Paul M. Healy

James R. Williston Professor of Business Administration
Senior Associate Dean for Research

Unit: Accounting and Management

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(617) 495-1283

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Paul Healy is the James R. Williston Professor and Senior Associate Dean for Research at the Harvard Business School. His research covers a broad range of topics, including financial analysis, Wall Street research, corruption, governance, mergers and acquisitions, and business ethics. He joined the HBS faculty in 1998, after fourteen years on the faculty at the M.I.T. Sloan School of Management, where he received awards for teaching excellence in 1991, 1992, and 1997. He received accounting and finance degrees from Victoria University in New Zealand (1976 and 1977) and a Ph.D. from the University of Rochester (1981). He has published widely in the leading academic and practitioner journals, has received numerous research rewards, and is the co-author of one of the leading financial analysis textbooks. He has taught MBA and executive courses on accounting, financial analysis, corporate boards, and ethical leadership.


Featured Work

Publications

Recent Work

  1. When the Crowd Fights Corruption

    Corruption is the greatest impediment to conducting business in Russia, according to leaders recently surveyed by the World Economic Forum. Indeed, it's a problem in many emerging markets, and businesses have a role to play in combating it, according to Healy and Ramanna. The authors focus on RosPil—an anticorruption entity in Russia set up by Alexey Navalny, a crusader against public and private malfeasance in that country. As of December 2011, RosPil claimed to have prevented the granting of dubious contracts worth US$1.3 billion. The organization holds corrupt politicians' and bureaucrats' feet to the fire largely through internet-based crowdsourcing, whereby often-anonymous people identify requests for government-issued tenders that are designed to generate kickbacks. Should entities like RosPil be supported, and should companies fashion their own responses to corruption? On the one hand, there are obvious public-relations and political risks; on the other hand, corruption can erode a firm's competitiveness, the trust of customers and employees, and even the very legitimacy of capitalism. The authors argue that heads of many multinational companies are well positioned to combat corruption in emerging markets. Those leaders have the power to enforce policies in their organizations and networks, and they enjoy the ability to organize others in the industry against this pernicious threat.

    Keywords: corruption; emerging economies; entrepreneurship; globalization; Crime and Corruption; Entrepreneurship; Ethics; Globalization; Russia; Georgia (nation, Asia); India;

    Citation:

    Healy, Paul M., and Karthik Ramanna. "When the Crowd Fights Corruption." Harvard Business Review 91, nos. 1/2 (January–February 2013). View Details
  2. Business Analysis and Valuation: Using Financial Statements, Text and Cases

    This book provides a framework for business analysis and has been used by business schools throughout the world. It provides a foundation for analysis using four key steps: 1) Strategy analysis: Identifying a firm's strategy and understanding sources of its competitive advantage; 2) Accounting analysis: Assessing how a firm's financial statements reflect its economics and determining whether any adjustments are needed. This new edition (5th ed) specifically covers measurement questions for firms reporting under US GAAP and International Standards; 3) Financial analysis: Evaluating a firm's performance using ratios and cash flow data; and 4) Forecasting future performance and estimating its value. These steps are applied to a variety of business contexts, including securities analysis, credit analysis, merger & acquisition decisions, and governance. The book includes a broad range of classic and new HBS cases to illustrate the concepts and applications.

    Keywords: Governance; Debt Securities; Valuation; Performance Evaluation; Financial Statements; Credit; Business Ventures; Strategy; Financial Condition; Mergers and Acquisitions; Forecasting and Prediction;

    Citation:

    Palepu, Krishna G., and Paul M. Healy. Business Analysis and Valuation: Using Financial Statements, Text and Cases. 5th ed. Cengage Learning, 2013. View Details

Books

  1. Wall Street Research: Past, Present, and Future

    Wall Street equity analysts provide research products and services on publicly-traded companies to institutional and retail investors to help them make more profitable investment decisions. During the last ten years Wall Street research has been battered by a series of shocks. As concerns over conflicts of interest mounted, the integrity of research output was questioned, leading to transformative regulatory changes. New technologies emerged to democratize information and change the way that stocks are traded, threatening the industry's product and business model. There were upheavals and stagnation in established core financial markets such as the U.S., Japan and Western Europe. And burgeoning new markets in countries such as China and India raised potential challenges to the dominance of leading firms. Our research tells a fascinating story of an industry that has proved remarkably resilient in resolving economic and regulatory challenges. It provides practitioners and scholars with a deeper understanding of the forces that have shaped the industry and accounted for its resilience, and how these are likely to influence its future.

    Keywords: financial analysts; investment banks; conflicts of interest; Accounting; Financial Institutions; Financial Services Industry; United States;

    Citation:

    Groysberg, Boris, and Paul M. Healy. Wall Street Research: Past, Present, and Future. Palo Alto, CA: Stanford University Press, 2013. View Details
  2. Business Analysis and Valuation: Using Financial Statements, Text and Cases

    This book provides a framework for business analysis and has been used by business schools throughout the world. It provides a foundation for analysis using four key steps: 1) Strategy analysis: Identifying a firm's strategy and understanding sources of its competitive advantage; 2) Accounting analysis: Assessing how a firm's financial statements reflect its economics and determining whether any adjustments are needed. This new edition (5th ed) specifically covers measurement questions for firms reporting under US GAAP and International Standards; 3) Financial analysis: Evaluating a firm's performance using ratios and cash flow data; and 4) Forecasting future performance and estimating its value. These steps are applied to a variety of business contexts, including securities analysis, credit analysis, merger & acquisition decisions, and governance. The book includes a broad range of classic and new HBS cases to illustrate the concepts and applications.

    Keywords: Governance; Debt Securities; Valuation; Performance Evaluation; Financial Statements; Credit; Business Ventures; Strategy; Financial Condition; Mergers and Acquisitions; Forecasting and Prediction;

    Citation:

    Palepu, Krishna G., and Paul M. Healy. Business Analysis and Valuation: Using Financial Statements, Text and Cases. 5th ed. Cengage Learning, 2013. View Details
  3. Business Analysis and Valuation: Using Financial Statements

    Financial statements are the basis for a wide range of business analysis. Managers, securities analysts, bankers, and consultants all use them to make business decisions. There is strong demand among business students for course materials that provide a framework for using financial statement data in a variety of business analysis and valuation contexts. The fourth edition of Business Analysis and Valuation: Using Financial Statements allows you to undertake financial statement analysis using a four-part framework—(1) business strategy analysis for developing an understanding of a firm's competitive strategy; (2) accounting analysis for representing the firm's business economics and strategy in its financial statements and for developing adjusted accounting measures of performance; (3) financial analysis for ratio analysis and cash flow measures of operating; and (4) prospective analysis. Then, you'll learn how to apply these tools in a variety of decision contexts, including securities analysis, credit analysis, corporate financing policies analysis, mergers and acquisitions analysis, and governance and communication analysis.

    Keywords: Valuation; Framework; Decision Choices and Conditions; Financial Statements;

    Citation:

    Healy, Paul M., and Krishna G. Palepu. Business Analysis and Valuation: Using Financial Statements. 4th ed. Mason, OH: Thomson South-Western, 2007. View Details

Journal Articles

  1. Market Competition, Earnings Management, and Persistence in Accounting Profitability Around the World

    We examine how cross-country differences in product, capital, and labor market competition, and earnings management affect mean reversion in accounting return on assets. Using a sample of 48,465 unique firms from 49 countries, we find that accounting returns mean revert faster in countries where there is more product and capital market competition, as predicted by economic theory. Country differences in labor market competition and earnings management are also related to mean reversion in accounting returns—but the relation varies with firm performance. Country labor competition increases mean reversion when unexpected returns are positive, but dampens it when unexpected returns are negative. Accounting returns in countries with higher earnings management mean revert more slowly for profitable firms and more rapidly for loss firms. Thus, earnings management incentives to slow or speed up mean reversion in accounting returns are accentuated in countries where there is a high propensity for earnings management. Overall, these findings suggest that country factors explain mean reversion in accounting returns and are therefore relevant for firm valuation.

    Keywords: Performance; Corporate performance; valuation; Equity Valuation; Persistence; competitive advantage; institutions; earnings management; labor market; capital markets; competition; Profit; Performance; Supply and Industry; Financial Statements; Government and Politics; Globalized Markets and Industries;

    Citation:

    Healy, Paul M., George Serafeim, Suraj Srinivasan, and Gwen Yu. "Market Competition, Earnings Management, and Persistence in Accounting Profitability Around the World." Review of Accounting Studies (forthcoming). (Vol. 20, no. 1, March 2015.) View Details
  2. The Stock Selection and Performance of Buy-Side Analysts

    Prior research on equity analysts focuses almost exclusively on those employed by sell-side investment banks and brokerage houses. Yet investment firms undertake their own buy-side research and their analysts face different stock selection and recommendation incentives than their sell-side peers. We examine the selection and performance of stocks recommended by analysts at a large investment firm relative to those of sell-side analysts from mid-1997 to 2004. We find that the buy-side firm's analysts issue less optimistic recommendations for stocks with larger market capitalizations and lower return volatility than their sell-side peers, consistent with their facing fewer conflicts of interest and having a preference for liquid stocks. Tests with no controls for these effects indicate that annualized buy-side Strong Buy/Buy recommendations underperform those for sell-side peers by 5.9% using market-adjusted returns and by 3.8% using four-factor model abnormal returns. However, these findings are driven by differences in the stocks recommended and their market capitalization. After controlling for these selection effects, we find no difference in the performance of the buy- and sell-side analysts' Strong Buy/Buy recommendations.

    Keywords: buy-side analysts; sell-side analysts; stock recommendations; recommendation optimism; recommendation performance; investment recommendations; conflicts of interest; Financial Markets; Financial Institutions; Financial Services Industry; United States;

    Citation:

    Groysberg, Boris, Paul Healy, George Serafeim, and Devin Shanthikumar. "The Stock Selection and Performance of Buy-Side Analysts." Management Science 59, no. 5 (May 2013): 1062–1075. View Details
  3. When the Crowd Fights Corruption

    Corruption is the greatest impediment to conducting business in Russia, according to leaders recently surveyed by the World Economic Forum. Indeed, it's a problem in many emerging markets, and businesses have a role to play in combating it, according to Healy and Ramanna. The authors focus on RosPil—an anticorruption entity in Russia set up by Alexey Navalny, a crusader against public and private malfeasance in that country. As of December 2011, RosPil claimed to have prevented the granting of dubious contracts worth US$1.3 billion. The organization holds corrupt politicians' and bureaucrats' feet to the fire largely through internet-based crowdsourcing, whereby often-anonymous people identify requests for government-issued tenders that are designed to generate kickbacks. Should entities like RosPil be supported, and should companies fashion their own responses to corruption? On the one hand, there are obvious public-relations and political risks; on the other hand, corruption can erode a firm's competitiveness, the trust of customers and employees, and even the very legitimacy of capitalism. The authors argue that heads of many multinational companies are well positioned to combat corruption in emerging markets. Those leaders have the power to enforce policies in their organizations and networks, and they enjoy the ability to organize others in the industry against this pernicious threat.

    Keywords: corruption; emerging economies; entrepreneurship; globalization; Crime and Corruption; Entrepreneurship; Ethics; Globalization; Russia; Georgia (nation, Asia); India;

    Citation:

    Healy, Paul M., and Karthik Ramanna. "When the Crowd Fights Corruption." Harvard Business Review 91, nos. 1/2 (January–February 2013). View Details
  4. What Factors Drive Analyst Forecasts?

    A firm's competitive environment, its strategic choices, and its internal capabilities are considered important determinants of its future performance. Yet there is little evidence on whether analysts' forecasts of firm performance actually reflect any of these factors and which are considered most important. We use survey data from 967 analysts ranking 837 companies to judge how their forecasts are related to evaluations of firms' industry competitiveness, strategic choices, and internal capabilities. Forecasts are generally associated with many of the factors that money managers rate as important in their assessments of analyst contributions, including industry growth and competitiveness, low-price strategy, strategy execution, top management quality, innovation, and performance-driven culture. We also find wide variation across variables for ratings consistency among analysts covering the same firm. On average, consistency is higher for sell-side than buy-side analysts, consistent with sell-side analysts facing greater incentives to herd.

    Keywords: Competition; Forecasting and Prediction; Industry Growth; Judgments; Performance; Valuation; Price; Quality; Innovation and Invention; Organizational Culture; Competency and Skills; Surveys;

    Citation:

    Groysberg, Boris, Paul Healy, Nitin Nohria, and George Serafeim. "What Factors Drive Analyst Forecasts?" Financial Analysts Journal 67, no. 4 (July–August 2011). View Details
  5. What Drives Sell-Side Analyst Compensation at High-Status Investment Banks?

    We use proprietary data from a major investment bank to investigate factors associated with analysts' annual compensation. We find compensation to be positively related to "All-Star" recognition, investment-banking contributions, the size of analysts' portfolios, and whether an analyst is identified as a top stock picker by The Wall Street Journal. We find no evidence that compensation is related to earnings forecast accuracy. But consistent with prior studies, we find analyst turnover to be related to forecast accuracy, suggesting that analyst forecasting incentives are primarily termination based. Additional analyses indicate that "All-Star" recognition proxies for buy-side client votes on analyst research quality used to allocate commissions across banks and analysts. Taken as a whole, our evidence is consistent with analyst compensation being designed to reward actions that increase brokerage and investment-banking revenues. To assess the generality of our findings, we test the same relations using compensation data from a second high-status bank and obtain similar results.

    Keywords: Investment Banking; Research; Compensation and Benefits; Investment Portfolio; Forecasting and Prediction; Resource Allocation; Status and Position; Business Earnings; Quality; Revenue; Stocks; Voting;

    Citation:

    Groysberg, Boris, Paul M. Healy, and David A. Maber. "What Drives Sell-Side Analyst Compensation at High-Status Investment Banks?" Journal of Accounting Research 49, no. 4 (2011): 969–1000. View Details
  6. Can Research Committees Add Value for Investors? An Analysis of Lehman Brothers' Ten Uncommon Values® Recommendations

    Since 1949 Lehman Brothers has used an investment committee to select the top ten recommendations made by its analysts each year. We examine the performance of this committee's recommendations and find that on average its selections generated abnormal returns of 2.7% at the recommendation announcement and 4.5% for the remainder of the year. This performance cannot be explained by changes in analyst recommendations and/or target prices that accompany the committee report. Nor was it due to analyst screening ability since the returns were higher than those that earned from investing in analysts' top stock picks that were not selected by the committee. Finally, we find that abnormal announcement returns and trading volume at the report publication are correlated with market-adjusted returns for the prior year's stock selections, suggesting that investors believe that a successful process in one year is likely to be repeated the following year. We believe that these findings are particularly interesting given recent efforts to require firms to use research recommendation committees to improve the quality of research.

    Keywords: Forecasting and Prediction; Stocks; Financial Markets; Investment; Investment Return; Governing Rules, Regulations, and Reforms; Performance Expectations; Groups and Teams; Research; Value Creation;

    Citation:

    Groysberg, Boris, Paul M. Healy, and Yang Gui. "Can Research Committees Add Value for Investors? An Analysis of Lehman Brothers' Ten Uncommon Values® Recommendations." Journal of Financial Transformation 24 (November 2008): 123–130. View Details
  7. Buy-Side vs. Sell-Side Analysts' Earnings Forecasts

    We compare the earnings forecast performance of analysts at a large buy-side firm to that of sell-side analysts. Our tests show that the buy-side firm analysts make more optimistic and less accurate forecasts than their counterparts on the sell-side. These performance differences appear to be partially explained by the buy-side's higher retention of poor-performing analysts and by differences in performance benchmarks used to evaluate buy- and sell-side analysts.

    Keywords: Motivation and Incentives; Business Earnings; Forecasting and Prediction; Performance Effectiveness;

    Citation:

    Groysberg, Boris, Paul M. Healy, and Craig James Chapman. "Buy-Side vs. Sell-Side Analysts' Earnings Forecasts." Financial Analysts Journal 64, no. 4 (July–August 2008): 25 – 39. View Details
  8. Audit the audit committees: VIEWPOINT PAUL HEALY AND KRISHNA PALEPU: After Enron, boards must change the focus and provide greater financial transparency

    Keywords: Corporate Disclosure; Accounting Audits;

  9. Information Asymmetry, Corporate Disclosure, and the Capital Markets: A Review of the Empirical Disclosure Literature

    Keywords: Information; Markets; Corporate Disclosure; Capital;

    Citation:

    Healy, Paul M., and Krishna G. Palepu. "Information Asymmetry, Corporate Disclosure, and the Capital Markets: A Review of the Empirical Disclosure Literature." Journal of Accounting & Economics 31, nos. 1-3 (September 2001): 405–440. View Details
  10. The Performance of International Joint Ventures: A Study of The Merchant Banking Industry In Singapore

    Keywords: Performance; Joint Ventures; Banks and Banking; Banking Industry; Singapore;

    Citation:

    Healy, Paul M., Andrew Alford, and Ng Kah Hwa. "The Performance of International Joint Ventures: A Study of The Merchant Banking Industry In Singapore." Journal of Corporate Finance 4, no. 1 (March 1998). View Details
  11. The Effect of Accounting Procedure Changes on CEO's Cash Salary and Bonus Compensation

    Keywords: Accounting; Change; Compensation and Benefits;

    Citation:

    Healy, Paul M., Sok-Hyon Kang, and Krishna G. Palepu. "The Effect of Accounting Procedure Changes on CEO's Cash Salary and Bonus Compensation." Journal of Accounting & Economics 9, no. 1 (April 1987): 7–34. View Details

Book Chapters

Working Papers

  1. The Use of Broker Votes to Reward Brokerage Firms' and Their Analysts' Research Activities

    In traditional markets, the price mechanism directs the flow of resources and governs the process through which supply and demand are brought into equilibrium. In the investment-research industry, broker votes perform these functions. Using detailed clinical data from a midsized investment bank for the years 2004 to 2007, we present evidence that institutional investors use broker votes to budget future aggregate commission payments across brokerage firms; that these votes are responsive to actions that brokerage-house analysts take to communicate with client investors; and that brokerage firms use client-supplied votes as a quasi allocation base to indirectly reward individual analysts for contributions to brokerage-wide commission payments. Overall, our results suggest that broker votes function as the nexus for a set of implicit contractual relationships between sell-side brokers, their affiliated analysts, and their buy-side clients.

    Keywords: Markets for information; sell-side analysts; Commissions; Broker votes; compensation; Public and private communications; Management access; relational contracts; Voting; Balance and Stability; Research; Supply and Industry; Investment; Corporate Governance; Compensation and Benefits; Banking Industry;

    Citation:

    Maber, David A., Boris Groysberg, and Paul M. Healy. "The Use of Broker Votes to Reward Brokerage Firms' and Their Analysts' Research Activities." Harvard Business School Working Paper, No. 14-074, February 2014. View Details
  2. An Analysis of Firms' Self-Reported Anticorruption Efforts

    We use Transparency International's ratings of self-reported anticorruption efforts for 480 corporations to analyze factors underlying the ratings. Our tests examine whether these forms of disclosure reflect firms' real efforts to combat corruption or are cheap talk. We find that the ratings are related to enforcement and monitoring, country and industry corruption risk, and governance variables. Specifically, firms with high anticorruption ratings are domiciled in countries with low corruption risk ratings and strong anticorruption enforcement, operate in high corruption risk industries, have recently faced a corruption enforcement action, employ a Big Four audit firm, and have a higher percentage of independent directors. Controlling for these effects and other determinants, we find that firms with lower residual ratings have relatively higher subsequent media allegations of corruption. They also report higher future sales growth and show a negative relation between profitability change and sales growth in high corruption geographic segments. In contrast, there is no relation between residual anticorruption ratings, sales growth, and changes in profitability in low corruption geographic segments. The net effect on valuation from sales growth and changes in profitability is close to zero. Given this evidence, we conclude that, on average, firms' self-reported anticorruption efforts signal real efforts to combat corruption and are not merely cheap talk.

    Keywords: corruption; bribery; sustainability; reporting; accountability; disclosure; international business; corporate sustainability; social responsibility; Crime and Corruption; Profit; Corporate Disclosure; Policy; Growth and Development; Law Enforcement; Performance; Sales;

    Citation:

    Healy, Paul M., and George Serafeim. "An Analysis of Firms' Self-Reported Anticorruption Efforts." Harvard Business School Working Paper, No. 12-077, February 2012. (Revised March 2013, March 2014.) View Details
  3. What Impedes Oil and Gas Companies' Transparency?

    We examine determinants of oil and gas companies' transparency on performance and government payments in host countries of operation. Holding a firm-year constant and varying the host country, we find that proprietary costs of disclosure, both in the form of political and product market competition costs, impede transparency. Specifically, transparency on performance is lower in host countries with a history of nationalizations. These political costs are mitigated for state-owned oil firms. Performance transparency is also lower in host countries where few oil and gas firms operate, consistent with disclosure in such regions revealing proprietary information to competitors. Transparency on government payments is higher in more corrupt host countries, consistent with companies responding to a demand for information in more risky regions. Moreover, the relation between government payment transparency and host country corruption is mitigated by host government transparency about oil and gas payments, suggesting that companies increase their government payment transparency in host countries that are both corrupt and opaque.

    Keywords: Crime and Corruption; Corporate Disclosure; Financial Reporting; Energy Industry;

    Citation:

    Healy, Paul, and George Serafeim. "What Impedes Oil and Gas Companies' Transparency?" Harvard Business School Working Paper, No. 12-038, November 2011. (Revised July 2013.) View Details
  4. Market Competition, Government Efficiency, and Profitability Around the World

    We examine how cross-country differences in product, capital, and labor market competition, and government efficiency affect the rate of mean reversion of corporate profitability. Using a sample of 42,337 unique firms from 49 countries, we find that corporate profitability mean reverts faster in countries where product and capital markets are more competitive. Moreover, holding constant product, capital, and labor market competition we find that profitability mean reverts faster in countries with less efficient governments. The findings suggest that country-level factors have an economically significant impact on the rate of corporate profitability mean reversion. The study has implications for forecasting profitability and equity valuation in a global context.

    Keywords: Profit; Competition; Government and Politics; Labor; Markets; Capital Markets; Valuation; Forecasting and Prediction; Equity; Performance Efficiency; Product; Country;

    Citation:

    Healy, Paul M., George Serafeim, Suraj Srinivasan, and Gwen Yu. "Market Competition, Government Efficiency, and Profitability Around the World." Harvard Business School Working Paper, No. 12-010, May 2011. View Details

Cases and Teaching Materials

  1. Three-Year Planning at Li & Fung Limited

    Having been able to follow its own "three-year plan" on course constantly, Li & Fung Limited fell short of meeting its stretch earnings target for the first time in almost two decades, leading to a double-digit drop in stock price overnight. Questions were raised on the company's strategies pursued to meet such targets, and on the validity of its Three-Year Planning process.

    Keywords: Li & Fung; financial reporting; financial planning; Accounting; Financial Reporting; Distribution Industry; Service Industry; Hong Kong; China;

    Citation:

    Healy, Paul M., and Keith Chi-ho Wong. "Three-Year Planning at Li & Fung Limited." Harvard Business School Case 114-098, May 2014. View Details
  2. Restaurant Industry 2013

    Examines factors underlying differences in valuation multiples (price-earnings and price-to-book) across four firms in the restaurant industry.

    Keywords: restaurant industry; valuation ratios; price/earnings; price/book value; Valuation; United States;

    Citation:

    Healy, Paul M., and Penelope Rossano. "Restaurant Industry 2013." Harvard Business School Case 114-081, March 2014. View Details
  3. Managing Change at Axis Bank (B)

    Axis Bank is India's third largest private sector bank. In April 2009, Shikha Sharma, an outsider was appointed as its CEO. She took over from a person who had overseen ten years of rapid growth at the bank. The selection of an outsider as the new CEO surprised many inside and outside the bank. Sharma changed the bank's hierarchical culture, strengthened the core team by appointing new talent where needed, sought to build its core processes and infrastructure, and filled several gaps in its business portfolio. Despite these changes, the stock market continues to undervalue Axis Bank compared with its chief rivals. In light of this, Axis Bank needs to figure out what more it needs to do to ensure that the market values the franchise correctly.

    Keywords: Change Management; Transformation; Organizational Culture; Organizational Change and Adaptation; Leadership Style; Leading Change; Valuation; Finance; Banks and Banking; Financial Services Industry; Banking Industry; India;

    Citation:

    Healy, Paul, and Rachna Tahilyani. "Managing Change at Axis Bank (B)." Harvard Business School Supplement 114-083, April 2014. View Details
  4. Managing Change at Axis Bank (A)

    Axis Bank is India's third largest private sector bank. In April 2009, Shikha Sharma, an outsider, was appointed as its CEO. She took over from a person who had overseen ten years of rapid growth at the bank. The selection of an outsider as the new CEO surprised many inside and outside the bank. Sharma changed the bank's hierarchical culture, strengthened the core team by appointing new talent where needed, sought to build its core processes and infrastructure, and filled several gaps in its business portfolio. Despite these changes, the stock market continues to undervalue Axis Bank compared with its chief rivals. In light of this, Axis Bank needs to figure out what more it needs to do to ensure that the market values the franchise correctly.

    Keywords: Change Management; Transformation; Organizational Culture; Organizational Change and Adaptation; Leadership Style; Leading Change; Valuation; Finance; Banks and Banking; Financial Services Industry; Banking Industry; India;

    Citation:

    Healy, Paul, and Rachna Tahilyani. "Managing Change at Axis Bank (A)." Harvard Business School Case 114-082, March 2014. View Details
  5. Mittal Steel's Pursuit of Arcelor (B)

    Lakshmi Mittal, CEO of Mittal Steel, a UK-based company with Indian roots, took advantage of a weakened Arcelor that had successfully won a bidding war for Canadian steel company Dofasco, with an unsolicited bid to buy the company. Mittal's plans for acquiring Arcelor were initially thwarted by concerted opposition from Arcelor's board and several European governments. To Mittal's further surprise, on May 26, Arcelor orchestrated a merger with the Russian steelmaker Severstal. Although the proposed merger did not offer Arcelor shareholders as much value as Mittal's deal, Arcelor had structured the deal in such a way that it did not require shareholders' approval. Mittal wondered how he should respond to the Severstal deal. Did it make sense to continue pursuing Arcelor or should he look for other ways to expand his steel empire?

    Keywords: strategy; Fiduciary Duty; negotiation; steel; india; Europe; governance; mergers; board decisions; white knight; Valuation; Mergers and Acquisitions; Corporate Governance; Economics; Steel Industry; Canada; United Kingdom; India;

    Citation:

    Healy, Paul, and Penelope Rossano. "Mittal Steel's Pursuit of Arcelor (B)." Harvard Business School Supplement 114-057, January 2014. View Details
  6. Mittal Steel's Pursuit of Arcelor (A)

    Lakshmi Mittal, CEO of Mittal Steel, a UK-based company with Indian roots, took advantage of a weakened Arcelor that had successfully won a bidding war for Canadian steel company Dofasco, with an unsolicited bid to buy the company. Mittal's plans for acquiring Arcelor were initially thwarted by concerted opposition from Arcelor's board and several European governments. To Mittal's further surprise, on May 26, Arcelor orchestrated a merger with the Russian steelmaker Severstal. Although the proposed merger did not offer Arcelor shareholders as much value as Mittal's deal, Arcelor had structured the deal in such a way that it did not require shareholders' approval. Mittal wondered how he should respond to the Severstal deal. Did it make sense to continue pursuing Arcelor or should he look for other ways to expand his steel empire?

    Keywords: strategy; Fiduciary Duty; negotiation; steel; india; Europe; governance; mergers; board decisions; white knight; Strategy; Negotiation; Mergers and Acquisitions; Corporate Governance; Cross-Cultural and Cross-Border Issues; Steel Industry; Canada; United Kingdom; Russia; India;

    Citation:

    Healy, Paul, and Penelope Rossano. "Mittal Steel's Pursuit of Arcelor (A)." Harvard Business School Case 114-056, January 2014. (Revised August 2014.) View Details
  7. Alcoa's Bid for Alcan (B)

    In spring 2007, Alcoa CEO Alain Belda was concerned about the company's market position in light of increased competition from developing markets. China's recent entry into the aluminum market was affecting both supply and demand. Furthermore, downstream and upstream product was coming on-line from other parts of the world, including Russia. As a result, Alcoa had lost its historical market dominance and stock premium. Belda was convinced that for Alcoa to regain its leadership position, the company would have to increase efficiencies by expanding its scale, diversification and reach. The acquisition of a large competitor presented the best opportunity to achieve this goal and, as a result, he was particularly intrigued by Canadian rival, Alcan, because its assets would complement Alcoa's portfolio and enhance its reach. Further, Alcan had sold off non-aluminum assets, essentially making it a pure play in aluminum. That and its access to relatively cheap Canadian hydro power made it an even more intriguing acquisition opportunity for Alcoa. However, another major competitor, Rio Tinto, was also interested in Alcan; the company was in play.

    Keywords: strategy; Acquisitions; Alcoa; Alcan; Rio Tinto; aluminum industry; consolidation; accounting; financial analysis; United States; Canada;

    Citation:

    Healy, Paul, and Penelope Rossano. "Alcoa's Bid for Alcan (B)." Harvard Business School Supplement 114-030, October 2013. View Details
  8. Alcoa's Bid for Alcan (A)

    In spring 2007, Alcoa CEO Alain Belda was concerned about the company's market position in light of increased competition from developing markets. China's recent entry into the aluminum market was affecting both supply and demand. Furthermore, downstream and upstream product was coming on-line from other parts of the world, including Russia. As a result, Alcoa had lost its historical market dominance and stock premium. Belda was convinced that for Alcoa to regain its leadership position, the company would have to increase efficiencies by expanding its scale, diversification and reach. The acquisition of a large competitor presented the best opportunity to achieve this goal and, as a result, he was particularly intrigued by Canadian rival, Alcan because its assets would complement Alcoa's portfolio and enhance its reach. Further, Alcan had sold off non-aluminum assets, essentially making it a pure play in aluminum. That and its access to relatively cheap Canadian hydro power made it an even more intriguing acquisition opportunity for Alcoa. However, another major competitor, Rio Tinto, was also interested in Alcan; the company was in play.

    Keywords: Acquisitions; strategy; aluminum; competition; consolidation; accounting; financials; Alcoa; Rio Tinto; Alcan; Metals and Minerals; Competition; Consolidation; Emerging Markets; Acquisition; Financial Statements; Manufacturing Industry; Canada; China; Russia;

    Citation:

    Healy, Paul, and Penelope Rossano. "Alcoa's Bid for Alcan (A)." Harvard Business School Case 114-029, October 2013. View Details
  9. Gordon Brothers: Collateralizing Corporate Loans by Brands

    The case explores the collateralization of intellectual property in a loan agreement between a highly leveraged apparel company and a large US bank. Leveraging intangibles in the credit market is a new practice that has significantly grown over the past few years. However, estimating their liquidation value is not directly intuitive, since intangibles are highly illiquid assets and have uncertain future cash flows. Can banks reliably secure corporate loans by intellectual property, and how can they alleviate the challenges in estimating a loan-to-value ratio for this collateral?

    Keywords: Intangible assets; Accounting; Valuation; Finance; Restructuring; United States;

    Citation:

    Healy, Paul, and Maria Loumioti. "Gordon Brothers: Collateralizing Corporate Loans by Brands." Harvard Business School Case 114-016, August 2013. (Revised November 2013.) View Details
  10. Growing Financial Services in India: Aditya Birla Financial Services Group

    Aditya Birla Financial Services Group is a large, broad-based, Indian financial services institution offering products ranging from life insurance and mutual funds to private equity. The company has witnessed a turnaround in recent years and regained lost market share. However, in recent years, concerns about investor protection has increased financial sector regulatory oversight specifically in the asset management and life insurance space and changed the rules of the game. Additionally, the central bank has invited new banks to apply for licenses to operate in the country. In the face of these changes, the company has to figure out what its strategy should be to realize its vision of becoming a leading integrated financial services player offering customers a menu of products that support their needs at different stages of their life.

    Keywords: regulatory environment; Finance; Asset Management; Business Growth and Maturation; Transformation; Leadership Development; Leadership Style; Business Processes; Organizational Structure; Organizational Change and Adaptation; Competitive Strategy; Diversification; Segmentation; Financial Services Industry; Insurance Industry; India;

    Citation:

    Healy, Paul M., and Rachna Tahilyani. "Growing Financial Services in India: Aditya Birla Financial Services Group." Harvard Business School Case 113-059, April 2013. (Revised November 2013.) View Details
  11. Value Partners and the Evergrande Situation

    In June 2012, Cheah Cheng-Hye and his colleagues at Value Partners, a Hong-Kong-based investment firm, received a copy of a short-seller report alleging that Evergrande, one of China's largest property developers, was using fraudulent accounting and paying bribes to secure business. Evergrande's stock plummeted, and Value Partners, which had a sizable holding of Evergrande stock, had to determine how to respond to the allegations. The case provides an opportunity to review Value Partners' research approach to investing in Chinese companies and to assess the merits of the Evergrande allegations.

    Keywords: asset management; financial analysis; value investing; China; Asset Management; Crime and Corruption; Financial Services Industry; China;

    Citation:

    Healy, Paul, and Keith Chi-ho Wong. "Value Partners and the Evergrande Situation." Harvard Business School Case 113-113, April 2013. (Revised March 2014.) View Details
  12. Corruption at Siemens (TP) (A), (B), (C) and (D)

    This teaching plan is designed to be used in conjunction with the case Corruption at Siemens (A), HBS No. 108033 [and its related B and C cases] to help faculty deepen students' comprehension of business issues and to energize classroom discussion.

    Keywords: corruption; management; Management; Medical Devices and Supplies Industry; Germany;

    Citation:

    Healy, Paul. "Corruption at Siemens (TP) (A), (B), (C) and (D)." Harvard Business School Teaching Plan 113-092, March 2013. View Details
  13. Aubrey McClendon's Special Incentive Compensation at Chesapeake Energy (B)

    Keywords: stockholders; Activist Investors; corruption; Conflict of Interests; Crime and Corruption; Executive Compensation; Energy Industry;

    Citation:

    Healy, Paul, Clayton S. Rose, and Penelope Rossano. "Aubrey McClendon's Special Incentive Compensation at Chesapeake Energy (B)." Harvard Business School Supplement 113-093, January 2013. View Details
  14. Rospil.info

    What should business leaders do about corruption? In December 2011, four HBS alumni met to debate how to engage the unprecedented protests against Vladimir Putin's corrupt government, which had erupted in Russia in response to alleged fraud in the recent parliamentary elections. A notable figure in the protests was anti-corruption blogger Alexey Navalny. Navalny used publicly available requests for tender, "crowd-sourcing," and volunteer experts to discover, expose, and encourage prosecution of corrupt dealings by the Russian government. These efforts made Navalny a cause célèbre in Western media and a popular figure with Russia's tech-savvy population. But was Navalny the right figure for business leaders in Russia to organize around? What were the risks of getting involved with a politically volatile activist?

    Keywords: Leadership; Crime and Corruption; Government and Politics; Social and Collaborative Networks; Blogs; Information Industry; Russia;

    Citation:

    Healy, Paul, Karthik Ramanna, and Matthew Shaffer. "Rospil.info." Harvard Business School Case 112-033, February 2012. (Revised June 2012.) View Details
  15. The Fall of Enron

    The case traces the rise of Enron, covering the company's business innovations, personnel management, and risk management processes. It then examines the company's dramatic fall including the extension of its trading model into questionable new businesses, the financial reporting problems, and governance breakdowns inside and outside the firm. The case offers students an opportunity to explore why Enron failed and to understand the systemic problems in governance that affected its board of directors, the audit committee, the external auditors, and financial analysts.

    Keywords: Risk Management; Governing and Advisory Boards; Management Practices and Processes; Crime and Corruption; Financial Reporting; Corporate Governance;

    Citation:

    Healy, Paul, and Krishna Palepu. "The Fall of Enron." Harvard Business School Case 109-039, November 2008. (Revised September 2013.) View Details
  16. Aubrey McClendon's Special Incentive Compensation at Chesapeake Energy (A)

    Aubrey McClendon, founder and CEO of Chesapeake Energy, was, according to Fortune Magazine, the highest paid U.S. CEO in 2008 receiving over $100 million in total compensation. McClendon received this compensation despite a significant drop in the company's stock price and financial performance during the year. The (A) case addresses the specifics of the compensation and the rationale for the compensation from the perspective of Chesapeake's board and its compensation committee including McClendon's role in consummating several joint ventures, which the board and committee believed positioned the company for future growth in the relatively young industry of unconventional natural gas exploration and extraction. In addition, the (A) case describes the role of the compensation committee and the company's executive performance measurement factors.

    Keywords: Financial Statements; Financial Reporting; Price; Stock Options; Valuation; Joint Ventures; Business Growth and Maturation; Economic Growth; Growth and Development Strategy; Change Management; Energy Industry; United States;

    Citation:

    Healy, Paul, Clayton S. Rose, and Aldo Sesia. "Aubrey McClendon's Special Incentive Compensation at Chesapeake Energy (A)." Harvard Business School Case 110-047, January 2010. (Revised April 2013.) View Details
  17. Gerson Lehrman Group: Managing Risks

    It was June 2011 and Alexander Saint-Amand, President and CEO of Gerson Lehrman Group, the largest expert network firm globally, has found his firm once again in the midst of controversy. This controversy centered around a number of insider trading cases that had been brought against consultants working for competing expert network firms. While GLG was in no way implicated in these cases, and GLG had invested significantly in its compliance policies and controls in order to prevent the mishandling of public information, the entire industry was being impacted. Saint-Amand is faced with the challenge of deciding how best to handle this crisis.

    Keywords: Risk Management;

    Citation:

    Groysberg, Boris, Paul Healy, and Sarah L. Abbott. "Gerson Lehrman Group: Managing Risks." Harvard Business School Case 412-004, September 2011. (Revised January 2012.) View Details
  18. Wealth Management Crisis at UBS (A)

    The case describes the challenges that UBS faced as a result of the U.S. Department of Justice (DOJ) investigation for tax fraud, that claimed that UBS had helped some 52,000 U.S. residents hide billions of dollars in untaxed assets in secret Swiss accounts between 2000 and 2007, depriving the U.S. Treasury of hundreds of millions of dollars in taxes.

    Keywords: Misleading and Fraudulent Advertising; Competitive Strategy; Taxation; Risk Management; Global Strategy; Asset Management; Emerging Markets; Ethics; Problems and Challenges; Governing Rules, Regulations, and Reforms; Financial Services Industry; United States; Switzerland;

    Citation:

    Healy, Paul M., George Serafeim, and David Lane. "Wealth Management Crisis at UBS (A)." Harvard Business School Case 111-082, March 2011. (Revised October 2011.) View Details
  19. Wealth Management Crisis at UBS (B)

    The case describes the resolution of the U.S. Department of Justice (DOJ) investigation for tax fraud and the increasing pressure on the wealth management business.

    Keywords: Wealth; Taxation; Crime and Corruption; Ethics; Governance; Competitive Advantage; Business and Government Relations; Asset Management; Globalization; United States;

    Citation:

    Healy, Paul M., George Serafeim, and David Lane. "Wealth Management Crisis at UBS (B)." Harvard Business School Supplement 111-090, March 2011. View Details
  20. Business Analysis and Valuation Model (Version 5)

    Once you enter company financial statements, this software enables you to standardize them to a common format, make any needed adjustments to the company's accounting, and make assumptions about the company's future performance. The model then provides financial ratios for the company, with benchmarks for the U.S. economy, company pro forma financial statements, and a company valuation using several standard valuation techniques. Available only in a CD-ROM, Windows-only format.

    Keywords: Financial Statements; Standards; Mathematical Methods; Valuation;

    Citation:

    Healy, Paul M., Krishna G. Palepu, and Jonathan Barnett. Business Analysis and Valuation Model (Version 5). Harvard Business School Tool 103-701, January 2003. (Revised February 2011.) View Details
  21. Sidoti & Company: Launching a Micro-Cap Product

    It is 2010 and Sidoti & Company, a New York-based brokerage firm specializing in small capitalization stocks, has just launched a new product- micro cap stock research. The firm has hired a group of five analysts who will produce written research reports on micro-cap stocks, that is, publicly traded stocks with a market capitalization of less than $250 million. Peter Sidoti, Sidoti & Company's founder and CEO, knows that there is demand for this product. However, he is not entirely certain how this new business will function, both with respect to how the product is distributed and to how Sidoti & Company will get compensated for it. The case discusses Sidoti & Company's business model, and how the new business fits with, and differs from, that model. It discusses the challenges Sidoti faces in making this new business a success.

    Keywords: Business Model; Financial Strategy; Product Launch; Strategic Planning; Corporate Strategy; Financial Services Industry; New York (city, NY);

    Citation:

    Groysberg, Boris, Paul M. Healy, and Sarah Abbott. "Sidoti & Company: Launching a Micro-Cap Product." Harvard Business School Case 411-072, January 2011. View Details
  22. Morgan Asset Management

    It is 2010 and Guillermo Araoz, the equity research director at Morgan Asset Management (MAM), is considering his research budget for the year. Due to recent declines in the equity markets and MAM's sale of its mutual funds business, MAM has seen a decline in its assets under management and, consequently, in its research budget. The case describes the investment process at MAM, including how stocks are selected and portfolios are constructed, and discusses the way in which the research budget supports this process. Araoz is faced with the challenge of how best to allocate this smaller research budget without negatively impacting the firm's investment process and investment performance.

    Keywords: Budgets and Budgeting; Asset Management; Financial Strategy; Investment; Resource Allocation; Research and Development; Financial Services Industry;

    Citation:

    Groysberg, Boris, Paul M. Healy, and Sarah Abbott. "Morgan Asset Management." Harvard Business School Case 411-058, November 2010. View Details
  23. Eddie Bauer (A)

    In June 2005, Eddie Bauer, the specialty apparel retailer, emerged from bankruptcy. Under the plan of reorganization former creditors converted their debt into common shares, taking 100% ownership in the reconstituted company. Large banks-including Bank of America and J.P. Morgan Chase-were among the former creditors. In October 2005, Eddie Bauer stock was selling for $24 per share. Analysts were projecting target prices ranging from $22 to $35 per share. Account managers at Bank of America and J.P. Morgan Chase needed to assess whether to hold or sell their shares in Eddie Bauer.

    Keywords: Financial Statements; Mergers and Acquisitions; Restructuring; Insolvency and Bankruptcy; Stock Shares; Valuation; Apparel and Accessories Industry; Retail Industry; United States;

    Citation:

    Healy, Paul, Sharon Katz, and Aldo Sesia. "Eddie Bauer (A)." Harvard Business School Case 110-008, August 2009. (Revised February 2013.) View Details
  24. Eddie Bauer (B)

    In February 2007, shareholders of Eddie Bauer, the specialty apparel retailer, were scheduled to vote on management's proposed sale of the company to two private equity firms. More than 50% of outstanding shares in Eddie Bauer needed to be voted in favor of the deal for it to be finalized. Shareholders needed to decide whether to vote for or against the proposed sale, which was fully endorsed by the board of Eddie Bauer.

    Keywords: Financial Statements; Mergers and Acquisitions; Governing and Advisory Boards; Privatization; Valuation; Apparel and Accessories Industry; Retail Industry; United States;

    Citation:

    Healy, Paul M., Sharon P. Katz, and Aldo Sesia. "Eddie Bauer (B)." Harvard Business School Supplement 110-009, August 2009. (Revised August 2010.) View Details
  25. Eddie Bauer (C)

    The Eddie Bauer (C) case describes what happened and the outlook for the retailer.

    Keywords: Mergers and Acquisitions; Decision Choices and Conditions; Voting; Governing and Advisory Boards; Apparel and Accessories Industry; Retail Industry; United States;

    Citation:

    Healy, Paul M., Sharon P. Katz, and Aldo Sesia. "Eddie Bauer (C)." Harvard Business School Supplement 110-010, August 2009. (Revised August 2010.) View Details
  26. Credit Suisse Group: Managing Equity Research as a Business

    In 2003, in the midst of industry turmoil and company-specific challenges, Stefano Natella was named Global Head of Equity Research at Credit Suisse. Over a six-year period, Natella implemented and refined a new methodology for valuing equity research analysts, both individually and as a collective unit. Natella's system, known as the 'Scorecard' was also used as the basis for compensating, hiring, and promoting analysts. Over time, the Scorecard was refined to allow Credit Suisse to improve its customer service efforts in a way that maximized profitability for the firm.

    Keywords: Business Model; Change Management; Customer Satisfaction; Compensation and Benefits; Selection and Staffing; Balanced Scorecard; Organizational Change and Adaptation; Financial Services Industry;

    Citation:

    Groysberg, Boris, Paul M. Healy, and Sarah Abbott. "Credit Suisse Group: Managing Equity Research as a Business." Harvard Business School Case 410-073, January 2010. (Revised April 2010.) View Details
  27. Subprime Crisis and Fair-Value Accounting

    This case examines the challenges in implementing fair value accounting for mortgage instruments, the role of accounting in the sub-prime crisis, and proposals for revising accounting standards given the crisis.

    Keywords: Fair Value Accounting; Financial Crisis; Debt Securities; Mortgages; Standards;

    Citation:

    Healy, Paul M., Krishna G. Palepu, and George Serafeim. "Subprime Crisis and Fair-Value Accounting." Harvard Business School Case 109-031, October 2008. (Revised August 2009.) View Details
  28. Financial Reporting Problems at Molex, Inc. (A)

    Following an accounting problem at Molex, the firm's auditors request changes in management. The board of directors has to decide whether the auditors' concerns have merit or whether, as management argues, the accounting issue is immaterial.

    Keywords: Managerial Roles; Governing and Advisory Boards; Financial Reporting; Relationships; Resignation and Termination; Accounting Audits;

    Citation:

    Healy, Paul M. "Financial Reporting Problems at Molex, Inc. (A)." Harvard Business School Case 105-082, June 2005. (Revised July 2009.) View Details
  29. Revenue Recognition Problems in the Communications Equipment Industry

    Designed to explore recognition issues in the context of a potential market downturn. In late 2000, Lucent Technologies reports multiple revisions to its recent financial results due to revenue recognition problems, leading to a dramatic decline in its stock price. This disclosure comes in the wake of a period of spectacular growth for the communications equipment industry during the 1990s. From the perspective of a securities analyst covering the industry, are the troubles at Lucent indicative of larger revenue recognition issues throughout the industry? Facilitates a discussion of potential early warning signs of the risks faced by Lucent's competitors.

    Keywords: Corporate Disclosure; Revenue Recognition; Policy; Supply and Industry; Performance; Communications Industry;

    Citation:

    Healy, Paul M., and Arjuna J Costa. "Revenue Recognition Problems in the Communications Equipment Industry." Harvard Business School Case 107-025, August 2006. (Revised August 2007.) View Details
  30. DICOM Group plc and Captiva Software Corp.

    Compares two companies in the information capture software industry. Asks students to analyze and compare the performance of two companies (one in the United Kingdom and the other in the United States) from the perspective of a buy-side analyst reporting to the manager of the firm's Global Technology Fund. The analyst must decide whether to recommend one or both stocks to the fund manager. Provides an opportunity to compare the differences in terminology, presentation of financial reports, and accounting methods for the U.S. and U.K. firms.

    Keywords: History; Financial Management; Environmental Accounting; Activity Based Costing and Management; Financial Reporting; Performance; Performance Evaluation; Financial Statements; Economic Growth; Fair Value Accounting; Information Industry; Computer Industry; United Kingdom; United States;

    Citation:

    Healy, Paul M. "DICOM Group plc and Captiva Software Corp." Harvard Business School Case 106-015, August 2005. (Revised April 2007.) View Details
  31. 10 Uncommon Values®: Optimizing the Stock-Selection Process

    In 2003, Steve Hash, research director at Lehman Brothers, prepared to initiate the firm's "Ten Uncommon Values" stock-picking process for the year. An investment committee had to pick the 10 best stocks from about 100 stock ideas presented by the firm's analysts. The performance of the stocks selected for the Ten Uncommon Values had historically been strong--an investment strategy to acquire the recommended stocks and hold them for one year would have outperformed the S&P 500 for 39 of the last 54 years. However, during the latest three years--2000 to 2002--the recommendations had performed poorly, generating an average return of -22.5% vs. -11.7% for the S&P 500. Hash pondered several questions: What was the importance of the Ten Uncommon Values for Lehman Brothers and its clients? How much time and effort should the firm put into the process of selecting stocks for the report? How many members should be on the Investment Policy Committee, and who should be selected? What should the process for selection be? Should analysts whose stocks were selected be compensated for their picks? Finally, should they continue the process? Teaching Purpose: Using both qualitative and quantitative data, to allow students to discuss a range of issues: the optimal process of selecting stocks, the optimal size of the committee, how much time to spend with each analyst, private or public voting on stocks by the committee members, the right decision-making process, and whether incentives play a role in the process.

    Keywords: Stocks; Investment; Financial Strategy; Decision Making; Groups and Teams; Financial Services Industry; United States;

    Citation:

    Healy, Paul M., and Boris Groysberg. "10 Uncommon Values®: Optimizing the Stock-Selection Process." Harvard Business School Case 405-022, November 2004. (Revised March 2007.) View Details
  32. Nokia in 2003

    Examines the challenges facing a money manager who owns stock in Nokia, the leading wireless handset provider. Two analysts covering the stock make very different predictions about the economies of the industry, Nokia's future performance, and stock recommendations. Whose advice should the money manager follow?

    Keywords: Financial Reporting; Forecasting and Prediction; Performance Effectiveness; Performance Evaluation; Problems and Challenges; Electronics Industry;

    Citation:

    Healy, Paul M. "Nokia in 2003." Harvard Business School Case 106-067, May 2006. View Details
  33. United Parcel Service's IPO

    Examines the valuation of United Parcel Service (UPS) at the time of its IPO in mid-1999. Offers students the opportunity to assess UPS's current performance relative to its major competitor, Federal Express (FedEx), and to judge whether that performance is sustainable. Students then make projections of UPS's future earnings performance, estimate on IPO price, and assess the reasonableness of their estimate compared to the valuation of FedEx and best-in-class leaders.

    Keywords: Initial Public Offering; Valuation; Performance Evaluation; Competition; Shipping Industry; Georgia (state, US);

    Citation:

    Healy, Paul M., Brett Laschinger, and Ajay Shroff. "United Parcel Service's IPO." Harvard Business School Case 103-015, October 2002. (Revised October 2005.) View Details
  34. Prematriculation Financial Accounting Tutorial/Module

    The Financial Accounting course is an introduction to the fundamental concepts of financial accounting in a management context. The course describes the business activities for Global Grocer, a small retail franchise specializing in gourmet foods and specialty kitchen implements from all over the world. In the course, students follow the story of Global Grocer from its inception through the first year of operation. The course teaches students how accounting systems are used to record the day-to-day economic activities of a business and places special emphasis on understanding accounting terminology. Students learn fundamental accounting concepts and then apply those concepts in a detailed examination of the financial statements used to describe the business. Throughout the course, students are presented with real-world challenges that require them to interpret the financial data to find answers.

    Keywords: Accounting; Performance; Financial Statements;

    Citation:

    Hawkins, David F., Paul M. Healy, and Ratna G. Sarkar. Prematriculation Financial Accounting Tutorial/Module. Harvard Business School Tutorial 105-708, June 2005. View Details
  35. Merrill Lynch in 2003: Sunny Skies Ahead?

    Merrill Lynch (ML) is at a crossroads. Stan O'Neal became its CEO and implemented a radical cost-cutting program. In addition, the company dot-com continues to recover from the fallout from the Enron and dot-com scandals. What are the future prospects for ML? Can the firm compete against its traditional competitors or against the recently merged Goliaths of banking, such as Citigroup?

    Keywords: Management Teams; Forecasting and Prediction; Financial Condition; Investment; Financial Services Industry; Insurance Industry; United States;

    Citation:

    Groysberg, Boris, Paul M. Healy, and David Kiron. "Merrill Lynch in 2003: Sunny Skies Ahead?" Harvard Business School Case 105-067, April 2005. View Details
  36. Prudential Securities

    Prudential Insurance Co. attempted to diversify into financial services by building an investment banking franchise. Prudential's initial foray into the industry was its acquisition of The Bache Group in 1982. In 2000, the company decided to exit investment banking. The firm adopted various strategic positions and human resource management strategies during the 18 years it struggled to compete successfully against prestigious incumbents. Although Prudential's efforts to establish a top-tier investment bank ultimately failed, other firms did succeed in this endeavor.

    Keywords: Investment Banking; Corporate Strategy; Competitive Strategy; Market Entry and Exit; Diversification; Mergers and Acquisitions; Financial Services Industry; Insurance Industry;

    Citation:

    Groysberg, Boris, Paul M. Healy, and Amanda Cowen. "Prudential Securities." Harvard Business School Case 104-008, May 2004. (Revised April 2005.) View Details
  37. Valuation Ratios in the Restaurant Industry

    Examines factors underlying differences in valuation multiples (price-earnings and price-to-book) across four firms in the restaurant industry.

    Keywords: Business Earnings; Valuation; Mathematical Methods; Food and Beverage Industry;

    Citation:

    Healy, Paul M., and Krishna G. Palepu. "Valuation Ratios in the Restaurant Industry." Harvard Business School Case 104-066, January 2004. (Revised March 2005.) View Details
  38. Pre-Paid Legal Services, Inc.

    Pre-Paid Legal Services' business model reveals two key issues--managing the sales force and sales growth and managing claims. Students analyze the economics of the business and consider how to measure firm performance, how to evaluate and reward the sales force, and what services to offer. The case also discusses a Fortune article criticizing Pre-Paid Legal's method of reporting sales force commissions. Students are asked to evaluate Fortune's analysis and to recommend potential responses by Pre-Paid Legal's management.

    Keywords: Financial Management; Financial Strategy; Salesforce Management; Marketing Strategy; Accrual Accounting; Business Cycles; Forecasting and Prediction; Insurance; Business Growth and Maturation; Insurance Industry;

    Citation:

    Healy, Paul M., and Jacob Cohen. "Pre-Paid Legal Services, Inc." Harvard Business School Case 100-037, November 1999. (Revised July 2003.) View Details
  39. Valuation Ratios in the Airline Industry

    Four firms in the airline industry illustrate the underlying differences in valuation multiples (price-earnings and price-to-book).

    Keywords: Valuation; Activity Based Costing and Management; Accounting Audits; Air Transportation Industry;

    Citation:

    Healy, Paul M., Krishna G. Palepu, and Jonathan Barnett. "Valuation Ratios in the Airline Industry." Harvard Business School Case 103-002, April 2003. (Revised May 2003.) View Details
  40. Computer Associates International, Inc.: Governance and Investor Communication Challenge

    Sanjay Kumar, the CEO of Computer Associates, faces investor communication challenges following the company's implementation of a new business model and the accompanying change method used to recognize revenue. Despite management's confidence that the new business model is working effectively, the firm's stock price falls significantly and a major shareholder challenges management through a proxy contest.

    Keywords: Business Earnings; Earnings Management; Stock Shares; Problems and Challenges; Communication Strategy; Accrual Accounting; Business Model; Budgets and Budgeting; Corporate Governance; Revenue; Computer Industry; Information Technology Industry;

    Citation:

    Healy, Paul M., and Krishna G. Palepu. "Computer Associates International, Inc.: Governance and Investor Communication Challenge." Harvard Business School Case 103-007, July 2002. (Revised April 2003.) View Details
  41. Yahoo!'s Stock-Based Compensation

    Amy Maislos, an investor in Internet and technology companies, was excited to read that Yahoo! had reported a positive net income for 1998 operations. During the late 1990s, stock prices of Internet companies had risen rapidly even though most companies were reporting losses. Amy believed that investors and Wall Street analysts would soon expect profits from tech companies. When she reviewed the annual report she noticed a compensation footnote that reported that if Yahoo! had booked an expense for stock options, the company would have experienced a loss for 1998 operations.

    Keywords: Stock Options; Online Technology; Financial Statements; Corporate Disclosure; Business Earnings; Earnings Management; Information Technology Industry;

    Citation:

    Healy, Paul M., and Jacob Cohen. "Yahoo!'s Stock-Based Compensation." Harvard Business School Case 101-059, November 2000. (Revised January 2003.) View Details
  42. Inventory Exercises

    Introduces students to the concepts of inventory valuation (LIFO and FIFO) using a simple example. They then get the chance to apply this knowledge to help understand the inventory footnote for California Steel Industries.

    Keywords: Logistics;

    Citation:

    Healy, Paul M. "Inventory Exercises." Harvard Business School Exercise 101-012, September 2000. (Revised January 2002.) View Details
  43. Liability Reporting

    By examining key criteria for recognizing a liability, this case explores liability recognition in straightforward situations and then examines the most difficult reporting issues in recording liabilities. These often arise when: 1) uncertainty arises about whether an obligation has been incurred; or 2) measuring the value of the obligation is difficult.

    Keywords: Financial Reporting; Legal Liability; Valuation; Problems and Challenges; Accounting Industry;

    Citation:

    Healy, Paul M., and Preeti Choudhary. "Liability Reporting." Harvard Business School Background Note 101-016, August 2000. (Revised November 2001.) View Details
  44. Financial Reporting Environment, The

    Provides a framework for understanding the role of financial reporting and various intermediaries as mechanisms for reducing both adverse selection and moral hazard problems in capital markets. Financial reports reduce adverse selection by providing basic information for investors and their agents before they make initial capital resource allocation decisions. Subsequently, after capital is allocated to particular business ventures, financial reports reduce moral hazard between managers and investors by supplying information used in contracting between investors and managers to reduce conflicts of interests. Various institutional mechanisms and information intermediaries monitor and limit the manipulation of reported information by managers and constrain managers' ability to act in their own self-interest, rather than investors' interests. They also improve information production, reduce incentive conflicts, and enable capital markets to function effectively and efficiently, channeling the economy's savings to the most productive opportunities.

    Keywords: Financial Reporting; Financial Statements; Capital Markets; Venture Capital; Corporate Disclosure; Conflict of Interests;

    Citation:

    Healy, Paul M., Amy P. Hutton, Robert S. Kaplan, and Krishna G. Palepu. "Financial Reporting Environment, The." Harvard Business School Background Note 102-029, September 2001. View Details
  45. Revenue Recognition

    This case discusses revenue recognition in straightforward situations and then considers revenue transactions that may be more complex to record. Revenue recognition criteria can be implemented for the following situations: 1) Customers pay prior to delivery; 2) Products/services are provided over multiple years; 3) Credit-worthiness of the customer is questionable; and 4) Money-back guarantees are offered.

    Keywords: Business Earnings; Revenue Recognition; Decision Making; Financial Statements;

    Citation:

    Healy, Paul M. "Revenue Recognition." Harvard Business School Background Note 101-017, August 2000. (Revised February 2001.) View Details
  46. Expense Recognition

    Recording expenses is not often clear-cut and can require considerable management judgment. This case discusses expense recognition in straightforward situations and then considers expense transactions that may be more complex to record. It uses examples that include situations in which: 1) The value of resources consumed is difficult to define; 2) Resources provide benefits for multiple years; 3) Resources are consumed, but the timing and amount of future payments is uncertain; and 4) Unused resources have declined in value.

    Keywords: Accounting; Cost; Financial Statements;

    Citation:

    Healy, Paul M., and Preeti Choudhary. "Expense Recognition." Harvard Business School Background Note 101-015, August 2000. (Revised February 2001.) View Details
  47. Asset Reporting

    Using historical cost and conservatism to identify and value assets, this case explains the criteria for asset reporting in straightforward situations and then examines scenarios where implementing the criteria for recognition and valuation of assets is conceptually challenging. These more complex situations occur when: 1) Ownership or control of a resource is uncertain; 2) The economic benefits from outlays are uncertain or difficult to quantify; or 3) Resource values have changed.

    Keywords: Accounting; Assets; Problems and Challenges; Accounting Industry;

    Citation:

    Healy, Paul M., and Preeti Choudhary. "Asset Reporting." Harvard Business School Background Note 101-014, August 2000. (Revised January 2001.) View Details
  48. Boeing Company's Accounting for Executive Stock Compensation, The

    Executive stock options are experiencing increased use and the Financial Accounting Standards Board is proposing changes in accounting in the United States.

    Keywords: Executive Compensation; Stock Options; Financial Reporting; United States;

    Citation:

    Healy, Paul M., and Jacob Cohen. "Boeing Company's Accounting for Executive Stock Compensation, The." Harvard Business School Case 100-031, September 1999. (Revised December 2000.) View Details
  49. Off-Balance Sheet Leases in the Restaurant Industry

    Amid mounting concern by credit agencies about off-balance sheet liabilities, an analyst for one of the leading credit-rating agencies has been asked to make a presentation about off-balance sheet liabilities, the strategic analysis behind leasing versus purchasing property, and accounting for leases.

    Keywords: Fair Value Accounting; Property; Leasing; Financial Statements; Capital Structure; Credit; Financial Services Industry;

    Citation:

    Hutton, Amy P., Paul M. Healy, and Jacob Cohen. "Off-Balance Sheet Leases in the Restaurant Industry." Harvard Business School Case 101-033, October 2000. (Revised October 2000.) View Details
  50. MCI-WorldCom Combination, The (A)

    Outlines the accounting decision faced by WorldCom in its acquisition of MCI. Two methods are discussed (purchase and pooling) and students are asked to evaluate which would be more suitable for WorldCom.

    Keywords: Mergers and Acquisitions; Accounting; Telecommunications Industry;

    Citation:

    Healy, Paul M., and Jacob Cohen. "MCI-WorldCom Combination, The (A)." Harvard Business School Case 101-027, September 2000. View Details
  51. Aerospace Technologies, Inc.

    Ben Galil's privately held engineering consulting firm represents aerospace products manufacturers in Israeli government biddings. The company incurs expenses for years before getting paid. This case deals with the alternative methods for booking revenues and expenses (i.e., cash and accrual accounting). It examines whether the company is profitable and whether its current commission structure is sound.

    Keywords: Accrual Accounting; Accounting; Revenue; Cost; Business or Company Management; Profit; Engineering; Bids and Bidding; Government and Politics; Private Ownership; Consulting Industry; Israel;

    Citation:

    Healy, Paul M., and Jacob Cohen. "Aerospace Technologies, Inc." Harvard Business School Case 101-003, July 2000. View Details
  52. City of New York, The

    This case examines the economics of a municipality, and then explores its financial position from the perspective of a bond rating firm.

    Keywords: Bonds; Financial Management; Public Sector; City; Financial Statements; Government Administration;

    Citation:

    Healy, Paul M. "City of New York, The." Harvard Business School Case 198-030, May 1998. (Revised April 2000.) View Details
  53. Adelphia Communications Corporation

    A bank officer must make a loan application decision for a large but financially troubled cable broadcaster.

    Keywords: Financial Condition; Financing and Loans; Decision Choices and Conditions; Contracts; Telecommunications Industry;

    Citation:

    Healy, Paul M. "Adelphia Communications Corporation." Harvard Business School Case 198-031, September 1997. (Revised March 2000.) View Details
  54. Brierley Investments Limited

    Brierley's is an investment company that has performed poorly in the New Zealand market. Management has prepared a report of the intrinsic value of the company's investments.

    Keywords: Valuation; Corporate Disclosure; Financial Strategy; Management Analysis, Tools, and Techniques; Performance Evaluation; Investment; Business Strategy; Financial Services Industry; New Zealand;

    Citation:

    Healy, Paul M. "Brierley Investments Limited." Harvard Business School Case 100-014, December 1999. View Details
  55. Emergence of an International Accounting Standards Setter, The

    Provides students with an overview of recent developments in the setting of accounting standards at a global level.

    Keywords: International Accounting; Financial Statements; Globalization;

    Citation:

    Healy, Paul M., and Jacob Cohen. "Emergence of an International Accounting Standards Setter, The." Harvard Business School Background Note 100-046, October 1999. View Details
  56. Boston Chicken, Inc.

    This case examines Boston Chicken's franchise strategy for growing its innovative restaurant business, and the associated accounting reporting issues that arise.

    Keywords: Financial Reporting; Franchise Ownership; Financial Strategy; Business Strategy; Food and Beverage Industry;

    Citation:

    Healy, Paul M. "Boston Chicken, Inc." Harvard Business School Case 198-032, September 1997. (Revised August 1999.) View Details
  57. Echlin vs. SPX

    Echlin has received a hostile takeover offer from SPX. Both companies have been undertaking major restructurings, and Echlin's shareholders face a difficult decision of whether to support current management or sell out to SPX. Students are asked to analyze the two companies and prepare letters explaining their positions from the CEOs of both companies to be sent to Echlin's shareholders

    Keywords: Acquisition; Financial Statements; Business and Shareholder Relations;

    Citation:

    Healy, Paul M., Bjorn N. Jorgensen, and Penny Joseph. "Echlin vs. SPX." Harvard Business School Case 199-010, October 1998. (Revised January 1999.) View Details
  58. CUC International, Inc. (A)

    The case series examines the role of financial reporting and corporate finance policies as vehicles for communication between managers and outside investors. This case describes management's concern that the company's stock is undervalued because analysts viewed the company's accounting as aggressive. Students are asked to advise CUC's management on ways to improve investor confidence.

    Keywords: Financial Reporting; Stocks; Financial Management; Decisions; Economic Slowdown and Stagnation; Management Style; Management Practices and Processes; Business and Shareholder Relations; Value; Financial Services Industry;

    Citation:

    Palepu, Krishna G., and Paul M. Healy. "CUC International, Inc. (A)." Harvard Business School Case 192-099, February 1992. (Revised October 1996.) View Details
  59. CUC International, Inc. (B)

    Describes CUC's initial response to investors' concerns about the firm's accounting. Students are asked to evaluate this response.

    Keywords: Financial Reporting; Business and Shareholder Relations;

    Citation:

    Palepu, Krishna G., and Paul M. Healy. "CUC International, Inc. (B)." Harvard Business School Supplement 192-100, February 1992. (Revised May 1995.) View Details

Other Publications and Materials

    Research Summary

  1. Wall Street Research

    Wall Street research helps to support a well-functioning capital market by providing investors with information about investment opportunities, and corporate issuers with liquidity for their stocks. Yet surprisingly little is known about how Wall Street research actually works. Academic research has focused on analysts' earnings forecasts and stock recommendations, although investors appear to put little stock in this summary data. Regulators have focused on concerns about analysts' conflicts of interest that diminish the quality and integrity of analyst research. My research provides greater insights into how analysts perform their role as information intermediaries, how they are managed and rewarded, and how they really perform.

    Keywords: sell-side analysts; brokerage; investment banking; buy-side analysts; compensation; Financial Services Industry;

  2. Corruption

    World Bank estimates indicate that as much as $1 trillion is paid in bribes throughout the world in a given year. Corruption has been shown to slow economic development. My research focuses on how corruption affects multinational companies. It discusses differences in companies’ commitments to fighting corruption and their implications for performance, as well as providing greater understanding for how companies become involved in corruption and the consequences of getting caught.

    Keywords: corruption; Internal governance;

    Teaching

  1. Leadership in Financial Organizations

    In the wake of the recent global economic crisis, financial organizations are confronted with volatile financial markets, heightened regulation, and increased public scrutiny of both performance and ethics. this course explores industry-specific subjects related to leadership, change management, ethics, and talent management, and is designed to help leaders of financial organizations navigate the difficult economic and regulatory climate. The course is offered in four of the world's leading financial centers.

    Keywords: Financial Markets; regulation; management; ethical behavior; ethics; Ethical Judgment; talent management; global; financial institutions; Management; Finance; Investment Banking; Financial Institutions; Talent and Talent Management; Ethics;

  2. Strategic Financial Analysis

    This course focuses on the tools used to create economic value. It presents frameworks for assessing strategy, monitoring performance, forecasting capital utilization, valuing strategic assets, and reviewing restructuring opportunities. Participants learn to apply rigorous financial analysis as they evaluate business performance, weigh potential acquisitions, and assess global competition.

    Keywords: strategic change; restructuring; Restructuring; Strategy;

  3. Financial Reporting and Control

    Throughout their careers, business leaders are required to measure and evaluate their organization's economic performance, improve resource allocation and strategy implementation within their organizations, and build accountability for performance through effective external and internal governance. Top leadership in most organizations must also communicate performance information to external investors and other capital providers to ensure that their organizations are able to access capital on favorable terms. This course provides students with key concepts and frameworks that guide the effective design and use of performance measurement systems to accomplish these multiple complex goals.
  4. Leadership and Corporate Accountability

    This course focuses on the responsibilities of companies, their leaders, and their boards. Its aim is to deepend students' understanding of the economic, legal, and ethical dimensions of these responsibilities and to provide practical guidance on driving performance that delivers on all three dimensions. These situations have the potential to define, for good and bad, the careers of executives involved, and to determine the sustainability of their firms. Through a series of difficult dilemmas set in different regions of the world, the course builds a framework for decision-making and explores the elements of effective governance.
  5. Audit Committees in a New Era of Governance

    The last ten years has heightened demands on audit committees. Not only are they responsible for overseeing internal and external audits to ensure that investors receive accurate and transparent information, but they must ensure compliance with new accounting and regulatory rules and standards. This intensive program prepares audit committee members and chief financial officers to operate effectively in this new environment.
  1. Awarded an Honorary Doctorate in 2013 by the University of Turku (Turun yliopisto) in Finland.

  2. Winner of the second place 2013 Hermes Fund Managers' Best Paper Prize for the paper "Causes and Consequences of Firm Disclosures of Anticorruption Efforts" (with George Serafeim, Harvard Business School Working Paper, No. 12–077, 2012).

  3. Winner of the 2006 Emerald Management Reviews Citation of Excellence for "Which Types of Analyst Firms Are More Optimistic?" (with Amanda Paige Cowen and Boris Groysberg, Journal of Accounting & Economics, April 2006).

  4. Business Analysis and Valuation Using Financial Statements (South-Western College Publishing, 1996), with Victor L. Bernard and Krishna G. Palepu, won the 1999 American Accounting Association Notable Contributions to Accounting Literature Award.

  5. Recipient of the MIT Sloan School of Management Outstanding Teacher Award in 1997. Also a recipient of this award in 1991 and 1992.

  6. Business Analysis and Valuation Using Financial Statements (South-Western College Publishing, 1996), with Victor L. Bernard and Krishna G. Palepu, won the 1997 Wildman Medal from the American Accounting Association.

  7. Winner of the 1990 American Accounting Association Notable Contribution Award for the article "The Effect of Bonus Schemes on Accounting Decisions" (Journal of Accounting & Economics, April 1985).

  8. Honored in 2013 as a Fellow of the New Zealand Institute of Chartered Accountants for outstanding contributions to the profession of accountancy.