COURSE TITLE: SEMINOR IN FINANCE COURSE CODE: MPH 622

Presentation on

Why Can’t Michael Jackson Do Heart Surgery?

Article written by: Lawrence J. Gitman, Professor of Finance, San Diego State University, San Diego, CA

Article published in: Financial Practice and Education, (Spring/Summer 1992), pp. 73-75.

14 February, 2011

Objective of the study

To explain the findings of Mary F. Mobley and Harry

Kuniansky (M&K)’s study “Chief Financial Officers’ Views of

Academicians Versus Practitioners in the Field of Finance”

Methodology used for the study

Article (literature) review

Approach: Qualitative approach

Research Design: Descriptive research design (issue

analysis)

Overview of M&K’s article

Research problemso The educational institution are confronting serious challenges posed by

the unprecedented environmental and global changes.

o Many of the business area personality perceived that academia is unresponsive to the number of complex problems faced in the business areas.

Objectiveso To investigate finance executives’ views of academicians and their self-

perceptions on various professional dimensions.

o To access which academic journals are being read by the practitioners.

Methodologyo Mail survey (distributed to 500 CFOs), Response rate (22%)

Tools o For objective one (5 point likert scale, t-test for comparison, average

and mean)

o For objective two (7 point likert scale, percentage and mean)

Overview…..…

Findings of the studyo 7 items out of 8 asked to the 110 CFOs were significantly different at

0.01 level which shows – practitioners believed that they have better knowledge on general business, business problem solving, ability to generate creative ideas and ability to solve practical financial problems and academicians have better knowledge on research methodologies, research findings and ability to develop applicable finance theories. But, there is no significant difference in ethical standard of both categories.

o Finance practitioners in US corporations do not appear to avail themselves of available academic publications but they prefer to read the most popular business periodicals namely Wall Street Journal, Forbes and Fortune.

Conclusion o The findings of the study confirm the obvious expectations and

previous research findings that practitioners view research methodology and journal publication as basically academic domains. In other words, the findings provide an indication of their own strength relative to those of their academic counter parts.

Why can’t Michael Jackson……

To explain the findings of M&K’s article, the author comments that ignoring any methodological problems the study confirm the obvious that CFOs know more about their field issues and academicians know more about their concern dimensions.

To fulfill the purpose of the study Gitman explain M&K’s findings with following five points

I) Specialization creates competitive advantage

II) Educational choice and filtering down of new ideas

III) Professional readings and career choice are highly correlated

IV) How can we improve knowledge transfer?

V) Even specialist can do a better job

Continue…. Specialization creates competitive advantage

o Market environment is competitive and specialization create competitive advantage to succeed. For example: CFOs and Finance Academicians specialized in their concern field so that they get better payoff.

o The competitive advantage of CFOs are the management of financial affairs of a firm in a cost effective way that positively contribute to its value. On the other hands, finance academicians have their competitive advantage on teaching, advance and communication on the frontier of financial understanding. The market reward system for the academics are based on their publish articles.

o Broadly, researches are classified into four types – theoretical, empirical, applied and interpretive. Academic journals generally divided into top journals which focus on theoretical and empirical research while lower tier journals publish more applied and interpretive. The market reward system tends to favor publication in top journals.

o Mostly, the sources of new ideas, techniques, tools and strategies come form the top journal articles.

Educational choice and filtering down of new

ideaso People who want to be a CFO tend to focus their formal

education on accounting and finance to obtain the solid ground in

finance. “A Study of the Fortune 1000 CFO’s on Business School

Education” by Ben Collier and Mike Wilson support the statement.

o The study result shows as;

Continue….

Educational ChoiceUGD

(more than 75% of 233)

GD

(about 60% of 233)

Accounting or Finance major123

(70% of ttl UGD)

47

(42% of Business)

Other subjects major52

(30% of UGD)

93

(58% of Business +20% of 233)

Total 175 140

Note: UGD = Under Graduate Degree, GD = Graduate Degree, Business Students = 80% of GD, Total respondent = 233 CFOs

o On the other hand, finance academicians who want to hold Ph. D. or DBA have solid skills and understand the important literature in the field.

o Filter down is a learning life-cycle – a logical progression of acceptance. Overtime theories filter down to practice. It takes generally 20 years of time lags. During this period new ideas creates a broad base of understanding at the practitioners level. Because understanding is a key to implement new ideas, knowledge and tools into practice. Unless decision makers understand and feel comfort about the implementation of new knowledge. They will not implement it, regardless of how financially attractive it may appear. For example, CAPM, beta, etc.

Continue….

Professional Reading and Career Choice are Highly Correlated

o M&K’s finding concerning the practitioner readership of academic journals validate the previous research findings that very little readership of academic literature devoted financial research issues. Mostly, practitioners read the popular business periodicals namely Wall Street Journal, Forbes and Fortune. This finding is also very much expected because they want to learn about practical matters, the economy and what competitors in other companies are doing. But, does not fully bypass the academic literature they also prefer to read lower tier academic journals such as Harvard Business Review and Financial Analyst Journal.

o Why many academicians read practitioner journals and probably fewer practitioners read academic journals? This is because of the availability of journals and interest of the practitioners.

Continue….

How Can We Improve Know Transfer?

o The valid finding of M&K’s article is that both academicians

and practitioners are doing well in their job because they are

specialized in their concern areas. The most deserving way of

improving knowledge transfer is through those platforms

where the future and the present practitioners come to learn

new knowledge, strategies, tools and ideas and particularly,

that could be the MBA classroom, executive training,

seminars and consultation.

Continue….

Even Specialist Can Do a Better Job

o CFOs and financial academicians have different jobs and

although each may be capable of performing the other’s jobs

but their voluntary career choice indicate that they do not

want to do so. Even though they are specialized in their

respective fields, they can also do better in their own jobs

which results greater application of financial management

tools in practice and shortening of the time lag for

implementing new ideas in to practice.

Continue….

Critical appraisal

o Strengths: The author present the contains in a simple and

illustrative way so that I found this is a supportive to know

better and in detail about the findings of M&K’s article. And, it

raised the numbers of questions and its solutions which help

to broaden the reader’s knowledge.

o Weaknesses: The author only relates the findings of M&K’s

work despite clarifying its weaknesses in terms of sample

characteristics (only CFOs as respondents), selection of

limited dimensions of study (only 7 or 8 items), judgmental

errors, procedures (lack of internal consistency test – Alfa

coefficient), etc.

Continue….

Thank you.