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Bringing Cutting-Edge Research to the Classroom
At the beginning of Darius Miller’s academic career, someone advised him to clip interesting articles out of publications like The Wall Street Journal and BusinessWeek as a way to collect possible research topics with practical angles. Fortunately for Miller, an associate professor of finance at the Cox School, he heeded the suggestion.
When it came time to start focusing his research as a Ph.D. student at the University of California of Irvine in the mid-1990s, Miller dipped into his file of clippings. There he found an article commenting on the sharp up-tick in Yankee listings—when non-U.S. companies list themselves on one of the U.S. stock exchanges, such as the New York Stock Exchange (NYSE) or the NASDAQ. Miller was immediately drawn to understand why this was happening.
During his doctoral program, he published two papers that explored Yankee listings, and his dissertation, “The Market Reaction to International Cross Listings: Evidence from Depositary Receipts,” shed even greater light on the subject. Published in the Journal of Financial Economics two years after Miller completed his doctoral program, his dissertation turned out to be the first paper that showed the positive economic impact of Yankee listings on foreign firms and continues to be one of the journal’s most heavily cited papers published that year.
“I found that foreign firms enjoyed a large increase in their stock price on the day they announced they were going to list on a U.S. exchange,” Miller commented. “When I dug a little deeper, I discovered that the corporate governance, accounting standards, and legal systems in various countries influence the decisions made by firms in those countries and ultimately impact the value of those companies. My research also confirmed the value of the United States’ generally accepted accounting principles and investor protection laws compared to ‘regimes’ in other countries.”
In subsequent research, Miller found foreign firms that don’t list in the United States tend to have very concentrated ownership and significant corporate governance problems. At the same time, the principal shareholders of such firms stand to enjoy certain benefits and consume more perks by staying put. So there’s a natural tension that leaders of those companies feel when making a whole range of decisions, including whether to list in the U.S. or not. These findings have important implications for firms, investors, and government policy makers—both at home and abroad. In fact, Miller’s findings on the value of auditor rotation were used by Congress to write portions of the Sarbanes-Oxley Act of 2002.
So where will his research go from here?
“Today, there are a lot of big questions concerning how much information companies should disclose above and beyond what’s required by laws and regulations,” he said. “Can companies that operate in regimes with lax accounting standards or poor corporate governance laws come to the U.S. and, in so doing, opt into a better regime and be rewarded by the market? What kind of corporate governance mechanisms should foreign countries put in place to protect investors? Would it be better to introduce international accounting standards? Those are just a few of the topics I’m looking forward to exploring in the future.”
Since arriving in Dallas last May, Miller has been focused on research, but he’s looking forward to bridging that aspect of his work to the classroom when he teaches his first courses at Cox this spring. His teaching philosophy involves bringing some of his latest research findings to the classroom and talking to students about cutting-edge theories, many of which challenge conventional wisdom and haven’t yet found their way into textbooks.
“Students like this influx of new ideas,” he remarked. “Learning purely through textbooks can give students the false impression that there’s a simple formula for doing just about anything. But in reality, the more we learn about finance, the more we realize how many basic questions remain unanswered, such as the price of risk. So my approach to teaching emphasizes that students know the right questions to ask, since the answers can clearly change. I also believe in presenting students with the data and letting them reach their own conclusions, rather than giving them pre-digested answers.”
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