Donors to major universities have increasingly questioned the amount of money spent to produce academic research, perhaps due to its link (or lack thereof) to practice. Indeed, not all research needs to have a direct link to practice. However, using events of recent macroeconomic cycles, we show that practice-informed accounting research is a large subset of academic research that provides important evidence on the extent to which financial disclosures provide information to anticipate firm performance. Specifically, we focus on the “emergence of derivatives, the internet, and terrorism” cycle (1995–2008) and the “digitalization of information, computing power, climate, and pandemic” cycle (2009–2020). We demonstrate how these cycles led to greater scrutiny of accounting disclosures, regulatory action, and subsequent research on the effectiveness of disclosure regulation. We also provide thoughts on future trends that could drive upcoming macroeconomic cycles and subsequent research that is likely to be needed. Finally, we impart advice to current and future accounting academic researchers for how they can develop the necessary institutional knowledge to execute relevant practice-informed research while also discussing the pros and cons of doing so. Overall, we demonstrate that a subset of accounting research is intricately linked to the macroeconomy and finds that investors generally respond effectively to disclosure; however, there are instances where markets are surprised by firm performance at least partly due to ineffective disclosure, and unintended consequences resulting from regulation designed to improve disclosure.

In this monograph, I advocate and illustrate an emerging stream of accounting literature that deploys economic models to study issues of accounting disclosure by banking institutions. To motivate the focus on a specific industry (banking), I identify two banking specificities: first, banks are fragile to the risk of runs due to their economic roles in liquidity creation, and second, banks are heavily regulated due to a desire to protect uninformed and dispersed depositors. More importantly, I show that considering these banking specificities, accounting disclosure by banks can play a prominent role in influencing the stability and the efficiency of the banking system. I present workhorse models that can be adapted as building blocks to capture the roles of accounting disclosure in the banking industry. I also draw on recent studies to illustrate specific accounting applications of the workhorse models and discuss their potential to generate implications that inform policy debates and empirical tests.

Since the 1930s, successive private-sector accounting standard setters in the United States have established, under the oversight of the Securities and Exchange Commission (SEC), “generally accepted accounting principles” for use by public companies. In the early decades, when the standard setter was a committee or board of the American Institute of Certified Public Accountants, and was a part-time body with a slender staff, the SEC intervened actively in its deliberations and in the formulation of its recommended practices. With the coming of the independent, full-time, well-resourced Financial Accounting Standards Board (FASB) in 1973, the SEC’s regard for the standard setter increased, and a climate of mutual respect and consultation prevailed. But beginning in the 1990s, companies and banks strongly opposing the Board’s standards already issued or in prospect increasingly turned to members of Congress for relief, hoping to force the FASB to back down. This article is a recounting and explanation of the series of episodes from the 1930s to the present on the evolution of the U.S. regulatory and standard-setting process for financial reporting by companies in the private sector. By gathering together all of these events and developments in a single article, it is hoped that researchers will come to appreciate the historical antecedents that have shaped today’s institutional reality for both the SEC and the FASB. An extensive list of references to books, articles, press reports, and other documents has been provided to enable readers to obtain a fuller story of this evolution. An appendix completes the article, containing the first published list of the SEC Chief Accountants from 1935 to the present.

This monograph reports on developing research that assesses the risk of equity investing from financial statements. The relevant information is conveyed by accounting numbers generated under accounting principles that respond to risk and its resolution, namely the realization principle and conservative accounting for investment. The recognition of this information leads to a financial statement analysis that extracts the risk information, to a reevaluation of performance metrics, and to revisions in risk factor models in asset pricing that utilize accounting information. The research also has implications for accounting-based valuation and for accounting standards that provide information for valuation and equity investing.