Assistant Professor of Accounting
Whittemore School of Business and Economics
"Without all of the information, people don't trust one another. Accounting is the information that crosses the bridge."
During the first week of her graduate-level accounting course, Emily Xu likes to perform an "experiment." She divides the class into two groups: buyers and sellers. She gives each group some information, sends them off, and asks them to negotiate a deal.
What's the product?
A used car.
What's a used car got to do with accounting?
That is precisely the question Xu knows her students will ask. By Xu's own admission, accounting, especially as it relates to capital markets—and the focus of her research—can be dauntingly analytical. It can be as difficult to teach as it is to learn.
When the class is back together, she tallies up the results. "In the past four years, only once was a deal successful," she says. The whole idea is that agreements are difficult to reach because of "information asymmetry," a concept put forth by Nobel Prize-winning economist George A. Akerlof.
"So here comes the importance of accounting," says Xu. "In a capital market, you have buyers (investors) who want to purchase shares and sellers (companies) who want that income. But, without all of the information, people don't trust one another. Accounting is the information that crosses the bridge."
Her students get it and they get her. Xu helps them see how putting together seemingly disparate pieces of accounting information can provide a wealth of information about a company.
"Her upbeat personality keeps a challenging class interesting," notes a student. "I liked her eagerness," notes another. "If I weren't graduating, I would want to have her as an instructor again," says a third. That's high praise for this professor who, as a non-native speaker, thought at first that she wouldn't do well in a classroom setting.