Expertise
Richard Willis has extensive experience in accounting and financial reporting and a distinguished body of scholarly research. He currently serves as the Senior Associate Dean for the Faculty and the Associate Provost for Research and Innovation at Vanderbilt University.
His research focuses on three principal areas: security analysts and the properties of their earnings forecasts and stock recommendations; firm disclosure; and corporate governance.
His work on security analysts studies how characteristics of analysts and the environments in which they work affect the accuracy and bias of their earnings forecasts and the profitability of their stock recommendations. His work shows that analysts improve their forecast accuracy with experience, in part by improving their ability to process publicly available earnings information as their experience following a firm increases. This improved ability to process earnings information with experience is associated with the efficiency of a firm’s market price conditional on the aggregate experience level of its analyst following. His work has also established that cognitive processing biases can affect both sell-side and buy-side security analysts, such as mutual fund managers.
His work was the first to establish that sell-side analysts face employment-induced incentives to improve the accuracy of both earnings and cash flow forecasts to mitigate the probability of involuntary job changes. His work supports that there is investment value in following analysts’ advice—especially those whose recommendations have performed well over the prior three to five years and he concludes that stock-picking ability is not random. Both superior and inferior analysts tend to persist in the profitability, or lack thereof, of their recommendations, consistent with some component of innate ability in analysts’ stock recommendation choices.
His work in firm disclosure, investigates the relation between earnings quality and market participant reactions to the release of other corporate disclosures predictive of future cash flows. His work substantiates an economic rationale for why managers prefer to reduce earnings surprises, by managing earnings, by managing the market’s expectations of earnings, or both. His work also investigates the contracting efficiency of accounting numbers for corporate financial reporting practices.
In corporate governance, his work has documented that the Securities and Exchange Commission’s Regulation FD failed to achieve one of its stated objectives, contributing to the literature on the consequences of regulatory intervention. His work also provides some of the first direct evidence on reputational costs theory—that corporations can suffer losses in excess of legal costs for actual or perceived misdeeds. His work concludes that political uncertainty induces firms to avoid corporate taxation.