May 2020: Prof. Dr. Katharina Hombach

Katharina Hombach, Assistant Professor of Accounting at Frankfurt School of Finance & Management, is one of the principal investigators of Project A07 “Ambiguity, Learning, and the Diffusion of Reporting Practices”. Together with Thorsten Sellhorn she explores, how decision makers cope with ambiguity about optimal reporting policies. She is also one of the organizers of the Emerging Scholars in Accounting Conference.

Accounting: Providing important insights

It was clear to me rather early that I wanted to pursue a scientific career. Unlike in the corporate sector, where management tasks predominate as of a certain career level, as a researcher I can focus on substantive issues until I retire. I am particularly intrigued by the question how information influences economic activity. The underlying mechanisms of action are usually not obvious. By uncovering the mechanisms of transparency regulation, we can in particular provide regulators with important information for suitable regulations that strike a good balance between costs and benefits.

By uncovering the mechanisms of transparency regulation, we can in particular provide regulators with important information for suitable regulations that strike a good balance between costs and benefits.

Optimal reporting policy: How do managers deal with uncertainty?

In subproject A07, Thorsten Sellhorn and I investigate how companies make reporting decisions. This includes the decision to whom companies provide what information, and in what form. Our project is motivated by a certain gap between accounting theory and practice. Many commonly used theoretical models assume that managers make their reporting decisions by choosing the reporting alternative that maximizes their utility. When doing so, managers are assumed to have the information about important parameters, such as their stakeholders’ information preferences, necessary to optimize their reporting.

In practice, however, managers face substantive uncertainty when optimizing their reporting. For instance, managers might not know which reporting alternative is preferred by their various stakeholders. Hence, managers first need to form expectations about their reporting costs and benefits when optimizing their reporting. In our project, we explore the challenges that managers face in doing so, and the learning strategies they employ to cope with these challenges.

Practical relevance and validity

We still know little about this “learning process”, the corresponding literature is still in its infancy. Therefore, we need evidence from the field. We are currently preparing a survey for business representatives who are responsible for reporting decisions in their company. Our initial talks to practitioners suggest that we are dealing with a topic that has spark substantial interest in practice. Whereas it is important to me to produce insights that are of value to a broad audience including practitioners, I also believe it is crucial to find the right balance: We are committed to independent research that is not oriented towards individual interests, but aims to answer questions and produce insights that are of relevance to society as a whole. Relevance must of course always go hand in hand with validity. In my research, I attach great importance to the reliability and accuracy of the research methods and devices – as probably most scientists do.

We are committed to independent research that is not oriented towards individual interests, but aims to answer questions and produce insights that are of relevance to society as a whole.

Encouraging exchange: Emerging Scholars in Accounting Conference

In my research I benefit from the diverse professional backgrounds and knowledge of the other TRR 266 researchers. Within our network we use to work very closely together across project boundaries and maintain an intensive exchange. This exchange we already want to encourage at an early stage. Therefore, we offer different event formats for young scientists. Together with Laurence van Lent, I organize the Emerging Scholars Conference in Accounting at the Frankfurt School – which is co-hosted by the TRR 266 since 2019. It offers young researchers the opportunity to present their research to a broad audience – consisting of established researchers and young academics – and to discuss it in depth. This provides them with valuable feedback for their research. Despite Corona, one thing is already certain: the conference will take place again this year. When and in what form, is currently still topic of discussion. We will keep you up to date on our TRR 266 website.

The article reflects the opinion of the researcher and not necessarily the views of the TRR 266. As a scientific association, the TRR 266 is committed to both freedom of speech and political neutrality.