Research Accounting

Telling the Good and the Bad in Accounting

, by Giulia Sargiacomo
Stephen Penman, Distinguished Professor at Bocconi, has a mission that goes beyond teaching technical skills

Imagine growing up as a kid with the dream of becoming a farmer and ending up becoming the One Hundred and First member of The Accounting Hall of Fame. These few words could describe Professor Stephen Penman's life path. However, a deep dive into his astonishing career is worth the effort.

Professor Penman, who joined Bocconi Department of Accounting this year as Distinguished Professor, strongly affirms that no one grows up thinking to be a Professor of Accounting. As a matter of fact, after high school graduation, he got a job as accounts payable clerk. Nonetheless, Professor Penman had a strong inclination to learning embedded in his genes – his grandmother was the first woman to graduate from University of Sydney – and, encouraged by his boss, he joined night classes of Accounting at University of Queensland.

Other than graduating with a bachelor's degree with First Class Honors, in 1970 Professor Penman had a first confirmation that Accounting academia was his place to be: his undergraduate research was published by The Accounting Review.

Only one year after, Professor Penman was accepted into the Ph.D. program at University of Chicago where he could strengthen his Accounting theory knowledge and be exposed to Finance under the enlighten guidance of Nobel Prize winners as Eugene Fama and Merton Miller.

After this enriching experience, Haas School of Business at University of California, Berkeley became his house for 23 years where he says he was sent to class with the mission of teaching what good Accounting and bad Accounting are instead of how to do Accounting. As a matter of fact, students in his class had already all the technical skills, but Professor Penman wanted to push the audience to think about alternative Accounting methodologies and to spot possible areas of improvement. Indeed, Penman is firmly convinced that Accounting is like designing a product and a Professor of Accounting has, as primary mission, to address the question "how do I design good Accounting?", which is not as easy as it appears since different investors may prefer different Accounting practices that align better to their objectives.

During his career Professor Penman has largely contributed to the existing knowledge by publishing both in Finance and Accounting journals and today his profile counts almost twenty-one thousand citations. Additionally, his two textbooks are recognized by scholars as pillars of Accounting literature.

Financial Statement Analysis and Security Valuation is the product of teaching and research and is considered by many as a turning point on how financial statement analysis is taught in classrooms. Accounting for Value blends together finance and accounting in a revolutionary and innovative result. Specifically, Accounting for Value is thought as a tool for practitioners to challenge the reality of market prices. As Professor Penman highlights, the book is meant to give security and comfort to market players that want to understand what's underneath the market price to give them a competitive hedge.

Interestingly, if Professor Penman is asked about the future of Accounting academia he firmly replies that there is still a lot to do in the field, but he has noticed that there is more and more institutional research (the regulation type) – which is not a complaint – while he would strongly suggest young scholars to go back to the original question: "What is good or bad Accounting?". Addressing this question should be their core mission as Accounting faculty.

Find out more

Penman, S. H. (2010). Accounting for Value. Columbia University Press.

Penman, S. H. (2010). Financial Statement Analysis and Security Valuation. McGraw Hill/Irwin.

Penman, S. H. & Zhang, X. J. (2002). "Accounting Conservatism, the Quality of Earnings, and Stock Returns." The Accounting Review, 77(2), 237–264. DOI: