David Burgstahler receives “Seminal Contributions” award from the American Accounting Association

Dave Burgstahler, the Julius A. Roller Professor of Accounting at the University of Washington Foster School of Business, has received the 2022 Seminal Contributions to Accounting Literature Award from the American Accounting Association.

This prestigious award is given no more frequently than once every three years and no more than one work is honored in any given year. When given, it recognizes a crucial accounting study that has stood the test of time and contributed in a fundamental way to subsequent research.

That certainly describes the most-recent recipient, a 1997 paper by Burgstahler and Ilia D. Dichey that documents and explains the corporate practice of earnings management to avoid reporting a decrease or loss in revenue.

Creative accounting

The paper, “Earnings Management to Avoid Earnings Decreases and Losses,” opened a lot of eyes when it appeared the December 1997 issue of the Journal of Accounting and Economics.

The central question it addressed was whether firms use a combination of accounting choices and real actions to produce financial statements that present a more positive view of a company’s earnings.

Burgstahler and Dichey established that earnings management is pervasive. Specifically, they found that 8-12% of firms with small pre-managed earnings decreases used earnings management to achieve earnings increases on financial reports. And a whopping 30-44% of firms with small pre-managed losses used discretionary accounting to create positive earnings.

They also found evidence of even higher frequencies when earnings management would maintain longer series of positive earnings or longer series of positive changes in earnings.

Finally, they theorized two motivations for managers to maintain positive earnings through creative accounting: a desire to decrease the costs imposed in transactions with stakeholders or a fundamental aversion to relative or absolute losses.

AAA rated

Burgstahler joined the Foster School in 1981, after earning his PhD in accounting and econometrics from the University of Iowa.

His research has been widely published in the discipline’s most influential journals, including The Accounting Review, Journal of Accounting Research, Contemporary Accounting Research, Auditing: A Journal of Practice & Theory, Journal of Management Accounting Research and Journal of Accounting and Economics.

Burgstahler is a past editor of The Accounting Review, associate editor of Accounting Horizons, and has served on the editorial boards of The Accounting Review, Accounting Horizons, Auditing: A Journal of Practice & Theory, and several other peer-reviewed journals. He won the AAA-AICPA Notable Contributions to the Accounting Literature Award in 2002.

He is a past president of the American Accounting Association (2016-2017), and also served as vice president for publications (2007-2009) and as a member or chair of multiple committees throughout the AAA.

At the Foster School, Burgstahler served as associate dean for masters programs from 2002-2004 and acting dean in 2005. He has received the Andrew V. Smith Faculty Development Award (2008 and 1994), the Dean’s Research Award (1998), the Burlington Northern Foundation Achievement Award for Scholarship (1986) and is a four-time Beta Alpha Psi Professor of the Year.

Burgstahler is currently chair of the Department of Accounting.