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Leuz Receives Award for Accounting Research

August 22, 2014

Christian Leuz, Joseph Sondheimer Professor of International Economics, Finance and Accounting at the University of Chicago Booth School of Business, has been selected as one of three recipients of the 2014 Distinguished Contribution to Accounting Literature Award.

The award, given by the American Accounting Association for research that has had a significant impact across the discipline for a period of at least five years, honors Leuz and his co-authors, Dhananja Nanda and Peter Wysocki, both of the University of Miami School of Business, for their paper, "Earnings Management and Investor Protection: An International Comparison," published in 2003 in the Journal of Financial Economics.

"The award is a big honor, and it feels great that other researchers in the profession recognize our work with this award. I am very thankful for that," Leuz says. "The award is also special because the paper was somewhat controversial when we wrote it. Right after Enron and the accounting scandals in the U.S., many people were skeptical about the results and the way we measure the opacity of reported numbers across countries. But over time the paper’s insights have been replicated and applied in many other papers and settings."

The researchers compared the quality of financial reporting using various opacity and earnings management measures across 31 countries, and found that countries with more dispersed ownership, strong investor protection and large stock markets are less likely to have opaque and manipulated earnings reports.

"In my mind, the paper's main contribution has been to show that there is systematic variation in the quality of financial reporting that relates to countries' institutional features, like the protection of outside investors, the functioning of the legal system, etc. Thus, the paper highlighted the importance of institutional features — or clusters thereof," Leuz says. "Conventional thinking at the time primarily focused on the accounting rules — and differences therein — as driving international differences in financial reporting."

Also this year, Leuz has been named among The World's Most Influential Scientific Minds 2014, by Thomson Reuters, who identified him as one of the year's most highly cited researchers. Leuz also serves as co-director of the Initiative on Global Markets at Booth, a research associate at the National Bureau of Economic Research, and a fellow at the European Corporate Governance Institute, the Financial Institution Center at Wharton, the Center for Financial Studies at Goethe University and in the CESifo Research Network. Leuz has done extensive research on the role of corporate disclosures, accounting transparency and disclosure regulation in capital markets and in corporate financing. He has contributed studies to the link between financial disclosure and firms' cost of capital, which is considered one of the most fundamental links in accounting and financial economics.

Among his other awards, Leuz has received the Humboldt Research Award, given by the Alexander von Humboldt Foundation in Germany in honor of a researcher’s total body of work to date.

The American Accounting Association, founded in 1916, is the largest community of accountants in academia.