemporary Accounting Research. She is an associate editor of Journal of Accounting and Economics, Journal of Accounting Research, and Journal of Financial Services Research. She is the author (along with Patricia Dechow) of Earnings Quality, and of Understanding earnings quality: A review of the proxies, their determinants and their consequences (with Weili Ge and Patricia Dechow).

In addition to doctoral level courses, she teaches an undergraduate elective on Financial Accounting. She has been actively involved in the accounting standard setting process through her past service on the Financial Accounting Standards Committee of the American Accounting Association and her involvement with the AAA/FASB Financial Reporting Issues Conference.

She received her PhD from the University of Chicago in 1994 and her BBA from the University of Michigan. Before attending graduate school, Professor Schrand was a staff auditor and audit manager at KPMG Peat Marwick in Chicago and she is a Certified Public Accountant in Illinois.

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Research

  • Karthik Balakrishnan, Catherine M. Schrand, Rahul Vashishtha (Working), Analyst recommendations, traders’ beliefs, and rational speculation.

  • Jonathan Rogers, Catherine M. Schrand, Sarah Zechman (Working), Do managers tacitly collude to withhold industry-wide bad news?.

  • Kathryn Dewenter, Catherine M. Schrand, Clare Wang (Working), The impact of currency risk on US MNCs: New evidence from returns and cross-border investment around currency crises.

  • Christian Leuz and Catherine M. Schrand (Working), Voluntary disclosure and the cost of capital: Evidence from firms’ responses to the Enron shock.

  • Bernadette A. Minton and Catherine M. Schrand (2016), Institutional investments in pure play stocks and implications for hedging decisions, Journal of Corporate Finance, 37, pp. 132-151.

    Abstract: We show that institutions invest in stocks within an industry that maintain exposure to their underlying industry risk factor. These “pure play” stocks have greater numbers of institutional investors and institutions systematically overweight them in their portfolios while underweighting low industry-exposure stocks of firms in the same nominal industry. Pure play stocks also have greater liquidity measured by stock turnover and price impact. An implication of these results is that catering to these preferences could be an important variable in firms' risk management decisions, potentially offsetting incentives to reduce volatility via hedging. We further characterize institutions' investments for pure play stocks across institution type, industries, and over time.

  • Catherine M. Schrand (2014), Discussion of “Cash flow asymmetry: Causes and implications for conditional conservatism research”, Journal of Accounting and Economics, 58 (2-3), pp. 201-207.

    Abstract: Accounting researchers should not view CHT?s analysis as the solution to our collective problem of being able to measure conditional conservatism. CHT provide evidence about earnings asymmetric timeliness and an accruals-based measure of asymmetric timeliness that is useful for evaluating construct validity. In some cases, CHT?s evidence will translate directly to another researcher?s setting. In other cases, CHT provide useful guidance for researchers to follow in conducting their own construct validity analysis. But it is ultimately the responsibility of each researcher to conduct his own construct validity analysis specific to his research question and sample.

  • Catherine M. Schrand and Sarah Zechman (2012), Executive overconfidence and the slippery slope to financial misreporting, Journal of Accounting and Economics, 53, pp. 311-329.

    Abstract: A detailed analysis of 49 firms subject to AAERs suggests that approximately one-quarter of the misstatements meet the legal standards of intent. In the remaining three quarters, the initial misstatement reflects an optimistic bias that is not necessarily intentional. Because of the bias, however, in subsequent periods these firms are more likely to be in a position in which they are compelled to intentionally misstate earnings. Overconfident executives are more likely to exhibit an optimistic bias and thus are more likely to start down a slippery slope of growing intentional misstatements. Evidence from a high-tech sample and a larger and more general sample support the overconfidence explanation for this path to misstatements and AAERs.

  • Patricia Dechow, Weili Ge, Catherine M. Schrand (2010), Understanding earnings quality: A review of the proxies, their determinants and their consequences, Journal of Accounting and Economics, Forthcoming. 10.1016/j.jacceco.2010.09.001

    Abstract: Researchers have used various measures as indications of “earnings quality” including persistence, accruals, smoothness, timeliness, loss avoidance, investor responsiveness, and external indicators such as restatements and SEC enforcement releases. For each measure, we discuss causes of variation in the measure as well as consequences. We reach no single conclusion on what earnings quality is because “quality” is contingent on the decision context. We also point out that the “quality” of earnings is a function of the firm’s fundamental performance. The contribution of a firm’s fundamental performance to its earnings quality is suggested as one area for future work.

  • Katherine Schipper, Catherine M. Schrand, Terry Shevlin, T. J. Wilks (2009), Reconsidering Revenue Recognition, Accounting Horizons, (March).

    Abstract: This commentary summarizes the materials presented and some of the discussion at the November 2007 AAA/FASB Financial Reporting Issues Conference. The topic of the conference was revenue recognition, and the IASB/FASB were considering two new models: the customer consideration model and the measurement model. This commentary provides some background on revenue recognition, discusses the need for a new model, and presents the two models. The conference discussion highlighted that the two proposed models are based on a single conceptual approach but differ in measurement issues. Key aspects in both models are the identification of contractual performance obligations between the seller and customer (which gives rise to a contract liability) and determining when the performance obligation is satisfied (equivalently, when the contract liability is extinguished) and revenue is recognized.

  • Christopher C. Géczy, Bernadette A. Minton, Catherine M. Schrand (2007), Taking a View: Corporate Speculation, Governance, and Compensation, Journal of Finance, (October).

    Abstract: Using responses to a well-known confidential survey, we study corporations' use of derivatives to “take a view” on interest rate and currency movements. Characteristics of speculators suggest that perceived information and cost advantages lead them to take positions actively; that is, they do not speculate to increase risk by “betting the ranch.” Speculating firms encourage managers to speculate through incentive-aligning compensation arrangements and bonding contracts, and they use derivatives-specific internal controls to manage potential abuse. Finally, we examine whether investors reading public corporate disclosures are able to identify firms that indicate speculating in the confidential survey; they are not.

Teaching

Current Courses

  • WH 150 - Evaluating Evidence

    WH 150 provides an introduction to all stages of the research process for business topics. In the first third of the course, we discuss theory building, hypothesis development, and research design choices particularly in casual research. In the second third, we discuss data collection methods (e.g., surveys, experiments, case studies and fieldwork) and the use of archival databases. This part of the cours emphasizes the interplay between research design and sampling/data collection methods. In the final third of the course, we introduce data analysis and interpretation, including methods for converting raw data into measurable constructs suited to statistical analysis.

    WH 150301

    WH 150302

Past Courses

  • ACCT101 - Accounting and Financial Reporting

    This course is an introduction to the basic concepts and standards underlying financial accounting systems. Several important concepts will be studied in detail, including: revenue recognition, inventory, long-lived assets, present value, and long term liabilities. The course emphasizes the construction of the basic financial accounting statements - the income statement, balance sheet, and cash flow statement - as well as their interpretation.

  • ACCT921 - Empirical Research in Accounting I

    This is an empirical literature survey course covering topics that include corporate disclosure, cost of capital, incentives, compensation, governance, financial intermediation, financial reporting, tax, agency theory, cost accounting, capital structure, international financial reporting, analysts, and market efficiency.

  • ACCT922 - Empirical Research in Accounting II

    This is an empirical literature survey course covering topics that include corporate disclosure, cost of capital, incentives, compensation, governance, financial intermediation, financial reporting, tax, agency theory, cost accounting, capital structure, international financial reporting, analysts, and market efficiency.

  • WH 150 -

    WH 150 provides an introduction to all stages of the research process for business topics. In the first third of the course, we discuss theory building, hypothesis development, and research design choices particularly in casual research. In the second third, we discuss data collection methods (e.g., surveys, experiments, case studies and fieldwork) and the use of archival databases. This part of the cours emphasizes the interplay between research design and sampling/data collection methods. In the final third of the course, we introduce data analysis and interpretation, including methods for converting raw data into measurable constructs suited to statistical analysis.

  • WH 399 - Honors Thesis

    This seminar takes place over two semesters and provides students with the skills to perform their own research under the guidance of a Wharton faculty member. At the conclusion of the fall semester, students will produce a thesis proposal including literature review, significance of the research, methodology, and exploratory data if relevant. Throughout the fall semester faculty guests from a range of disciplines will present on their research in class, highlighting aspects that are relevant to the work students are engaging in at that point. During the second semester, students will collect and analyze data and write up the results in close collaboration with their faculty mentor. At the end of the spring semester, each student will present their research in a video presentation. Throughout the course, students will work individually, in small groups, and under the mentorship of a Wharton faculty member. The goal is to becomes capable independent researchers who incorporate feedback and critical (self-) analysis to take their research to the next level.

Awards and Honors

  • American Accounting Association’s Financial Accounting and Reporting Section (FARS) Best Paper Prize, 2015
  • GARP Risk Management Research Grant, 2007
  • Caesarea Award for the Best Paper in Risk Management (WFA meetings), 2004
  • University of Pennsylvania Research Foundation award, 1995
  • Arthur Andersen & Co. Foundation Doctoral Dissertation Fellowship, 1993
  • University of Chicago Big Ten Doctoral Consortium representative, 1993
  • KPMG Peat Marwick Doctoral Scholarship, 1992
  • AAA Doctoral Consortium Fellow, 1992
  • AICPA Doctoral Fellow, 1990-1992

In the News

Activity

Latest Research

Karthik Balakrishnan, Catherine M. Schrand, Rahul Vashishtha (Working), Analyst recommendations, traders’ beliefs, and rational speculation.
All Research

In the News

What the BoA Settlement Means for the Bank – and for Banking

Despite the Justice Department’s ruling in the Bank of America mortgage case, it’s unlikely those hurt most will get any money, or that the outcome will prevent a re-occurrence.

Knowledge @ Wharton - 2014/09/9
All News

Awards and Honors

American Accounting Association’s Financial Accounting and Reporting Section (FARS) Best Paper Prize 2015
All Awards