Mahmoud M. Nourayi

Accounting Students' Performance and Personality Types

Abstract This article reports on a study of the relationship between the performance of 103 students majoring in accounting and their gender and personality types. The grades of students in various accounting classes, together with overall grade point average (GPA) for those graduated, were collected. SAT scores were also analyzed when available. We identified personality types of accounting students by using the Myers-Briggs Type Indicator questionnaire. Further, the sample was dichotomized based on gender. Using analysis of variance (ANOVA), we examined the hypothesis of no differences between the means of any two groups of students. The null hypothesis was rejected for sensing versus intuitive individuals but could not be rejected in all other cases. Gender appeared to be an insignificant variable except for one accounting course grade and quantitative and total SAT scores. Male students outperformed female students in those cases.

Firm Profitability: Mean-Reverting or Random-Walk Behavior?

We analyze the stochastic properties of three measures of profitability, return on assets (ROA), return on equity (ROE), and return on investment (ROI), using a balanced panel of US firms during the period 2001-2010. We employ a panel unit-root approach, which assists in identifying competitive outcomes versus situations that require regulatory intervention to achieve more competitive outcomes. Based upon conventional panel unit-root tests, we find substantial evidence supporting mean-reversion, which, in turn, lends support to the long-standing “competitive environment” hypothesis originally set forward by Mueller (1976). These results, however, prove contaminated by the assumption of cross-sectional independence. After controlling for cross-sectional dependence, we find that profitability persists indefinitely across some sectors in the US economy. These sectors experience extremely slow, or non-existent, mean-reversion.

The impact of incentives on CEO compensation and firm performance

A significant component of a management control system is the incentive mechanism and motivational underpinning of compensation contracts. Most executives are rewarded in the form of cash and company stock. Our data indicate that over 82.5 percent of the observations include a bonus pay to CEOs and an even larger percentage, about 94.5 percent, have stock option grants. Our analyses indicate that the means of market-based returns are significantly larger for companies with no stock option incentives. However, the accounting-based returns do not appear to be significantly influenced by stock-based rewards. (JEL: J30, G30, L21)