Report of the External Examining Committee

of the Department of Finance

Robinson College of Business, Georgia State University

Professor Lal Chugh (committee chair), University of Massachusetts at Boston

Professor Don Chance, Louisiana State University

Professor Doug Emery, University of Miami

April 2011

Introduction

A committee of Professors Don Chance of Louisiana State University, Lal Chugh of the University of Massachusetts Boston, and Doug Emery of the University of Miami was asked by the Provost of Georgia State University to conduct an external review of the Department of Finance of the Robinson College of Business. The committee reviewed the self study report and visited the campus on March 14-15, 2011. The committee met with Provost Risa Palm and her staff, Dean Fenwick Huss, and Department ChairGerry Gay as well as with research and clinical faculty of the Department. It met with the Director of the doctoral program, and doctoral students. The committee met with undergraduate and master’s level students, and also a member of the CFO Council. The exchange of information was honest at all levels, which enabled the committee to form opinions and provide recommendations. The committee members also had time to meet privately and discuss various issues during the two-day visit.

The committee formed a very positive impression of the Department. It hasperformed well in research and is holding up its professional reputation. The doctoral program is strong. The Department has been innovative in its master’s programs and course offerings. The Department intends to examine its undergraduate program and is making progress in external relations. The emphasis of our report is on recommendations in the spirit of continuous improvement rather than a restatement of the material in the reports and critical evaluation. The report is divided into five parts: research activities and the Department’s standing in the academic finance profession,the doctoral program, the master’s level programs, the undergraduate program, and finally alumni relations and other activities.

Research and the Department’s Reputation

Over many years the Georgia State University Department of Finance has established an excellent reputation for quality research. The Department faculty has consistently targeted its papers to top-tier journals and been successful in getting in those journals. Fortunately, the academic finance profession has a considerable amount of data on which schools publish in which journals, so relative success is easy to judge. A data base maintained by the Finance Department at Arizona State University (ASU) provides this information for the top tier journals. The ASU data base records publications in the top four journals (Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis) and gives full credit for an article to all authors.[1] It provides a simple ranking of each institution by the number of articles and the user can choose any time period starting at 1992.

While the Department’s self-study report covered the period of 2008-2010, the committee felt it necessary to review a longer period. Short-term rankings can change dramatically with a single publication.[2] The committee reviewed the ranking of the Department over several time periods. The previous external review, which was conducted by two of the current committee members, was done in 2002 and looked at the period of 1997-2002. The current committee examined that period, as well as 2003-2008, and the current formal evaluation period, 2008-2010, though we do believe three years is too short. We also looked at data for 2003-2010, the period since the last review.

For the 1997-2002 period, GSU ranked #70 with seven publications in the top four journals. Over the next five years, 2003-2008, it ranked #57 with 13 articles. Thus, there was clearly substantial improvement following the 2002 review. For the period for which the Department provided the current report, 2008-2010, the ASU data base ranks the Department at #72 with seven publications.[3] Taking the long-term perspective, from 2003-2010, GSU ranked #59 with 20 articles. It is also important to note that there are only 23 state schools ranked higher than GSU during this period. This eight-year ranking of #59 is also the same as its very long-term ranking of #59 over the entire period covered by the ASU data base, 1992-2010.

Even though these rankings are based only on the top four journals, there is nonetheless an element of quantity being captured in that the rankings are not adjusted for the number of tenure-track faculty. This can be an important factor in the rankings. New York University, for example, currently shows 48 tenure track finance faculty on its web site, while Wharton has 41 and Harvard 33. The state-supported University of Texas has 30. GSU has lost tenure track faculty since the last review. At that time it had 15 tenure track faculty and currently has 11. Thus, some decline in the rankings might well be expected, but GSU is holding its own. The committee firmly believes that this evidence shows that high quality research continues to be produced by a hard-working albeit shrinking faculty with, as we discuss later, a fragile resource base.

Another element indicative of the faculty’s research quality is publications in top tier journals in disciplines closely related to finance. Although we do not have a data base on these non-finance articles for comparison, the committee notes that in the recent self-study for 2008-2010, there were articles placed in two top-tier journals related to finance (Journal of Law and Economics and Journal of Accounting Research). This is most commendable and strengthens the College’s ranking in its other fields. The Department is also poised to show well in future rankings. Since the 2010 report deadline, there have also been four articles accepted for future publication in the top four finance journals.In addition, one other paper has been accepted in a top-tier non-finance journal (Management Science).

The committee commends the Department for focusing on top-tier journals as the highest priority. Nonetheless, there are many journals that rank only a slight notch below top tier and numerous other well-respected journals that are considered high quality in the profession. The GSU faculty publish many papers in these journals. Publishing in these level journals is important, because these journals have a high level of visibility in the broader academic finance community, and they are often supported by academic finance societies.

Moreover, the Department has provided support and editorial service for the Journal of Financial Research, an official publication of the Southern Finance Association, since 2006.[4] This journal is considered a solid B+-level journal in the profession. Professors Gay and Kale have been the co-editors. During their term, the journal processed over 800 manuscripts and ultimately accepted about 80. Editorial work is a significant research activity, but one for which neither the individual nor the school receive much credit. We believe this important contribution should not be overlooked in the larger picture of the Department’s research efforts in recent years.

A critical element of any finance department’s research success is data bases. Indeed, it can be said that data are the life blood of any finance research program. The Department appears to have the right data bases, but funding is clearly unstable. The constant struggle on a year-to-year basis to come up with these funds and the frequent use of soft dollars mean that future research could be jeopardized in a heartbeat. Unfortunately the academic finance profession does not have many opportunities for research grants. These data bases provide a treasure trove of economic and financial information.The University should not view these as simply tools used by finance professors to do research. It should view this data as information that should be available through a library or central repository to the entire GSU community and those who are served by it.

Another important input in the process of research success is travel to conferences, which provides valuable feedback in the seasoning process of preparing a paper for submission and also provide exposure for the department’s scholarly mission. Travel funds have also been cut significantly since the last report, further imperiling the Department’s research efforts.

The self-study report lists the Department’s research objectives as the acquisition of funding for data bases, travel funding, endowed chairs and professorships, clinical faculty professors, and more external funding. We agree that these are worthwhile objectives, though the committee believes that clinical faculty professorships should be low priority. Although the GSU clinical faculty are doing an outstanding job, the Department should guard against becomingtoo dependent on them or using more resources in that direction when there are other more pressing needs.

In summary, the Department’s research record is impressive, especially given its limited resources.The committee recommends, as a top priority, that the Department and College increase funding for endowed professorships and stabilize funding for databases. Otherwise future successes could be in great jeopardy.

Doctoral Program

The self-study report provided information on the structure and challenges facing the doctoral program. Our interview with Professor Ryan, the doctoral program director, was very useful. He appears to be doing an excellent job, with an extreme commitment to helping the students from the point at which they enter the program to their graduation and beyond. Professor Ryan is passionate about high quality research, and that enthusiasm is contagious within the doctoral student group. In fact, interviews with the doctoral students reveal that they are not only talented but excited about their futures.

The committee has always been aware that GSU graduates have contributed to the academic finance profession for many years. The Department states that its objective is to produce graduates that can conduct high quality academic research. Some modest information was provided on the two key measures of doctoral program success: placement and publications. This information, however, was neither sufficiently detailed nor current. For example, on p. 17 of the self-study there is a list of schools where GSU graduates were placed, but we believe this list includes graduates going back many years. The list of the journals in which GSU graduates have published is impressive, but the list also appears to take into account the entire history of graduates of the program. We believe that the Department should formally track the publishing records of its graduates, if it does not already do so. Such a metric is almost surely the best measure of the success of a doctoral program, as it aligns perfectly with the stated objective of producing “graduates that can conduct high quality academic research … (and) publish their research in first-rate academic journals.” Moreover, it allows the program to separate the productivity of its most recent graduates from those who have simply been out a long time and somewhere over their careers, have published in top tier journals.

The Department stated in the self-study report that its only future goal for the Ph.D. program is to increase stipends. In the 2002 report, the stipend was $9,000, which was surely near the bottom of all Ph.D. programs in finance. The current stipend is $24,000, an impressive compound growth rate of 13%. The report notes that comparable schools offer $24,000 - $30,000, which clearly puts GSU in a competitive range. While increasing the stipend is laudable, we do not see this as a serious problem at this time. If resources are flexible, there may be better uses for such resources to enhance research capabilities through grants, travel and data bases. Overall, we believe that the most important objective for the doctoral program, which overlaps with the research mission of the Departmentas well, is to stabilize funding for the data bases.

Masters Programs

The Department services the College’s MBA program and provides its own MS in finance, including the new Fast Track Masters in Finance. Masters level courses in finance are an important and very popular component of any graduate business school. The Department is doing an excellent job at the masters’ level. It offers an unusually large number of electives (15), some of which are quite innovative, such as its course on hedge funds. The Department is to be commended for its success in keeping masters level courses staffed only by full-time faculty members, a rare achievement in this day and age when clinical and adjunct faculty are increasingly being used to solve budget problems. There is room for improvement in course offerings, however, but the Department has recognized this concern. For example, there is no fixed income course, an important and popular course for many finance programs. The 12 Bloomberg terminals the Department leases are ideal tools for such a course. These terminals are probably underutilized if students are not studying fixed income markets with them. To its credit, the Department has noted its desire to add a fixed income course.

Since the last external review, the student managed investment fund course has been launched and represents a significant leap forward in gaining students real world investment experience. The MS retention rate of 70% seems good, given that these students are almost all part time, but frankly, there are no data against which we can benchmark. Judging from GMAT scores, the quality of the MS students is not real strong, however and has dropped notably for the 2010 admissions. The Department should certainly monitor the situation and be sure that its standards are not being lowered in the interest of maintaining enrollments in light of its acknowledgment of increased competition from nearby schools.

The MBA program is a college-wide program, within which finance plays an important role. Indeed, most deans would agree that it is impossible to have a strong MBA program without a strong finance department. Given the large number of electives and what appears to be quality instruction, the Department certainly seems to be meeting the needs of the MBA program. The Department is also exploring possibilities for students in the MBA program to pick up an MS along with the MBA. This is an excellent idea that is likely to appeal to a lot of MBA students who feel compelled by societal pressure to opt for the MBA, but then enroll and discover how much more they enjoy finance over their other business courses, at which point it is too late to drop the MBA and pick up the MS in finance.

One problem noted by the Department at the MS level is the students’ perception that they may not be receiving adequate guidance outside the classroom. We suspect this concern is driven primarily by the fact that virtually all of the students are part time, holding down jobs in the city. The students show up for class and are probably not around at most other times. In addition, it is common that MS students are squeezed out of the social circles of business schools. MBA students, especially full-time, and Ph.D. students are closeknit within their cohort groups, and the College and the respective departments typically support the building of camaraderie within those groups. MS students are invariably left out. Nonetheless, the Department may wish to make a stronger effort to be more communicative with the MS students. Perhaps social events or an MS student society would be helpful.

The Department lists three objectives for its masters programs including the development of new course offerings. This is laudable but there are already 15 electives offered. The aforementioned fixed income course is, however, important. The second objective of a comprehensive curriculum review is certainly warranted, but all disciplines should be continuously monitoring their curricula. The third objective of improvements in advisement was discussed above.

We make one final comment that would particularly help the masters program but also the undergraduate program. The Department states that it is strongly involved in supporting the CFA program, but there are apparently only two CFA charterholders among its 20 full time faculty members. It would be helpful if in such a large department, there were more CFA charterholders among the faculty. Of course, no tenure-track assistant professor should be doing the CFA exam, but clinical and tenured faculty should consider it. We admit, however, that it is difficult, perhaps impossible, to get faculty to do the program. Perhaps some modest incentives could be provided, such as financial support.

In sum, the GSU Department of Finance is doing an excellent job in serving the needs of the College’s MBA students. Its MS program is doing well. The Department’s new Fast Track MS program is an excellent innovation that should be very successful. We also suspect a joint MBA-MS would be successfuland encourage the Department to consider it. There is room for improvement, but we see no serious problems with the Department’s masters’ level programs.