Catherine Schrand - Faculty Research in Knowledge@Wharton

Are 'Mark-to-market' Accounting Rules on the Mark?

Wed, 01 Apr 2009 17:13:39 EST

On April 2, the Financial Accounting Standards Board is expected to vote on a proposal to relax a standard at the heart of the financial crisis -- mark-to-market accounting rules that require toxic assets to be carried on companies' books at fire-sale prices, based on recent trades of similar assets for far less than they would command in normal times. Many big banks say the crisis has been made worse by these rules. Not everyone agrees.

Are Overconfident Executives More Inclined to Commit Fraud?

Wed, 05 Mar 2008 15:48:59 EST

No one makes it to the top ranks of corporate management without a healthy amount of self-assurance. Confidence underlies decisive, strong leadership, but does overconfidence lead managers to cross the line and commit fraud? New research by Wharton accounting professor Catherine M. Schrand and doctoral student Sarah L. C. Zechman examines patterns in frauds to determine if some frauds evolve, not out of pure self-interest, but because executives are overly optimistic that they can turn their firms around before fraudulent behavior catches up with them. Their paper is titled, "Executive Overconfidence and the Slippery Slope to Fraud."

The Role of Derivatives in Corporate Finances: Are Firms Betting the Ranch?

Wed, 11 Jan 2006 16:32:12 EST

Many American corporations use derivatives conservatively, to offset risks from fluctuating currency and interest rates. But over the years, companies such as Procter & Gamble and Gibson Greetings have run into serious financial trouble using derivatives in a more dangerous fashion -- to speculate. Is high-risk behavior common? Are shareholders in for ugly surprises if executives' derivatives bets go sour? To get a better picture of derivatives' role in corporate finances, Wharton finance professors Christopher C. Geczy and Catherine Schrand and their co-author, Bernadette A. Minton of Ohio State University, re-examined confidential responses from an earlier study that focused in part on derivatives. Their findings are in a paper entitled, "Taking a View: Corporate Speculation, Governance and Compensation."

Accounting for the Abuses at AIG

Wed, 20 Apr 2005 15:36:00 EST

When accounting problems at American International Group surfaced last winter, it looked like a small matter next to the corporation-busting scandals of the Enron era. But AIG directors acted as if the company's very survival was at stake, removing Maurice Greenberg as CEO and later forcing him to step down as chairman. The heart of the problem is this: No one can be sure how big the scandal will grow, because it involves business relationships, insurance products and accounting practices so arcane that few people understand them -- including a controversial product known as "finite insurance."

Accounting Games Companies Play (Especially With Revenues and Costs)

Wed, 14 Jul 2004 15:04:47 EST

Last month the Securities and Exchange Commission charged Lucent Technologies with "fraudulently and improperly" recognizing more than $1 billion in revenues and $470 million in pre-tax income during fiscal 2000. In these post-Enron days of tougher financial accounting standards, what lessons can be learned from the situation that got Lucent into trouble? Accounting professors at Wharton and other experts say that it is crucial for companies to pay close attention to issues such as the proper way to recognize revenues and calculate expenses. Unless this is done right, it may not only attract regulatory action but also undermine relations with investors and partners.