Grace Pownall

Professor Emerita of Accounting Emory University, Goizueta Business School

  • Atlanta GA

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Biography

Grace Pownall is Professor Emeritus of Accounting. She holds a BS in Accounting from the University of Illinois, an MBA from the University of Chicago, and a PhD in Accounting and Economics also from the University of Chicago. She joined the GBS faculty in 1993, served as Accounting Area Coordinator from 1993-1998 and 2014-2019, and as Associate Dean and Director of Doctoral Studies from 2004-2011. Her research interests include corporate disclosure incentives and practices, and information in global capital markets. Her research has been published in Journal of Accounting Research, The Accounting Review, Contemporary Accounting Research, Review of Accounting Studies, and Management Science, among other journals. She is the co-editor of Journal of International Financial Management and Accounting, and associate editor of the Journal of International Accounting Research. She served as Associate Editor (1999-2002), on the editorial board (2005-2008), and on the steering committee (2018-2021) of The Accounting Review, and as associate editor, on the editorial board, and/or as ad hoc reviewer for over a dozen other journals.

Professor Pownall served as Vice-President of the American Accounting Association (1999-2001), and Director of the AAA 1999 Doctoral Consortium. She served in several roles in the AAA Doctoral Consortium and in the AAA New Faculty Consortium, and on several committees of the American Accounting Association, the International Accounting Section, the Financial Accounting and Reporting Section, and the Accounting Programs Leadership Group.

Education

University of Chicago

PhD

Accounting and Economics

University of Chicago

Master's

Business Administration

University of Illinois at Chicago

Bachelor's Science

Accounting

Areas of Expertise

Information and Global Capital Markets
Voluntary Disclosure Incentives and Practices
International Accounting

Publications

Inferring Bad News from Insider Sales

Journal of Business, Finance, and Accounting (2020)

Irene Karamanou, Grace Pownall, and Rachna Prakash

Due to the paucity of sources of negative firm-specific information, US capital markets have more difficulty identifying and incorporating bad news into stock prices than they do good news. Even though insider selling is a potentially important proxy for undisclosed bad news, researchers have difficulty ex ante identifying information-based sales due to an inability to separate liquidity-motivated from information-based insider trades. We hypothesize that when insiders in multiple firms sell shares of one firm in which they are insiders and at the same time buy shares of other insider portfolio firms, the sale is more likely to be information-based, since the proceeds are reinvested. Conversely, when an insider sells one firm without purchasing others or sells multiple insider firms the sale is likely liquidity-motivated. We find that insider sales identified as information-based using this algorithm are followed by significant negative abnormal returns. Information-based sales are also more likely to be associated with delistings, earnings declines and earnings restatements. Analysts are also more likely to revise their earnings forecasts downwards for these firms. It is thus possible to ex ante identify insider sales with information content. Our results will be of interest to investors and also to regulators designing insider trading rules.

Deviations from the Mandatory Adoption of IFRS in the European Union: Implementation, Enforcement, Incentives, and Compliance

Contemporary Accounting Research (2018)

Grace Pownall and Maria Wieczynska

In this paper, we evaluate the common assumption that EU firms began using IFRS in 2005 when the EU formally adopted IFRS. Although the incidence of firms using local (or some other) GAAP declined between 2005 and 2012, it is still nontrivial. By 2012 the incidence of non-IFRS financial statements was still in excess of 17% (87% of which were fully consolidated). We estimate a model of the non-adoption of IFRS as a function of implementation features of the IFRS regulation, country-specific enforcement, and firm-specific reporting incentives. As expected, being specifically required by EU-wide and country-specific rules to adopt IFRS is positively associated with IFRS adoption but does not constitute a complete explanation. Proxies for enforcement are significantly associated with non-adoption, but the marginal effects of the enforcement variables are weak. We find that larger firms, firms with foreign operations and more analyst following, and firms that issue new debt and equity were more likely to adopt IFRS, both when the regulation was initially imposed and in subsequent years. We conclude that many EU firms do not use IFRS; that some firms exploited definitions, exemptions, and deferrals to avoid adopting IFRS while some firms simply failed to comply with the regulation; and that firms responded to their incentives in deciding whether to adopt IFRS.

Avoiding China's Capital Markets: Evidence from P-chips and Red-chips Listed in Hong Kong

Journal of International Accounting Research (2018)

Weishi Jia, Grace Pownall, and Jingran Zhao

The purpose of this paper is to explore the puzzle of why so many Chinese firms eschew listings in China. Hundreds of firms founded in China have reorganized themselves as overseas corporations and listed on the Hong Kong Stock Exchange. These firms are called Red-chips if they are state-owned enterprises (SOEs) and P-chips if they are not state-owned (Non-SOEs). To examine the rationale behind the listing decisions of P-chips and Red-chips, we compare the characteristics of Red-chips (P-chips) with SOEs (Non-SOEs) listed on China stock exchanges. We find that SOEs are more likely to list in China. Moreover, while we do not observe any significant difference between the performance of Hong Kong-listed and Mainland-listed SOEs, we find Non-SOEs that are listed in Hong Kong are significantly more profitable than those listed in China. We then explore three possible explanations for why Chinese firms, especially Non-SOEs, may prefer to be listed in Hong Kong: (a) to facilitate personal wealth transfers out of China; (b) to increase access to debt capital; and (c) to facilitate more efficient stock price formation. We find that all three of these explanations have statistical support.

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Research Spotlight

5 min

Why are U.S. corporate boards under-diversified?

Research tells us that firms with diverse workforces generally outperform those that do not. And in recent years, corporate America has taken significant strides towards greater heterogeneity in the employee base. But a problem remains at the top. U.S. boardrooms remain overwhelmingly Anglo Saxon and male. No less than 81 percent of the Standard & Poor (S&P) 1500 Index directors in America today are white men. White women account for 11 percent, while ethnic minority men make up 6 percent. Meanwhile, female minority board members account for just 2 percent of the total. For businesses, this is becoming problematic, not least because institutional investors and regulators like the Securities and Exchange Commission have started asking firms to open up about their processes in selecting board members. Where diversity is a criterion, firms are required to be transparent about specifications and frameworks. Shedding light on this issue is new research from Grace Pownall, professor of accounting, and Justin Short, assistant professor of accounting, at Emory University’s Goizueta Business School. Together with Zawadi Lemayian of Washington University, they parsed 12 years of data on gender, ethnicity, and salaries from the S&P 1500 to build a composite picture of who’s who and who’s paid what in U.S. boardrooms. What they found points to a systemic shortage of female and minority executives making it onto shortlists for board appointments. But that’s not all. Once women and minority men do make it onto the board, there’s another roadblock waiting for them: they are not getting promoted at the same rate as their white, male counterparts. There seem to be two complex dynamics at play, said Short: a glass ceiling effect hampering the upward trajectory of Black, female, and other minority executives, and what he and his co-authors call “myopic” bias on the part of corporate America. “We developed two hypotheses that might explain what’s behind the lack of diversity on boards,” explained Short. “The glass ceiling hypothesis comes from what we see as a shortfall of women and ethnic minorities in the workforce relative to white men—so the theory here is that these groups just aren’t getting promoted to the point where they would be considered for board positions.” “The alternative hypothesis we worked on was that there might actually be a plentiful supply, but that companies just don’t see directors from different backgrounds as being as valuable in the same way,” he said. “And we would put this down to some kind of institutional myopia or bias at the very highest echelons of business.” To put these hypotheses to the test, Short and his colleagues first collected demographical data on American board members from a database compiled by Institutional Shareholders Services. Here they were able to determine the gender and ethnicity of individuals. They also ran a simple statistical regression on salaries using data from S&P. Then they compared the two. “Economic theory tells us that if there’s a high demand for diverse directors—women and ethnic minorities—and there’s a low supply of them, then these directors will be able to command higher salaries than others,” said Short. “It’s a simple case of supply and demand, and minorities will come at a greater premium.” Looking at the S&P 1500 data, they found that female and minority directors were indeed getting paid more on average than white male counterparts in other companies. And when they analyzed this more closely, Short and his co-authors found that these salaries were in general being paid by larger, more successful firms. “We can see that women and minorities are commanding higher compensation than the average white male director across the S&P universe of 1500 companies, and it’s the bigger, better paying firms that are hiring them,” Short said. “So that tells us that the top companies are proactively trying to build diversity in their boardrooms. At the same time, it shows there is a deficit of supply in this talent pool—the so-called glass ceiling dynamic.” To understand whether bias or institutional myopia might also be limiting the prospects of Black, female, and ethnic directors, Short et al. also looked at differences in compensation within the same company, and here they found something striking. While they made more on average than the typical white male director in U.S. firms, minority directors were being paid around 3 percent less than their direct counterparts – the white male directors on the same board. All this scrutiny begs the questions: What is going on in the American boardroom? And why is there still such a stark lack of diversity in the upper echelons of business in the U.S. today? “This tells us something important,” said Short. “Once these directors make it to the board, for most of them that’s it. They don’t advance or achieve promotion at the same rate.” This could be due to bias or what Short calls a Rolodex effect: “Maybe it’s because they didn’t go to the same school as the chairman of the board, or weren’t connected socially in the same way, so they don’t appear in the Rolodex of candidates with right or familiar credentials to get promoted within the board,” he said. “We know it’s not about hard skills or aptitudes because the data shows us that women and minority directors typically hold more qualifications than their counterparts. But for whatever reason, once they are on the board, they fail to advance in the same way as white men.” Interestingly, Short and his colleagues found that there was a very small number of women and minority directors sitting on the boards of multiple companies in the U.S. “Pulling it all together, we see that there’s a generalized shortage of women and ethnic group candidates in the U.S.,” Short said. “Successful companies are proactively on the lookout for them and offer higher compensation to attract them. “But there seems to be a glass ceiling effect acting as a bottle neck for talent. We also see that minority directors become a bit stuck once they’re on a board. The upward momentum tails off relative to their white, male colleagues. This could be due to bias or myopic thinking.” All of this should provide rich food for thought for the most senior decision-makers in U.S. enterprises, according to Short and his co-authors. With the pressure on to drive board-level diversity in corporate American, leaders need to be cognizant of the roadblocks or cut-off points to tie to ethnicity and gender. “Diversity is something we urgently need to enable and nurture in the United States. Without diversity, creativity and innovation can stall, and in business you run the risk of deferring to group think—sourcing ideas and perspectives from the same small pool of shared experience or expertise,” said Short. “It’s encouraging to see that diversity has increased over time and the largest companies are proactive. But there are still vast gaps of representation on the board compared to the workforce. There’s still work to be done because diversity in American business should be commonplace.” If you are a journalist looking to cover this research or to learn more about the diversification of corporate boards in America, then let our experts help. Grace Pownall, professor of accounting, and Justin Short, assistant professor of accounting, at Emory University’s Goizueta Business School are both available for interviews; simply click on either expert's icon to arrange a time today.

Grace Pownall

1 min

Reducing home equity bias through transparency

One of the goals of global stock exchange mergers is to create a consolidated trading platform that makes listed firms available to a greater number of investors while providing firms with larger pools of liquidity. But the problem of equity home bias—the tendency of investors to overinvest in domestic securities and underinvest in foreign securities—can thwart optimal global portfolio diversification. In a recent study, Grace Pownall, professor of accounting; Maria Vulcheva 05MBA 11PhD (FIU); and Xue Wang (Ohio State) examine such home bias in Euronext, which was created in 2002 when four European countries merged their stock exchanges. The researchers focus in particular on two structural mechanisms adopted by Euronext: (1) the integration of trading platforms across the four exchanges, and (2) the creation of named segments open to firms that voluntarily pre commit to greater transparency in financial reporting and corporate governance. In their investigation of these mechanisms, the researchers find that firms that choose not to join the segmented list see no diminution of home bias, while the segmented, more transparent firms reap significant increases in all categories of foreign holdings relative to domestic holdings. Source:

Grace Pownall

In the News

Dichev, Pownall receive awards from American Accounting Association

emorybusiness.com  online

2016-07-29

Grace Pownall received the Outstanding International Accounting Educator Award. Her research interests include corporate disclosure incentives and practices, and information in global capital markets. Pownall served as Vice-President of the AAA from 1999-2001, and as Director of the AAA 1999 Doctoral Consortium.

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