Each week, Daniels is featuring a researcher who conducts meaningful research that impacts their field and the wider community. Learn more about their work in Q&As with Melissa Archpru Akaka, associate dean for faculty research. Email Melissa to nominate yourself or a colleague for a future Q&A.
Cheng Zhang is an assistant professor at the Reiman School of Finance . Cheng earned her PhD in finance from the London School of Economics and Political Science in 2017. She previously taught at Victoria University of Wellington in New Zealand. Cheng’s research interests include derivatives, financial reporting, information economics and empirical finance. Her research has been published in top scientific journals such as The Accounting Review and the Journal of Financial and Quantitative Analysis and has been presented at conferences such as the AEA Annual Meeting, FARS Midyear Meeting and SFS Cavalcade Asia-Pacific.
Can you talk about your educational journey and your interest in financial mathematics?
My background is influenced by my family. My grandparents and my mother have a background in accounting and my father was a professor in industrial engineering, so I developed an early interest in numbers and math. I was drawn to the elegance of math and studied financial mathematics in
undergrad. During my PhD at the London School of Economics, I focused on derivatives and theoretical asset pricing.
My background is influenced by my family. My grandparents and my mother have a background in accounting and my father was a professor in industrial engineering, so I developed an early interest in numbers and math. I was drawn to the elegance of math and studied financial mathematics in
Cheng Zhang
However, I later shifted my focus to financial reporting because theoretical models had limitations and were not always realistic, whereas financial economics is a subject closely related to real-life decisions. Financial reporting, which involves using financial statements to disclose information about firms, intrigued me.
What kind of audience are you targeting with your work?
My work offers new insights primarily for regulators on the cost and benefit trade-offs of improving financial reporting quality. Financial statements are more credible with higher-quality reporting, but my research provides both theoretical and empirical evidence that higher-quality reporting can also come with a cost, as it may cause managers to invest myopically. When regulators are evaluating firms’ disclosure policies, they should be aware of this potential downside.
My work offers new insights primarily for regulators on the cost and benefit trade-offs of improving financial reporting quality. Financial statements are more credible with higher-quality reporting, but my research provides both theoretical and empirical evidence that higher-quality reporting can also come with a cost, as it may cause managers to invest myopically. When regulators are evaluating firms’ disclosure policies, they should be aware of this potential downside.
How do you share your research with students and managers?
My research also has implications for academics, as well as for practitioners. I often integrate practical examples into my teaching, leveraging case studies based on my research findings. For example, in discussions on corporate governance, a key concept is the conflict of interest, and my research provides insights into the complexities of aligning managerial interests with those of stockholders. The traditional response to the question of aligning those interests is to give the managers stock options, but it’s actually far more complicated than that. So, I strive to bridge the gap between theoretical models and real-world applications in my interactions with students and managers.
My research also has implications for academics, as well as for practitioners. I often integrate practical examples into my teaching, leveraging case studies based on my research findings. For example, in discussions on corporate governance, a key concept is the conflict of interest, and my research provides insights into the complexities of aligning managerial interests with those of stockholders. The traditional response to the question of aligning those interests is to give the managers stock options, but it’s actually far more complicated than that. So, I strive to bridge the gap between theoretical models and real-world applications in my interactions with students and managers.
In terms of sharing my research, my primary focus has been on publishing papers. However, I recognize the importance of reaching a broader audience. For instance, I’ve had opportunities for media coverage through co-authors, and I’m open to exploring avenues for sharing my findings with students, managers and policymakers.
What are you working on now?
Currently, my research revolves around the dark side of competition, exploring the implications of competition among financial certifiers, such as auditors. Ostensibly, competition is good because it increases quality. But because there is such a concentrated audit market, competition might also induce misconduct at these firms. So, I am investigating whether the highly concentrated market structure in the auditing industry negatively affects financial reporting quality and, consequently, the functioning of the capital market.
Currently, my research revolves around the dark side of competition, exploring the implications of competition among financial certifiers, such as auditors. Ostensibly, competition is good because it increases quality. But because there is such a concentrated audit market, competition might also induce misconduct at these firms. So, I am investigating whether the highly concentrated market structure in the auditing industry negatively affects financial reporting quality and, consequently, the functioning of the capital market.