Research

High Free Cash Flow Means Auditors Must Delve Deeper

Companies that generate high levels of cash flow might appear to be a solid market investment. However, finance researchers have shown that when companies build up more cash flow than they need, errant managers tend to spend the excess unwisely, which can actually drain shareholder value.

Professor Paul Griffin has teamed up with David Lont of the Department of Accountancy and Business Law at University of Otago, New Zealand, and Yuan Sun of UC Berkeley’s Haas School of Business to analyze the impact this “free cash flow hypothesis” has on auditing fees. Griffin presented their research findings at the July 2009 Accounting and Finance Association of Australia and New Zealand.

Griffin and his co-authors concluded that auditors monitoring firms with high free cash flow and low growth prospects increase their fees due to the work involved in checking on managers. The rise in audit fees is due to the additional work load and auditing effort, not from additional risk associated with the questionable audit. Griffin et al. argue that the auditors are fulfilling an important governance or monitoring role that is critical to the well being of the company boards and their investors. Companies that generate high levels of cash flow might appear to be a solid market investment. However, finance researchers have shown that when companies build up more cash flow than they need, errant managers tend to spend the excess unwisely, which can actually drain shareholder value.

Griffin has been invited to lead the inaugural Quantitative Accounting Research Ph.D. consortium to be held November 26 at the University of Auckland in New Zealand. As an internationally recognized scholar in accounting, financial valuation and security markets, Griffin will provide his insights on research methodology and critical feedback to select Ph.D. students. The following day, Griffin will be the Distinguished Keynote Speaker at the 2009 Auckland Region Accounting Conference at the University of Auckland Business School, where he will present a talk on “Evolution and Application of Research in Accounting and Auditing.”

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News Release

UC Davis Part-Time MBA Ranked in Nation’s Top 9%
Fourth Consecutive Year among U.S News & World Report's Premier Programs

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(Davis, CA) — The UC Davis Part-Time MBA program offered in Sacramento and the San Francisco Bay Area is ranked among the top 9% in the U.S., according to U.S. News & World Report’s latest graduate business school rankings.

At No. 29, this is the fourth consecutive year the UC Davis Part-Time MBA program is among the top AACSB International-accredited part-time MBA programs surveyed. This year, there were 323 part-time MBA programs surveyed.

News Release

UC Davis Full-Time MBA Ranked among Nation’s Premier Programs for 20th Consecutive Year
MBA Programs among Top 10% in U.S.
Record Salary and Bonus

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(Davis, CA) — The UC Davis Graduate School of Management’s Full-Time MBA program is ranked among the premier business schools in the nation for the 20th consecutive year, according to U.S. News & World Report’s latest graduate business school rankings released today.

U.S. News’ latest ranking places the Full-Time MBA program at No. 48, placing it among the top 10% of the 464 Association to Advance Collegiate Schools of Business International’s accredited full-time MBA programs surveyed.

Key statistics from the School’s Full-Time MBA ranking include:

News Release

UC Davis Graduate School of Management partners with Lawrence Livermore and Sandia National Labs to drive technologies from lab to market

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(Davis, Calif.) – With a joint goal of speeding the transfer of new technologies from the laboratory to the commercial marketplace, the UC Davis Graduate School of Management, Lawrence Livermore National Laboratory and Sandia National Laboratories have announced a new partnership for researchers to develop their entrepreneurial skills.

Spotlight Story

Vickie Sherman MBA 13 Finds Her Passion, Her Career—and Herself

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What opportunities, decisions, events have shaped your professional life?

My career path has been a climb across a jungle gym rather than a tangent up a corporate ladder. As a child, I used to thumb through the three-inch JCPenney catalogue, picking out the professional women who I would grow to be. I wanted to rule the world from a corner office in a suit and heels. I wanted to shed my humble origins and become Corporate Barbie.

Spotlight Story

MBA Student Consultants Make an IMPACT
Projects Put Business Needs Front and Center

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Agilent Technologies’ Electronic Measurement Group is a $3.6 billion business that over the past decade has seen a dramatic shift in its customer base from U.S., and Western European customers to predominantly Asia-based customers. Today, the majority of the division’s revenues are generated outside of the U.S., with an increasing concentration in China.