Ian D. Gow

Assistant Professor of Business Administration

Ian Gow is an assistant professor of business administration in the Accounting and Management unit of Harvard Business School.  Professor Gow teaches the second-year M.B.A course, “Business Analysis and Valuation.”  He also teaches in the HBS Executive Education and doctoral programs. Professor Gow previously taught the first-year M.B.A. course, “Financial Reporting and Control.”

His primary research interests relate to the use of accounting information in markets and contracts, valuation, regulation of capital markets, and corporate governance. Professor Gow’s work has been published in The Accounting Review and the Journal of Financial Economics.

Prior to joining the HBS faculty, Professor Gow was an assistant professor at the Kellogg School of Management, Northwestern University. His professional experience includes positions at Morgan Stanley, General Motors, Stern Stewart & Co., and Andersen Consulting. 

Professor Gow received a Ph.D. in business from the Stanford University Graduate School of Business; an MBA with distinction from Harvard Business School; and a bachelor of commerce in accounting and bachelor of laws, both from the University of New South Wales.



Journal Articles

  1. Causal Inference in Accounting Research

    Ian D. Gow, David F. Larcker and Peter C. Reiss

    This paper examines the approaches accounting researchers use to draw causal inferences using observational (or non-experimental) data. The vast majority of accounting research papers draws causal inferences notwithstanding the well-known difficulties in doing so with observational data. While a minority of papers seeks to use quasi-experimental methods to draw inferences, there are concerns about how these methods are typically applied. We believe that accounting research would benefit from a greater focus on the study of causal mechanisms (or causal pathways), increased emphasis on structural modeling of the phenomena of interest, and more in-depth descriptive research. We argue these changes are possible and offer a practical path forward for rigorous accounting research.

    Keywords: Accounting; Research;


    Gow, Ian D., David F. Larcker, and Peter C. Reiss. "Causal Inference in Accounting Research." Journal of Accounting Research 54, no. 2 (May 2016): 477–523. View Details
  2. Why Do Pro Forma and Street Earnings Not Reflect Changes in GAAP? Evidence from SFAS 123R

    Ian D. Gow, Mary E. Barth and Daniel Taylor

    This study examines how key market participants—managers and analysts—responded to SFAS 123R's controversial requirement that firms recognize stock-based compensation expense. Despite mandated recognition of the expense, some firms' managers exclude it from pro forma earnings and some firms' analysts exclude it from Street earnings. We find evidence consistent with managers opportunistically excluding the expense to increase earnings, smooth earnings, and meet earnings benchmarks but no evidence that these exclusions result in an earnings measure that better predicts future firm performance. In contrast, we find that analysts exclude the expense from earnings forecasts when exclusion increases earnings' predictive ability for future performance and that opportunism generally does not explain exclusion by analysts incremental to exclusion by managers. Thus our findings indicate that opportunism is the primary explanation for exclusion of the expense from pro forma earnings and predictive ability is the primary explanation for exclusion from Street earnings. Our findings suggest the controversy surrounding the recognition of stock-based compensation expense may be attributable to cross-sectional variation in the relevance of the expense for equity valuation, as well as to differing incentives of market participants.

    Keywords: Motivation and Incentives; Employee Stock Ownership Plan;


    Gow, Ian D., Mary E. Barth, and Daniel Taylor. "Why Do Pro Forma and Street Earnings Not Reflect Changes in GAAP? Evidence from SFAS 123R." Review of Accounting Studies 17, no. 3 (September 2012): 526–562. View Details
  3. Rating the Ratings: How Good are Commercial Governance Ratings?

    Robert M. Daines, Ian D. Gow and David F. Larcker

    Proxy advisory and corporate governance rating firms (such as RiskMetrics/Institutional Shareholder Services, GovernanceMetrics International, and The Corporate Library) play an increasingly important role in U.S. public markets. They rank the quality of firm corporate governance, advise shareholders how to vote, and sometimes press for governance changes. We examine whether commercially available corporate governance rankings provide useful information for shareholders. Our results suggest that they do not. Commercial ratings do not predict governance-related outcomes with the precision or strength necessary to support the bold claims made by most of these firms. Moreover, we find little or no relation between the governance ratings provided by RiskMetrics with either their voting recommendations or the actual votes by shareholders on proxy proposals.

    Keywords: Corporate Governance; Markets; Rank and Position; Quality; Business and Shareholder Relations; Voting; Change; Information; Outcome or Result; United States;


    Daines, Robert M., Ian D. Gow, and David F. Larcker. "Rating the Ratings: How Good are Commercial Governance Ratings?" Journal of Financial Economics 98, no. 3 (December 2010): 439–461. View Details
  4. Correcting for Cross-Sectional and Time-Series Dependence in Accounting Research

    Ian D. Gow, Daniel Taylor and Gaizka Ormazabal

    We review and evaluate the methods commonly used in the accounting literature to correct for cross-sectional and time-series dependence. While much of the accounting literature studies settings in which variables are cross-sectionally and serially correlated, we find that the extant methods are not robust to both forms of dependence. Contrary to claims in the literature, we find that the Z2 statistic and Newey-West corrected Fama-MacBeth standard errors do not correct for both cross-sectional and time-series dependence. We show that extant methods produce misspecified test statistics in common accounting research settings, and that correcting for both forms of dependence substantially alters inferences reported in the literature. Specifically, several findings in the implied cost of equity capital literature, the cost of debt literature, and the conservatism literature appear not to be robust to the use of well-specified test statistics.

    Keywords: History; Cost of Capital; Activity Based Costing and Management; Performance Evaluation; Cost Accounting; Time Management; Research; Mathematical Methods; Equity; Borrowing and Debt; Accounting Audits; Accounting Industry;


    Gow, Ian D., Daniel Taylor, and Gaizka Ormazabal. "Correcting for Cross-Sectional and Time-Series Dependence in Accounting Research." Accounting Review 85, no. 2 (March 2010): 483–512. View Details
  5. Capital Budgeting: The Role of Cost Allocations

    Ian D. Gow and Stefan Reichelstein

    A common issue for firms is how to allocate capital resources to various investment alternatives. An extensive and long-standing literature in finance has examined various aspects of capital budgeting, including capital constraints, the determination of discount rates, and alternative approaches to estimating cash flows and handling risk, such as real options techniques. It is generally accepted that preferences of these managers may not coincide with those of the firm's owners (the principal). Consequences of asymmetric information include strategic reporting by better-informed managers (for example, "sandbagging" or "creative optimism") and a need to measure performance ex post. There has been significant progress in recent years in understanding the role of intertemporal cost charges, specifically depreciation and capital charges, in the capital budgeting process. Cost allocations across time periods and business units are essential in creating time-consistent performance measures that compare initial reports to subsequently realized outcomes. But major challenges remain in making the existing models more complete on several fronts, including (i) richer settings of capacity investments and subsequent capacity utilization, (ii) projects with sequential decisions stages and (iii) the coordination of risk exposures across the divisions of a firm. This paper reviews extant research and suggests avenues for further research.

    Keywords: Capital Budgeting; Resource Allocation; Performance Evaluation; Cost Management; Research; Investment; Cash Flow; Risk Management; Performance Capacity;


    Gow, Ian D., and Stefan Reichelstein. "Capital Budgeting: The Role of Cost Allocations." Operations Research Proceedings (2006): 115–122. View Details

Book Chapters

  1. How ISS Dictates Equity Plan Design

    David F. Larcker, Ian D. Gow, Allan McCall and Brian Tayan

    Proxy advisory firms have long been known to influence the voting decisions of institutional investors. Now, a growing body of evidence suggests that they also influence company decisions in equity plan design. Should shareholders and the SEC be concerned?

    Keywords: Voting; Institutional Investing; Corporate Governance;


    Larcker, David F., Ian D. Gow, Allan McCall, and Brian Tayan. "How ISS Dictates Equity Plan Design." Stanford Closer Look Series, Stanford Graduate School of Business, 2013. View Details

Working Papers

  1. Managing Reputation: Evidence from Biographies of Corporate Directors

    Ian D. Gow, Aida Sijamic Wahid and Gwen Yu

    We examine how corporate directors manage reputation through disclosure choices in biographies in proxy statements filed with the SEC. Directors are more likely to withhold information about directorships at firms that experienced adverse events. Withholding such information is associated with more favorable stock price reactions at appointment and loss of fewer subsequent directorships. Nondisclosure of directorships is significantly reduced following changes to SEC rules, with the greatest change being for adverse-event directorships. These findings suggest that reputation concerns of corporate directors lead to strategic disclosure choices that have real consequences in both capital and labor markets.

    Keywords: Director monitoring; reputation; strategic disclosure; Management; Corporate Disclosure; Reputation;


    Gow, Ian D., Aida Sijamic Wahid, and Gwen Yu. "Managing Reputation: Evidence from Biographies of Corporate Directors." Harvard Business School Working Paper, No. 17-029, October 2016. View Details
  2. CEO Personality and Firm Policies

    Ian D. Gow, Steven N. Kaplan, David F. Larcker and Anastasia A. Zakolyukina

    Based on two samples of high quality personality data for chief executive officers (CEOs), we use linguistic features extracted from conferences calls and statistical learning techniques to develop a measure of CEO personality in terms of the Big Five traits: agreeableness, conscientiousness, extraversion, neuroticism, and openness to experience. These personality measures have strong out-of-sample predictive performance and are stable over time. Our measures of the Big Five personality traits are associated with financing choices, investment choices, and firm operating performance.

    Keywords: Interpersonal Communication; Personal Characteristics; Management Teams;


    Gow, Ian D., Steven N. Kaplan, David F. Larcker, and Anastasia A. Zakolyukina. "CEO Personality and Firm Policies." NBER Working Paper Series, No. 22435, July 2016. View Details
  3. Linguistic Complexity in Firm Disclosures: Obfuscation or Information?

    Brian J. Bushee, Ian D. Gow and Daniel Taylor

    Prior research argues that the linguistic complexity of a firm’s disclosures reflects managerial obfuscation. However, complex language can be used either to obfuscate or to convey information, with the effect likely depending on the incentives of the source. We measure the overall linguistic complexity of quarterly earnings conference calls, and decompose it into the portion driven by managers and the portion driven by analysts. Consistent with complex language reflecting obfuscation, we find that manager-driven complexity is associated with lower earnings response coefficients and greater information asymmetry. However, consistent with the possibility that complex language can also reflect information, we find that analyst- driven complexity is associated with higher earnings response coefficients and lower information asymmetry.

    Keywords: Communication; Financial Reporting;


    Bushee, Brian J., Ian D. Gow, and Daniel Taylor. "Linguistic Complexity in Firm Disclosures: Obfuscation or Information?" Working Paper, January 2014. View Details
  4. Activist Directors: Determinants and Consequences

    Ian D. Gow, Sa-Pyung Sean Shin and Suraj Srinivasan

    This paper examines the determinants and consequences of hedge fund activism with a focus on activist directors, i.e., those directors appointed in response to demands by activists. Using a sample of 1,969 activism events over the period 2004–2012, we identify 824 activist directors. We find that activists are more likely to gain board seats at smaller firms and those with weaker stock price performance. Activists remain as shareholders longer when they have board seats, with holding periods consistent with conventional notions of "long-term" institutional investors. As in prior research, we find positive announcement-period returns of around 4–5% when a firm is targeted by activists, and a 2% increase in return on assets over the subsequent one to five years. We find that activist directors are associated with significant strategic and operational actions by firms. We find evidence of increased divestiture, decreased acquisition activity, higher probability of being acquired, lower cash balances, higher payout, greater leverage, higher CEO turnover, lower CEO compensation, and reduced investment. With the exception of the probability of being acquired, these estimated effects are generally greater when activists obtain board representation, consistent with board representation being an important mechanism for bringing about the kinds of changes that activists often demand.

    Keywords: Governing and Advisory Boards; Investment Activism;


    Gow, Ian D., Sa-Pyung Sean Shin, and Suraj Srinivasan. "Activist Directors: Determinants and Consequences." Harvard Business School Working Paper, No. 14-120, June 2014. View Details
  5. Consequences to Directors of Shareholder Activism

    Ian D. Gow, Sa-Pyung Sean Shin and Suraj Srinivasan

    Using a comprehensive sample for 2004–2012, we examine the impact of shareholder activist campaigns on the careers of directors of targeted firms. We find that activism is associated with directors being almost twice as likely to leave—and performance-sensitivity of turnover being higher over the subsequent two-year period. Our evidence suggests that director turnover occurs even without shareholder activists engaging in, let alone winning, proxy contests and, in contrast to most prior research, director election results matter. Overall, our evidence suggests that shareholder activism, even in the absence of proxy fights, is associated with greater accountability for independent directors.

    Keywords: shareholder activism; hedge funds; independent directors; Director reputation; accountability; Shareholder voting; Voting; Retention; Investment Funds; Management Teams; Investment Activism;


    Gow, Ian D., Sa-Pyung Sean Shin, and Suraj Srinivasan. "Consequences to Directors of Shareholder Activism." Harvard Business School Working Paper, No. 14-071, February 2014. (Revised May 2016.) View Details

Cases and Teaching Materials

  1. 'Golden Leash' Pay for Directors at The Dow Chemical Company

    Ian Gow, Suraj Srinivasan and Neeraj Goyal

    In November 2014, The Dow Chemical Company was faced with the prospect of a proxy battle with prominent hedge fund and activist investor Third Point Management. The activist had criticized Dow’s recent performance and advocated that the company split itself to maximize its potential. The activist also proposed two director candidates to join Dow’s board. Third Point offered its director nominees what had come to be known as a “golden leash” incentive structure—a significant amount of incentive payment from the investor if the company performed well. Supporters and critics had weighed in on the pros and cons of such incentive schemes for corporate independent directors. Faced with the prospect of a proxy fight, Dow’s board had to decide whether to invite the two directors to join the company’s board knowing they came with the special payment scheme from the hedge fund.

    Keywords: Motivation and Incentives; Governing and Advisory Boards; Executive Compensation; Investment Activism; Chemical Industry;


    Gow, Ian, Suraj Srinivasan, and Neeraj Goyal. "'Golden Leash' Pay for Directors at The Dow Chemical Company." Harvard Business School Case 117-029, July 2016. View Details
  2. Say on Pay at The Walt Disney Company

    Ian D. Gow and Gaizka Ormazabal

    This case focuses on the lead-up to Disney's 2012 annual meeting where Disney would face a vote on the compensation package of its CEO, Robert Iger. Leading proxy advisory firms were recommending that shareholders reject the proposed compensation.

    Keywords: Executive Compensation; shareholder votes; Executive Compensation; Business and Shareholder Relations; Media and Broadcasting Industry; United States;


    Gow, Ian D., and Gaizka Ormazabal. "Say on Pay at The Walt Disney Company." Harvard Business School Case 113-052, January 2013. View Details

Other Publications and Materials

  1. The Efficacy of Shareholder Voting: Evidence from Equity Compensation Plans

    Ian D. Gow, Christopher S. Armstrong and David F. Larcker

    This study examines the effects of shareholder support for equity compensation plans on subsequent chief executive officer (CEO) compensation. Using cross-sectional regression, instrumental variable, and regression discontinuity research designs, we find little evidence that either lower shareholder voting support for, or outright rejection of, proposed equity compensation plans leads to decreases in the level or composition of future CEO incentive-compensation. We also find that in cases where the equity compensation plan is rejected by shareholders, firms are more likely to propose and shareholders are more likely to approve a plan the following year. Collectively, our results suggest that shareholder votes have little impact on firms' compensation policies and that recent regulatory efforts aimed at strengthening shareholder voting rights, particularly in the context of executive compensation, may have limited effect on firms' compensation policies.

    Keywords: Voting; Equity; Executive Compensation; Rights; Performance Effectiveness; Business and Shareholder Relations; Mathematical Methods; Motivation and Incentives;


    Gow, Ian D., Christopher S. Armstrong, and David F. Larcker. "The Efficacy of Shareholder Voting: Evidence from Equity Compensation Plans." 2012. View Details