Karthik Ramanna

Associate Professor of Business Administration, Henry B. Arthur Fellow, Marvin Bower Fellow

Karthik Ramanna is an associate professor of business administration at Harvard Business School, where he is also the Henry B. Arthur Fellow, an appointment supporting the research and teaching of business ethics, and a Marvin Bower Fellow, an appointment to help faculty launch innovative new research agendas. Additionally, Karthik is a faculty associate in the Weatherhead Center for International Affairs in Harvard’s Faculty of Arts & Sciences and an associate editor of the Journal of Accounting & Economics. Karthik teaches the first-year M.B.A. course “Leadership and Corporate Accountability,” where he is particularly involved in studying the responsibilities of business leaders worldwide in lobbying regulators and combating corruption. Previously, Karthik taught the first-year M.B.A. course “Financial Reporting and Control.” Occasionally, he co-teaches in HBS’s executive education programs (“Finance for Senior Executives”) and its doctoral programs. In November 2012, he helped launch “Leadership and Corporate Accountability—India” an executive program at HBS’s new classroom in India.

Karthik has research interests in two distinct, but interrelated, fields. The first is the political economy of accounting standard-setting. Accounting standards, in facilitating resource allocation across competing ventures, are central to the functioning of complex economies. Karthik’s research examines how corporate lobbying, regulatory ideologies, power politics, and other political incentives interact to shape the nature of accounting standards and financial reports. He has explored these ideas both in the U.S. (e.g., through studies of the Financial Accounting Standards Board) and in the context of accounting’s globalization, as seen through countries’ adoption of International Financial Reporting Standards. Karthik is also interested in the political economy of various conceptual ideas in accounting such as accounting conservatism and fair-value accounting.

The second field of Karthik’s research is corporate accountability. Motivated by evidence of special-interest capture of the accounting standard-setting process in the U.S. and abroad, he is interested in examining business leaders’ broader responsibilities to society, particularly when engaging in public policy. This stream of research explores, across countries, the role of transparency as an instrument of accountability, particularly in addressing corruption and building responsible models of corporate lobbying. The central thesis here is that theories of transparency from accounting can be applied to develop and improve systems of corporate accountability.

Karthik has published several articles and case studies in his areas of interest, including in Accounting, Economics & LawAccounting Horizons, CPA Journal, Harvard Business Review, Journal of Accounting & EconomicsJournal of Accounting Research, and Review of Accounting Studies. His research has been awarded the Journal of Accounting & Economics’ Best Paper Prize and the American Accounting Association’s FARS Best Dissertation Prize. He has a Ph.D. in management from the Massachusetts Institute of Technology.

  1. Managers and Market Capitalism

    Harvard Business School Working Paper No. 13–075.

    In a capitalist system based on free markets, do managers have responsibilities to the system itself, and, in particular, should these responsibilities shape their behavior when they are attempting to structure those institutions of capitalism that are determined through a political process? A prevailing view — perhaps most eloquently argued by Milton Friedman — is that managers should act to maximize shareholder value, and thus that they should take every opportunity (within the bounds of the law) to structure market institutions so as to increase profitability. We maintain here that if the political process is sufficiently ‘thick,’ in that diverse views are well-represented and if politicians and regulators cannot be easily captured, then this shareholder-return view of political engagement is unlikely to reduce social welfare in the aggregate and thus damage the legitimacy of market capitalism. However, we contend that sometimes the political process of determining institutions of capitalism is ‘thin,’ in that managers find themselves with specialized technical knowledge unavailable to outsiders and with little political opposition — such as in the case of determining certain corporate accounting standards that define corporate profitability. In these circumstances, we argue that managers have a responsibility to structure market institutions so as to preserve the legitimacy of market capitalism, even if doing so is at the expense of corporate profits. We make this argument on grounds that it is both in managers’ self-interest and, expanding on Friedman, managers’ ethical duty. We provide a framework for future research to explore and develop these arguments.
  2. The Auditing Oligopoly and Lobbying on Accounting Standards

    Harvard Business School Working Paper No. 13–054.

    We examine how the tightening of the U.S. auditing oligopoly over the last twenty-five years—from the Big 8 to the Big 6, the Big 5, and, finally, the Big 4—has affected the incentives of the Big N, as manifest in their lobbying preferences on accounting standards. We find, as the oligopoly has tightened, Big N auditors are more likely to express concerns about decreased “reliability” in FASB-proposed accounting standards (relative to an independent benchmark); this finding is robust to controls for various alternative explanations. The results are consistent with the Big N auditors facing greater political and litigation costs attributable to their increased visibility from tightening oligopoly and with decreased competitive pressure among the Big N to satisfy client preferences (who usually demand accounting flexibility at the expense of reliability). The results are inconsistent with the claim that the Big N increasingly consider themselves “too big to fail” as the audit oligopoly tightens.
  3. A Framework for Research on Corporate Accountability Reporting

    Accounting Horizons 26, no. 2 (June 2013).


  4. The International Politics of IFRS Harmonization

    Accounting, Economics and Law 3, no. 2 (April 2013)


  5. Business Leaders are more than Profiteers

    The Economic Times (December 4, 2012).

    ... The legitimacy of market capitalism rests on its ability to deliver freedom, prosperity, and growth in a manner that is efficient and fair. The pursuit of profit is a central but not the only element of capitalism. There are many circumstances, such as when lobbying the government for technical regulations or when confronted with opportunities to obtain public licences through corrupt means, when businesspersons may have to suspend the short-term profit motive and assume a more benevolent, stewardship role toward the system and society. It is their capacity and good judgment to identify and act on these circumstances that will transform them from simply profiteers to true business leaders, and will forestall the heavyhanded political response that might destroy the very system from which so many benefit...