Opportunistic Financial Reporting in Higher Education

• In Event: Current Topics in Nonprofit Accounting

Abstract

Annual university rankings have become popular and often represent the prestige of a university. One major component of these ranking systems is the research expenditures reported by a university. This system provides incentives for administrators to make strategic accounting choices to improve the ranking of the university. I measure the amount of accounting discretion within a university’s research expenditures and find that discretionary research expenditures are positively associated with university prestige. Specifically, universities within my sample that have positive discretionary research expenditures have an increased probability of subsequently being classified as a Doctoral University with moderate to high research activity by 5% and 7% respectively. In addition, universities within my sample that had positive discretionary research expenditures experienced increases in their ranking of federal funding received relative to other universities by an average of 20.4 positions.

Author

• Trent Stanton Henke, Texas State University