Overview

Relying on empirical archival methodologies—as well as techniques in data science—to develop and structure new sources of data by which to approach questions of looming disclosure changes, Professor Rouen has focused on one of the Securities and Exchange Commission’s most controversial recent disclosure requirements, the CEO pay ratio. In his research, he examines the ratio of CEO compensation to mean employee compensation, and its relation to future firm performance. Professor Rouen’s results are among the first to provide evidence that differing types of pay disparity can have differing effects on employees and firms, a finding that is important to politicians, regulators, and investors preparing to understand a radical new disclosure. Professor Rouen has also studied financial statement errors. His research shows that reported financial statement numbers conform to the mathematical distribution defined by Benford’s Law (i.e., the law of first digits). After creating a measure of divergence from conformity to the law as a proxy for data quality, Professor Rouen has found evidence that this measure is associated with proxies for accruals-based accounting quality and earnings management. In addition, the measure is predictive of Accounting and Auditing Enforcement Releases. He has received several awards for his work in this area, and the measure of financial statement errors he and his co-authors developed has been used by the S.E.C., as well as data providers and investment banks. The impact of the corporate tax regime in the United States on the relation between the performance of U.S. corporations and the overall economy is another of Professor Rouen’s interests. This examination is timely as world leaders debate how to discourage corporate tax shifting, and U.S. multinationals wrestle with managing the more than $2 trillion in cash they hold abroad. Professor Rouen has documented that as the domestic corporate tax rate rises relative to tax rates of other countries, fewer corporate profits flow into domestic investment. The results provide valuable evidence for policy makers examining how to tax the foreign profits of domestic companies.