..is a bit of a mystery to me. Partly because of my innate suspicion of numbers but also because I don't really understand why the questions asked are important in any practical sense. The dominance of this type of research probably explains why it took me so long to realise that qualitative approaches to research were possible and that I could do a PhD that didn't have any numbers in it.
So how did I come to attend an MBAR conference this week? A couple of people I knew expressed great surprise to find me there. Well, the title was appealing - "What constitutes Financial Reporting Quality?"- and I was especially keen to hear an investor relations expert talking about how annual reports are put together. And to hear some discussion of narrative reporting from the perspectives of quants people. And there was no fee and the venue was very conveniently situated. And it's always good to step out of one's comfort zone occasionally.
The first speaker was a very engaging young woman from Stanford, talking about modelling the relationship between voluntary disclosure and earnings management. She was so good that I actually understood some of what she was saying: suddenly, complex equations and Greek letters began to make some sense. But at coffee when I remarked happily on this, an eminent scholar responded that she had misjudged her audience and made it too simple. Put me in my place..
The second speaker was also very engaging, a computer linguist from Michigan, on assessing the quality of annual report narratives. He began with a lengthy preamble on why the analysis of narrative reports is of research interest: he clearly anticipated that the audience would need convincing and early interruptions confirmed this (mostly from an irritating young man wearing red braces and bright blue socks with white circles). He went on to explain the considerable challenges of using computer analysis to move beyond examining the "bag of words" to more contextual analysis. And I began to see that the quants people have cottoned on to the importance of words - but they are trying to turn them into numbers.
The investor relations guy was very good. The organisers had sent him a list of 16 questions about the process of putting together annual reports and he answered them all, mostly with variations on "It depends". I liked "Who is your audience?" to which the answer was "We don't know". He had worked for a lot of big companies - interestingly, mostly ones where I had interviewed audit committee members, internal auditors and finance directors. He made the limitations of the annual report very clear, which seemed to surprise some of the audience. He suggested that it should be carved up into different chunks for different users distributed at different times, something that has for some time seemed sensible to me, especially as we now have the technology to do this relatively easily. He said firmly that his job was not about selling the company but about providing the best possible information for investment decisions but he did let slip that his background was in marketing. If I were studying how annual reports are put together I'd want to hear from a lot of other people who are involved - company secretaries, for example, not to mention the directors themselves. And the auditors, who weren't mentioned.
The other speakers were all interesting and I left feeling quite pleased with myself for having dipped a toe in the MBAR waters. But there is little doubt that the researchers I talked to think that qualitative research is easy, anyone can do a few interviews but qualitative researchers don't understand the stats which make quantitative research much more rigorous. When I emailed the organiser to thank him I observed that it had been fascinating to experience a different ontology. He replied that he didn't know what ontology meant but agreed that there is more than one way to skin a cat.
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