Faculty Spotlight - G. Ryan Huston
The assistant professor has an article in the top accounting journal and recently received a teaching award from the American Taxation Association.
When USF Assistant Professor Ryan Huston researches accounting issues, human nature factors into the equation as much as numbers do. When money is on the line, decisions are often affected by profit – or at least, that's the assumption.
Huston recently examined whether stock analysts would provide a different quality of coverage to companies if they were being paid by those companies. Large public companies have no problems getting coverage from stock analysts, but smaller companies often fall through the cracks of analyst coverage. Huston and his fellow researchers looked at whether having small companies pay analyst firms for coverage would lead to overly optimistic earnings forecasts and stock recommendations. Their findings are documented in "Worth the Hype? The Relevance of Paid-for Analyst Research for the Buy-and-Hold Investor," forthcoming in The Accounting Review.
"If I'm paying somebody to be the analyst for my stock, are they just going to give me a favorable recommendation because I'm paying them?" Huston said.
The researchers found that paid-for analysts gave comparable quality of coverage when compared to analysts who were not paid by a particular company. The scholars looked at one- and two-year earnings forecasts, failing to find any significant bias. Additionally, their results suggested that the association between stock recommendations and future stock returns were also similar for the two groups. With the SEC Advisory Committee on Smaller Public Companies giving a recent recommendation that companies pay for researchers to fill the gaps created by declining analyst coverage, Huston's findings indicate that paid-for analysts can be a valuable and reliable resource for investors.
"I think the surprising and interesting piece was that the quality was the same," Huston said. "We were expecting that the conflict of interest would not allow the paid-for analyst firm to be able to say something bad about the companies that paid them. We would think that they would want to make sure that they still had the business."
Huston said these findings are sure to enter into the discussion about analyst coverage, given the current market.
"When you look at some of the scandals that have happened over the past 10 years, we now have a situation where there are a lot of companies that are not covered by sell-side analysts," he said. "We see that paid-for analysts are a viable option long-term for smaller companies."
Huston takes his knowledge from research and professional experience into the classroom, teaching in the School of Accountancy and working to grow the school's new tax track. Along with his wife, Janet (also an assistant professor in the School of Accountancy), he won the American Tax Association's Deloitte Teaching Innovation Award this year for developing a case to teach students how to work with clients on estate planning.
"To be able to stand in front of a room, to be able to field questions from a client, these are the kind of things we expect our students to be able to do," Huston said. "I want the program to succeed, and it has been my primary focus to make sure students have accounting jobs when they finish. I'm working every way that I can to get them in the door and let them have the opportunity to shine from there."