Faculty & Research

Michael Minnis

Associate Professor of Accounting

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5807 South Woodlawn Avenue
Chicago, IL 60637

Michael Minnis studies the role of accounting information in allocating investment efficiently by both management and capital providers, the use of financial reporting in mitigating information opacity issues of privately-held firms, and the interplay within management in the production and use of financial information. He particularly enjoys identifying unique data and methods to empirically examine issues in a novel way.

Prior to pursing his PhD, Minnis’ accountancy and CPA background allowed him to work in a variety of professional roles. He worked in corporate finance at Eli Lilly and Company, Inc. and later at Fitzgerald | Isaac, p.c. as a certified public accountant. Building on his knowledge and experience, Minnis went on to found Controller Associates LLC where he also served as President of the company. Controller Associates, LLC provided part-time controller and Chief Financial Officer services to small companies and non-profit organizations, as well as a variety of financial statement analysis and consulting services. He sold the firm to Milestone Advisors in 2006.

“Having worked with and studied companies ranging in size from large multi-nationals to start-up ventures, I have seen the usefulness and the power of the information conveyed in financial statements. I want students to be able to take full advantage of this information.”

Minnis received his PhD from the University of Michigan and his BS from the University of Illinois, where he graduated with Highest Honors. In addition to being awarded two fellowships, Minnis’ honors also include “Indy’s Best and Brightest, top accounting professional under the age of 40” and “Indiana CPA Society, 5 Under 35.”


2015 - 2016 Course Schedule

Number Name Quarter
30130 Financial Statement Analysis 2015 (Fall)

Other Interests

Enjoys a variety of sports and spending time with his family.


Research Activities

My research interests include the use of financial reporting in mitigating information opacity issues of privately-held firms; the role of accounting information in allocating investment efficiently by both management and capital providers; and the interplay between management in the production and use of financial information. I particularly enjoy identifying unique data and methods to empirically examine issues in a novel way.

"Knowledge, Compensation, and Firm Value: An Empirical Analysis of Firm Communication," with Feng Li, Venky Nagar, and Madhav Rajan, Journal of Accounting and Economics, accepted June 2014.

"A Measure of Competition Based on 10-K Filings," with Feng Li and Russell Lundholm, Journal of Accounting Research, 51 (May 2013): 399-436.

“The Value of Financial Statement Verification in Debt Financing: Evidence from Private U.S. Firms,” Journal of Accounting Research (May 2011).

REVISION: Commercial Lending Concentration and Bank Expertise: Evidence from Borrower Financial Statements
Date Posted: Feb  26, 2016
Concentration features prominently in models of information acquisition by banks. However, empirical evidence on the role of concentration is limited because banks rarely disclose details about their exposures or the information they collect. Using a novel dataset of bank-level commercial loan exposures, we find banks are less (more) likely to collect audited financial statements from firms in industries in which they have more (new) exposure. We exploit variation in the impact of the housing boom on construction lending to confirm these findings. The negative relation between exposure concentration and audited financial statement collection increases with bank size, suggesting scale is an important mechanism in information acquisition. Our results offer novel evidence on how lending concentration is related to the type of financial information used by the bank, suggesting that focus reveals a bank’s relative expertise.

REVISION: Financial Statements as Monitoring Mechanisms: Evidence from Small Commercial Loans
Date Posted: Jan  26, 2016
Theory offers competing predictions about the use of financial statements as a monitoring device in debt contracting. We use a proprietary dataset which records banks’ ongoing requests of information from small commercial borrowers after loan origination to examine these theories. We find banks request financial statements for half the loans and this variation is related to borrower credit risk, relationship length, collateral, and the provision of business tax returns, but in complex ways. The relation between borrower risk and financial statement requests has an inverted U-shape; and tax returns can be both substitutes and complements to financial statements, conditional on borrower characteristics and the degree of bank-borrower information asymmetry. Frequent financial reporting is used to monitor collateral, but only for non-real estate loans and only when the collateral is easily accessible to lenders. Collectively, our results provide novel evidence of a fundamental ...

REVISION: Credit Cycles and Financial Statement Verification
Date Posted: Oct  17, 2015
We use the US construction industry during the years 2002 to 2011 as a setting to examine whether credit cycles affect the use of financial statement verification in debt financing. Our estimates reveal that banks reduced their collection of unqualified audited financial statements from construction firms at nearly twice the rate of firms in other industries during the housing boom period before 2008. This reduction was most severe in the regions that experienced the most significant construction loan growth. These trends reversed during the subsequent housing crisis in 2008 to 2011 when the credit cycle reversed. Moreover, using bank and firm level data we find a strong negative (positive) relation between audited financial statements and subsequent loan losses (construction firm survival). Collectively, our results reveal that macroeconomic credit fluctuations produce temporal shifts in the overall level of financial statement verification in the economy and that temporal shifts in ...

REVISION: Knowledge, Compensation, and Firm Value: An Empirical Analysis of Firm Communication
Date Posted: Sep  18, 2015
Knowledge is central to managing an organization, but its presence in employees is difficult to measure directly. We hypothesize that external communication patterns reveal the location of knowledge within the management team. Using a large database of firm conference call transcripts, we find that CEOs speak less in settings where they are likely to be relatively less knowledgeable. CEOs who speak more are also paid more, and firms whose CEO pay is not commensurate with CEO speaking have a lower industry-adjusted Tobin’s Q. Communication thus appears to reveal knowledge.

REVISION: Which Private Firms Follow GAAP and Why?
Date Posted: Sep  12, 2015
We provide new evidence on the production of audited GAAP financial statements by large U.S. privately held firms. We find that over 60% of these firms, which control $4 trillion of assets, do not produce audited GAAP financial statements. Using across industry, within industry, and within firm tests over time, our analyses reveal that several important characteristics — such as profitability, firm age, growth, ownership changes, and presence of intangibles — partially explain this variation. These findings are consistent with financial statements reducing information asymmetry and serving a stewardship role. However, economically substantial variation remains unexplained by traditional variables. Our findings suggest that incomplete contracting and alternative mechanisms, such as relationships and tangible assets, are useful alternatives to producing audited GAAP financial statements, even for large firms. Our study informs researchers, standard setters, and regulators on the actual ...

REVISION: Investor Relations and the Flow of Information through Investor Networks
Date Posted: Apr  14, 2015
This study develops a model to examine how companies' investor relations can impact the dissemination of information and how the dissemination of information affects the time-series behavior of bid-ask spreads. In our model, investors become aware of the information release either directly from investor relations or via person-to person communication. The person-to-person communication then spreads in a network of heterogeneous individuals, where some serve as 'hubs' with high connectivity to others. We show that the optimal investor relations strategy relies on targeting highly connected investors, especially for time-sensitive and complex information. We also show that targeted disclosure can reduce bid-ask spreads over long horizons, indicating a benefit in terms of lower trading costs. We also show that investor relations activities to expand the investor base facilitate the optimal information release by increasing the number of hub-type investors who follow the company and ...

REVISION: A Measure of Competition Based on 10-K Filings
Date Posted: Oct  24, 2012
In this paper we develop a measure of competition based on management’s disclosures in their 10-K filing and find that firms’ rates of diminishing marginal returns on new and existing investment vary significantly with our measure. We show that these firm-level disclosures are related to existing industry-level measures of disclosure (e.g. Herfindahl index), but capture something distinctly new. In particular, we show that the measure is associated with the rates of diminishing marginal retu

New: The Value of Verification in Debt Financing: Evidence from Private U.S. Firms
Date Posted: Feb  01, 2011
I examine how verification of financial statements influences debt pricing. I use a large proprietary database of privately-held U.S. firms, an important business sector in which the information environment is opaque and financial statement audits are not mandated. I find that audited firms have a significantly lower cost of debt and that lenders place more weight on audited financial information in setting the interest rate. Further, I provide evidence of a mechanism for this increased financia

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