James A. Ohlson joins elite faculty ranks
Editor’s Note: This profile is one in a series that highlights Arizona State University’s 2008 and 2009 Regents’ Professors. The Regents’ Professor honor is the most prestigious faculty award at the university. Click here to view the complete list of awardees.
James A. Ohlson proved that accounting is more than just a numbers game.
A world-renowned leader in the field of financial accounting theory, he teaches that you have to marry the numbers to a company’s values and the context of the real world. He became famous in the accounting industry after spending 10 years crafting his masterpiece, a paper called “Earnings, Book Value and Dividends in Security Valuation.”
“The idea is that you can come up with a coherent theory as to why firm values correspond with accounting data,” says Ohlson, the W. P. Carey Chair in Accountancy at the W. P. Carey School of Business, and a 2008 Regents’ Professor. “You have to have the values and the numbers as a package – neither can stand alone. If something is worth something today, then it has to be dependent on your vision of the future and what you know. You must connect with the context and what people do in practice.”
“No entity, for-profit or not-for-profit, can be successful without metrics, controls and a thorough understanding of its financial condition,” says Robert Mittelstaedt, the dean of the W. P. Carey School of Business. “For that reason, one of the foundations of a top-tier business school is a strong accounting department, and Jim Ohlson is one of the top professors in the field. We are very pleased to have such an eminent scholar and teacher in our school.”
One of his colleagues says that Ohlson changed the way people utilize accounting information, both in the real world and at educational institutions.
“Thirty years ago, Ohlson observed that accountants measured earnings and put most of their emphasis on those numbers, but finance teachers really discounted that and put their focus on cash flow,” says James Boatsman, the KPMG Professor of Accounting at the W. P. Carey School of Business. “Jim redeemed those of us in accounting, showing that what we do matters. He came up with a theory to show why we focus on the earnings. His research had a very dramatic impact on the way equity valuation is thought about and how it is taught to MBA students.”
Ohlson has taught at Stanford University, Columbia University, New York University and the University of California, Berkeley. He refers to his six-month appointment as a Centennial Professor at the London School of Economics and Political Science as one of the highest honors he has received.
Ohlson’s impressive research has been published in a staggering 20-plus academic journals, including the Journal of Finance, International Economic Review, Management Science, the Accounting Review, Decision Sciences, Contemporary Accounting Research, Review of Accounting Studies, Journal of Accounting Research and the Journal of Accounting, Auditing and Finance. He also has served on the editorial boards of nine major academic journals, still participating on three. His work includes a book, “The Theory of Financial Markets and Information,” and more than 50 published papers.
Ohlson’s peers have recognized him with many top awards and prizes, including the American Accounting Association’s Notable Contribution to the Literature Award, an honorary doctorate degree from the Stockholm School of Economics, the American Accounting Association’s Educator of the Year Award and the AICPA/AAA Notable Contributions Award. His international appeal has resulted in lectures in countries from Germany and England to Norway, China and Kuwait.
His career as an educator spans more than three decades, ever since he graduated with a master’s degree and a doctorate in business administration from the University of California, Berkeley. However, he’s not even close to finished with working on new concepts and innovation.
Ohlson is currently working on another paper with an idea that aims to revolutionize the way the world looks at accounting. He says you have to consider more than just numbers in an accounting package to create a true “big picture” of a company.
“Growth, risk and accounting are three sides of the same coin,” Ohlson says. “You can’t understand one without the other. You have to take all of these factors into account as a whole.”