Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
One of the main reasons given for the accounting Ph.D. shortage is that the opportunity cost of pursuing a Ph.D. is too high for individuals who are already working in public accounting. The purpose of this paper is to show that obtaining a Ph.D. in accounting can provide a financial return for the recipient over his or her lifetime adequate enough to justify giving up a career in public accounting. This study addresses the issue from a monetary perspective ignoring other reasons to pursue or not pursue a Ph.D. in accounting (e.g., flexible schedule, high level of autonomy, higher quality lifestyle, or lack of Ph.D. student support, or lack of interest in doing basic research, etc.). The authors conduct simulations to calculate the return on investment for a Ph.D. degree in accounting for hypothetical individuals who switch from public accounting careers after 3, 5, and 7 years. The simulations show a positive return on investment ranging from 5 percent to over 22 percent depending on the number of years in public accounting, number of years in a Ph.D. program, and specific career path.
The hypothetical individuals used in the simulations have three to seven years of experience in public accounting and are assumed to be individuals who would not eventually become partner since the partner track is not typical (Note: According to the AICPA only 2 percent of public accountants become partners). In addition to the experience variable, the simulations are based on a time in the Ph.D. program variable of four, five, and six years. After receiving their Ph.D.s each individual obtains a tenure-track position at a research-focused university such as the schools in the Big 12 (Beyer places these schools in Tier 3), and follows a forty-year career path in accounting. There are also four career scenarios based on whether the individual stays at a single university, or moves to receive a market salary adjustment, becomes a full professor, or remains at the associate professor rank throughout their career. The public accounting salaries used in the simulations are based on Robert Half's International Salary Guide. Academic salaries are based on the AACSB Salary Surveys.
The various equations used in the simulations are provided along with several tables showing the ROI at different points in an individual's career. The graphic illustration below provides an overall view of the career return on investment averaged across all scenarios.
A best case scenario is where an individual who leaves public accounting after three years, receives a Ph.D. after four years in a doctoral program, becomes an associate professor in the seventh year, and a full professor in the fourteenth year (Scenario I). Using the assumptions in their model, this individual would earn a career return on the Ph.D. investment of 22.78 percent. A worse case scenario is where an individual who leaves public accounting after seven years, receives a Ph.D. after six years in the doctoral program, moves to receive a market adjustment in year four, becomes an associate professor in the seventh year, and never makes full professor (Scenario IV). This individual would earn a career return on the Ph.D. investment of 5.21 percent.
The results of these simulations have a number of implications. First, the argument that the opportunity cost of pursuing a Ph.D. is too high for individuals who are already working in public accounting does not appear to be valid. Potential Ph.D. students are either unaware of the financial advantages of receiving a Ph.D. or do not pursue an academic career for some other reason. Other reasons for the lack of interest in pursuing a Ph.D. include the view that adequate support is not available for Ph.D. students, Ph.D. programs require too much time, and the type of research required to obtain a Ph.D. and to eventually obtain tenure and promotion in research-oriented universities is not appealing. Ph.D. program administrators need to make potential candidates aware of these findings and address the issue of adequate support for Ph.D. students.
The authors developed a web site with a downloadable ROI calculator so that potential Ph.D. candidates can make their own calculations. To download an Excel spreadsheet to make your own ROI calculations using different scenarios see the authors' web site at http://www.mgt.unm.edu/roi
Other Articles related to the Accounting Doctoral Shortage and Opportunities to Teach Accounting
AACSB International. 2003. Sustaining Scholarship in Business Schools. AACSB.
AACSB International. 2013. 2012-2013 Salary Survey Reports: Executive Summary. AACSB. (Note).
Albrecht, W. S. and R. J. Sack. 2000. Accounting Education: Charting the Course through a Perilous Future. Accounting education Series (16): American Accounting Association.
Behn, B. K., G. A. Carnes, G. W. Krull Jr., K. D. Stocks and P. M. J. Reckers. 2008. Accounting Doctoral Education - 2007 A Report of the Joint AAA/APLG/FSA Doctoral Education Committee. Issues in Accounting Education (August): 357-367.
Bergner, J. 2009. Pursuing a Ph.D. in accounting: Walking in with your eyes open: Here's how the doctoral track looks through the eyes of one student. Journal of Accountancy web-exclusive article. (Mentioned in the March issue as an AICPA resource on page 40). (JOA Link).
Beyer, B., D. Herrmann, G. K. Meek and E. T. Rapley. 2010. What it means to be an accounting professor: A concise career guide for doctoral students in accounting. Issues in Accounting Education (May): 227-244. (Summary).
Bishop, C. C., D. M. Boyle, R. R. Clune and D. R. Hermanson. 2012. A different model for doctoral education in accounting and auditing: Student and faculty reflections. Current Issues in Auditing 6(1): A1-A16. (Note).
Bonner, P. 2010. New pathways to accounting excellence. Journal of Accountancy (October): 56-60. (Interview with Pathways Commission Chair Bruce Behn related to charting a national higher education strategy for the next generation of accountants).
Bonner, P. 2012. Bolstering the future of accounting education. Journal of Accountancy (October): 38-39.
Boyle, D., D. Hermanson and M. Mensah. 2011. Addressing the accounting and auditing faculty shortage: Practitioners' perceptions of academia. Current Issues in Auditing 5(1): A70-A85.
Boyle, D. M., B. W. Carpenter, D. R. Hermanson and M. O. Mensah. 2013. The accounting doctorate shortage: Opportunities for practitioners. Strategic Finance (May): 30-36. (Note).
Campbell, T. L., J. R. Hasselback, R. H. Hermanson and D. H. Turner. 1990. Retirement demand and the market for accounting doctorates. Issues in Accounting Education (Fall): 209-221.
Grasso, L. 2008. The accounting Ph.D. shortage: Crisis or opportunity? Cost Management (March/April): 15-25. (Note).
Hunt, S. C., T. V. Eaton and A. Reinstein. 2009. Accounting faculty job search in a seller's market. Issues in Accounting Education (May): 157-185.
Kachelmeier, S. J., S. Madeo, D. Plumlee, J. H. Pratt, G. Krull and G. Thornton. 2005. Report of the AAA/AAPLG Ad Hoc Committee to assess the Supply and Demand for Accounting Ph.D.s. A joint project of the American Accounting Association and the Accounting Programs Leadership Group. (Note).
Leslie, D. W. 2008. Accounting Faculty in U.S. Colleges and Universities: Status and Trends, 1993-2004. A Report of the American Accounting Association. American Accounting Association. (Note).
Martin, J. R. Not dated. Notes to those considering an Accounting Ph.D. Management And Accounting Web. https://maaw.info/ArticleSummaries/NotesforAccountingPhDStudents.htm
Martin, J. R. Not dated. The accounting doctoral shortage and opportunities to teach accounting. Management And Accounting Web. https://maaw.info/ArticleSummaries/ArtSumAccountingDoctoralShortage.htm
McNair, C. J. and B. Richards. 2008. Unintended consequences: Death of the teacher-scholar. Cost Management (January/February): 21-28. (Summary).
Meyer, M. J. and P. L. Titard. 2000. Those who can ... teach. Want to exchange your Palm Pilot for a blackboard, get a PhD and go back to college as a teacher? The time to do it is now. Journal of Accountancy. (July): 49-58. (Note).
Meyers, R. 2006. Teaching for the love of it. Journal of Accountancy (June): 30-38.
Plumlee, R. D., S. J. Kachelmeier, S. A. Madeo, J. H. Pratt and G. Krull. 2006. Assessing the shortage of accounting faculty. Issues in Accounting Education (May): 113-125.
Reigle, D. 2008. Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits. AICPA.
Ruff, M., J. C. Thibodeau and J. C. Bedard. 2009. A profession's response to a looming shortage: Closing the gap in the supply of accounting faculty. Journal of Accountancy (March): 36-41. (JOA Link).
The Pathways Commission. 2012. The Pathways Commission on Higher Education: Charting a National Strategy for the Next Generation of Accountants. American Accounting Association and American Institute of CPAs. (Note).
Trapnell, J. E., N. Mero, J. R. Williams and G. W. Krull, Jr. 2009. The accounting doctoral shortage: Time for a new model. Issues in Accounting Education (November): 427-432. (Note).