Mark Humphery-Jenner, Associate Professor from the UNSW School of Finance, explains why research trends are increasingly helping finance professionals navigate real-world issues, including the management of overconfident executives.
When American energy, commodities and services company Enron declared bankruptcy in 2001, people were stunned. How could such a successful company, with a peak market capitalisation of over USD $70 billion, seemingly crumble overnight?
Mark attributes a large part of the corporate scandal to executive overconfidence, and warns of the consequences.
“Some of my research with international colleagues show that firms with overconfident CEOs are about 25% more likely to be subject to a securities class action than other firms.”
Mark explains his research shines an empirical spotlight on corporate governance issues and suggests how they might be best managed.
“In many ways, academic research helps to emphasise the types of reforms companies might consider in order to prevent such governance failures going forward,” says Mark.
He adds that, “these types of analytical techniques are what’s taught in the Master of Finance program”.
“I wanted to look at behavioural characteristics and corporate governance, particularly focusing on the impact of overconfident CEOs,” he says. “I also looked at how firms can ensure they get the benefits of confident CEOs but mitigate the costs that might be associated.”
In finance, there’s become an increasingly large emphasis on evaluating trends in data. The degree gives students that chance. They may take apart stock data and look at trends or factors that could influence stock returns.
Mark Humphery-Jenner,
Associate Professor,
School Of Finance UNSW
Why research is important in finance
“The research that we are doing at the university helps to inform what we are teaching in the Master of Finance program, ensuring it’s on the cutting-edge,” says Mark.
Critical thinking and the ability to balance technical and empirical techniques is highly valued in the finance industry, where professionals need to evaluate financial data and events.
“The goal is for the degree to be industry-relevant,” says Mark. “People with finance or business backgrounds can then secure roles as banking professionals, financial advisors, funds managers or in international finance.
“The research we do and the teaching we deliver helps to future-proof qualifications – it means that the techniques and skills are up-to-date and current when students graduate and enter industry.”
Giving students the tools they need
Many classes within the Master of Finance discuss recent research, but Mark says the goal is to ensure students have the tools to evaluate and interpret the research findings, not just accept them.
“It’s about giving finance professionals the techniques they need to think critically and to evaluate financial data or events,” he says.
"In finance, there’s become an increasingly large emphasis on evaluating trends in data. The degree gives students that chance. They may take apart stock data and look at trends or factors that could influence stock returns."
It’s the ability to think analytically that is so crucial, says Mark.
“Critical thinking is highly valued by employers because it enables students to appraise data, make decisions based on it and implement an effective decision-making framework.
“If you pair data analysis skills with critical thinking and communication skills, students will find that they are very desirable in the finance industry.”