Faculty & Research

Michael Minnis

Associate Professor of Accounting

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5807 South Woodlawn Avenue
Chicago, IL 60637

Michael Minnis studies the role of accounting information in allocating investment efficiently by both management and capital providers, the use of financial reporting in mitigating information opacity issues of privately-held firms, and the interplay within management in the production and use of financial information. He particularly enjoys identifying unique data and methods to empirically examine issues in a novel way.

Prior to pursing his PhD, Minnis’ accountancy and CPA background allowed him to work in a variety of professional roles. He worked in corporate finance at Eli Lilly and Company, Inc. and later at Fitzgerald | Isaac, p.c. as a certified public accountant. Building on his knowledge and experience, Minnis went on to found Controller Associates LLC where he also served as President of the company. Controller Associates, LLC provided part-time controller and Chief Financial Officer services to small companies and non-profit organizations, as well as a variety of financial statement analysis and consulting services. He sold the firm to Milestone Advisors in 2006.

“Having worked with and studied companies ranging in size from large multi-nationals to start-up ventures, I have seen the usefulness and the power of the information conveyed in financial statements. I want students to be able to take full advantage of this information.”

Minnis received his PhD from the University of Michigan and his BS from the University of Illinois, where he graduated with Highest Honors. In addition to being awarded two fellowships, Minnis’ honors also include “Indy’s Best and Brightest, top accounting professional under the age of 40” and “Indiana CPA Society, 5 Under 35.”


2014 - 2015 Course Schedule

Number Name Quarter
30130 Financial Statement Analysis 2014 (Fall)

Other Interests

Enjoys a variety of sports and spending time with his family.


Research Activities

My research interests include the use of financial reporting in mitigating information opacity issues of privately-held firms; the role of accounting information in allocating investment efficiently by both management and capital providers; and the interplay between management in the production and use of financial information. I particularly enjoy identifying unique data and methods to empirically examine issues in a novel way.

"Knowledge, Compensation, and Firm Value: An Empirical Analysis of Firm Communication," with Feng Li, Venky Nagar, and Madhav Rajan, Journal of Accounting and Economics, accepted June 2014.

"A Measure of Competition Based on 10-K Filings," with Feng Li and Russell Lundholm, Journal of Accounting Research, 51 (May 2013): 399-436.

“The Value of Financial Statement Verification in Debt Financing: Evidence from Private U.S. Firms,” Journal of Accounting Research (May 2011).

New: Knowledge, Compensation, and Firm Value: An Empirical Analysis of Firm Communication
Date Posted: Nov  24, 2014
Knowledge is central to managing an organization, but its presence in employees is difficult to measure directly. We hypothesize that external communication patterns reveal the location of knowledge within the management team. Using a large database of firm conference call transcripts, we find that CEOs speak less in settings where they are likely to be relatively less knowledgeable. CEOs who speak more are also paid more, and firms whose CEO pay is not commensurate with CEO speaking have a lower industry-adjusted Tobin’s Q. Communication thus appears to reveal knowledge.

New: Credit Cycles and Financial Statement Verification
Date Posted: Sep  30, 2014
We use the US construction industry during the years 2002 to 2011 as a setting to examine whether credit cycles affect the use of financial statement verification in debt financing. Our estimates reveal that banks reduced their collection of unqualified audited financial statements from construction firms by 21% during the housing boom period before 2008, relative to firms in other industries. This reduction was most severe in the US regions that experienced the most significant construction loan growth and largest ex post loan losses. These trends reversed during the subsequent housing crisis in 2008 to 2011 when the credit cycle reversed. Moreover, using bank and firm level data we find a strong negative (positive) relation between audited financial statements and subsequent loan losses (construction firm survival). Collectively, our results reveal that macroeconomic credit fluctuations cause temporal shifts in the overall level of financial statement verification in the economy ...

REVISION: Financial Statements as Monitoring Mechanisms: Evidence from Small Commercial Loans
Date Posted: Feb  04, 2014
We use a proprietary database of bank information requests to small commercial firms to examine the role of financial statements in monitoring borrowers. In this setting financial reporting is not mandated by regulation, but is the equilibrium outcome of negotiation between the bank and borrower. We find that while financial statements are the most commonly requested item in the dataset, they are requested for only half of the loans. Moreover, we find that alternative contracting mechanisms mediate financial statement requests on both the extensive and intensive margins. Collectively, our results provide novel evidence of the fundamental demand for financial reporting in debt contracting and the manner in which banks fulfill their role as delegated monitors.

REVISION: Financial Reporting Choices of U.S. Private Firms: Large-Sample Analysis of GAAP and Audit Use
Date Posted: Jan  14, 2014
We examine the financial statement production of privately held U.S. firms using a comprehensive panel dataset of all tax returns from firms with more than $10 million in assets during the years 2008 to 2010. We find that more than 60% of these firms — controlling nearly $4 trillion in assets in 2010 — do not prepare audited GAAP financial statements. In contrast to recent assertions, the rate of audited GAAP financial statement production is remarkably persistent at both the population and firm levels over our time horizon. For firms that do switch, we find that producing audited GAAP financial statements is associated with characteristics of growth opportunities — young, high-growth, loss-making firms with intangible assets and expanding ownership — while the termination of audited GAAP statements is associated with financial distress. Firms raising new capital without an audit are typically mature, profitable firms with tangible assets. Collectively, our findings offer new ...

REVISION: A Measure of Competition Based on 10-K Filings
Date Posted: Oct  24, 2012
In this paper we develop a measure of competition based on management’s disclosures in their 10-K filing and find that firms’ rates of diminishing marginal returns on new and existing investment vary significantly with our measure. We show that these firm-level disclosures are related to existing industry-level measures of disclosure (e.g. Herfindahl index), but capture something distinctly new. In particular, we show that the measure is associated with the rates of diminishing marginal retu

REVISION: Disclosure Drifts in Investor Networks
Date Posted: Jun  05, 2011
This study develops a model of information diffusion in a setting where investors are linked in a social network. We develop a model in which a firm's disclosure initially reaches only a subset of the investor base. Examples include investor relations conferences and settings where finite attention and cognitive skills limit the set of investors who monitor the firm's disclosures. While investors can learn from prices in our model, we focus on how the initially uninformed investors receive the i

New: The Value of Verification in Debt Financing: Evidence from Private U.S. Firms
Date Posted: Feb  01, 2011
I examine how verification of financial statements influences debt pricing. I use a large proprietary database of privately-held U.S. firms, an important business sector in which the information environment is opaque and financial statement audits are not mandated. I find that audited firms have a significantly lower cost of debt and that lenders place more weight on audited financial information in setting the interest rate. Further, I provide evidence of a mechanism for this increased financia

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