Hiring practices in finance education: linkages among top-ranked graduate programs - The University

American Journal of Economics and Sociology, The, April, 2003 by Jeffrey H. Bair

I

Introduction

ARMSTRONG AND SPERRY (1994) and Borokhovich et al. (1995) described the relationship between published financial research and business school prestige as measured by published rankings of business schools. Klemkosky and Tuttle (1977a, 1977b) found an important relationship between an institution's faculty publication record and that of its graduates. They found that the research productivity of an institution's graduates is also one of the determinants of peer recognition of a quality doctoral finance program.

Although numerous studies document the role of academic journal publications in determining research reputations for both individuals and institutions, the role of faculty hiring practices in determining the prestige of finance doctoral programs has remained unexamined. The present study investigated the extent to which top-ranked graduate programs in finance might tend to maintain and enhance their reputations by hiring their own and one another's graduates. Top-ranked law schools were substantially linked to one another in this manner (Bair and Boor 1991) as were top-ranked doctoral programs in mathematics, the physical sciences, the social sciences, chemical engineering, psychology, social work, library science, and special education (Bair and Bair 1998). The extent to which top-ranked graduate programs in finance also might hire their own and one another's graduates was assessed in the present study.

II

Method

A RANKING OF THE most highly regarded graduate programs in finance was presented in the U.S. News & World Report ("Best Graduate Schools" 2000). That ranking was based on a survey of business school deans and MBA program heads. Respondents were asked to identify the 10 schools offering the best programs in finance. The 10 schools receiving the highest numbers of nominations appear in the ranking. This ranking is based solely on reputation.

The 10 top-ranked graduate programs in finance as reported in this survey are listed in Table 1. The names of the faculty members in these 10 programs and the universities from which those faculty members had received their doctoral degrees were obtained from the program home pages on the Internet.

III

Results and Discussion

THE NUMBER OF FACULTY MEMBERS in each of the 10 top-ranked finance programs, the percentage of those faculty members who had obtained their doctoral degrees from that same university, the percentage who had obtained their degrees from one of the other nine top-ranked programs, and the overall percentage who had obtained their degrees from the 10 top-ranked programs are presented in Table 1.

These data indicate that 174 (66.9%) of the 260 faculty members in these 10 programs had graduated from one of these 10 top-ranked schools. Stanford University had the highest percentage of faculty from among the 10 top-ranked programs (76.9%) and New York University had the lowest (56.80/a).

These data also indicate that some of these programs tended to hire their own graduates. Harvard University had hired the largest proportion of their faculty from among their own graduates (40.7%).

However, the University of Pennsylvania and the University of Michigan had not hired any of their own graduates. The other schools had hired from 3.7% to 30.8% (Mdn = 10.0%) of their faculties from among their own graduates. Finally, these top-ranked programs had hired from 33.3% to 70.4% (Mdn = 56.8%) of their faculties from other schools among the top-ranked programs (Table 1).

These data suggest that a small number of programs (10 in this case) tend to maintain and enhance their reputations by hiring their own and each other's graduates. Although these 10 elite programs might find that the best candidates for positions tend to come from their own and other elite programs, such a tendency would not account for the degree of inbreeding these data document. Approximately two-thirds (66.9%) of the faculty members in these 10 programs had graduated from one of these same 10 programs.

Several factors can influence the prestige rankings of graduate programs when those rankings are based on the ratings of deans and top administrators. It seems reasonable that the graduates of top-ranked programs, whether they currently are employed at top-ranked schools or at less prestigious schools, would tend to give high ratings to their alma maters. However, there are not enough graduates from top-ranked schools to allow them to maintain the high status of their alma maters without some support from lower-ranked colleagues. It seems that some non-elite have adopted the elites' definition that their programs are, in fact, the best. Elite programs have been accorded high esteem for decades and this tradition typically has gone unchallenged. Elite programs maintain their status in part because it is relatively easy for them to acquire faculty from other top-ranked programs and to place their own graduates in other top-ranked schools, a la C. Wright Mills (1956).