Ross Watts was raised in Newcastle, NSW. In 1964 he qualified as a Chartered Accountant and has been a member of the Institute of Chartered Accountants in Australia for more than fifty years. Ross graduated BCom with first class honours from the University of Newcastle in 1966 before attending the University of Chicago where he graduated MBA in 1968 and PhD in 1971. In January 1971 he was appointed Assistant Professor at the University of Rochester. In 1974 he joined the University of Newcastle as Professor of Commerce but in 1975 returned to Rochester, where he remained for the next thirty years. In 2005 he was appointed professor in the Sloan School at Massachusetts Institute of Technology (MIT) and, in 2008 he became Erwin H. Schell Professor of Management, and Professor of Accounting. Ross Watts is among the most heavily cited accounting academics in the world today.His paper titled “Corporate financial statements, a product of the market and political processes”, published in 1977 in the Australian Journal of Management, was the trigger point for a very large literature that focuses on financial accounting’s control role. His 1978 paper with Jerold L. Zimmerman, “Towards a positive theory of the determination of accounting practices” and published in The Accounting Review, was seminal. Another of their papers, published in 1983 in the Journal of Law and Economics and titled“Agency problems, auditing and the theory of the firm: some evidence”, traced the development of Anglo-American accounting. They maintained the argument that financial statements were substantially influenced by the demand for corporate control. More recently Ross Watts has focused on conservatism in accounting. His two “explanatory” papers published in 2004 in Accounting Horizons are especially well-known. Ross Watt’s editorial contribution has been extensive. In 1972 he joined the editorial board of the Journal of Accounting Research and in 1975 was appointed an associate editor of the Journal of Financial Economics. On the urging of his Dean at Rochester, William Meckling, in 1979 Ross Watts launched, as co-editor with Jerold Zimmerman, the Journal of Accounting and Economics. His other contributions include director of the Accounting Research Network, Division of Social Science Research Network and founding editor, Journal of Accounting Abstracts. He remains a board member of the Australian Journal of Management. Ross Watts has chaired or been a member of the PhD committee of almost 50 candidates many of whom have made major contributions to accounting scholarship. Ross Watts has received myriad awards including the University of Newcastle Alumni Medal for Professional Excellence in 2013; the American Accounting Association FARS Inaugural Lifetime Achievement Award in 2013; the American Accounting Association Seminal Contribution to Accounting Literature Award, shared with Jerold Zimmerman in 2004; the American Accounting Association Outstanding Accounting Educator Award in 2000; and the American Institute of Certified Public Accountants Award for Notable Contribution to Accounting Literature, received in 1978 and again in 1979 for papers with Jerold L. Zimmerman.
The Australian Accounting Hall of Fame honours Ross Watts as an eminent accounting researcher and thinker. In so doing it acknowledges the extraordinary impact his research output has had on the accounting research community and the accounting discipline.
Ross Watts was raised in Newcastle, NSW. In 1964 he qualified as a Chartered Accountant, at 21 years of age, having performed brilliantly in the chartered accounting examinations. Ross has presently more than fifty years membership of the Institute of Chartered Accountants in Australia. Initially he worked for a local chartered accounting firm and also enrolled as a part-time student in the Bachelor of Commerce course at the University of Newcastle, from which he graduated with first class honours in accounting in 1966. Having decided on an academic career, Ross then went to the University of Chicago where he graduated MBA in 1968 and PhD in 1971. At Chicago he took classes delivered by four future Nobel Laureates (Friedman, Stigler, Miller and Fama), and a number of other academic luminaries. Fama chaired his PhD committee and Miller was a member. Myron Scholes, another future Nobel Laureate, was an outside reader at Ross’s PhD thesis defence. Ross’s accounting mentor at Chicago was Nicholas Dopuch, a past editor of the Journal of Accounting Research. Ross co-authored a paper with Nick that was published in the Journal of Accounting Research in 1972. In the same year Ross was appointed to the journal’s editorial board.
Ross Watts’s first position after completion of his PhD studies was as Assistant Professor at the University of Rochester in January 1971 on the urging of Gene Fama. Ross returned to the University of Newcastle as Professor of Commerce in May1974. Ross and Helen had returned to Newcastle for personal and family reasons but Ross soon found the administrative demands of running a university department hindered his desire to pursue his research agenda. The Watts family returned to Rochester in 1975. On his return Ross completed an important paper that is only now receiving the attention it deserves. Titled “Corporate financial statements, a product of the market and political processes”, it was published in the Australian Journal of Management in 1977. In the paper Ross argued accounting reports are more a control mechanism than simply a measure of income or net assets. He also emphasised the role of the law in framing accounting practice. One indicator of the significance of this paper is that the lead paper presented at the Journal of Accounting Research conference in Chicago in May 2015 considered it to be the trigger point for an extensive literature that focuses on financial accounting’s control role.
Research activity at Rochester was at full pace when Ross returned in 1975. The Journal of Financial Economics had been started in July 1974, with Michael Jensen as editor and Gene Fama and Bob Merton as co-editors; Ross was appointed an associate editor. Accounting was closely tied to financial economics at Rochester and so under strong encouragement from the Dean, William Meckling, Ross and Jerry Zimmerman launched the Journal of Accounting and Economics, as co-editors, in March 1979. It was soon recognised as one of the premier accounting research journals. In 1978 Ross Watts and Jerry Zimmerman published a seminal paper in The Accounting Review: “Towards a positive theory of the determination of accounting practices” as the first of a series of prize-winning papers together. This paper has generated about 2,500 Google Scholar citations to date. Their book on positive accounting theory, published in 1986, has garnered more than 5,500 Google Scholar citations and has been adopted or adapted in numerous accounting courses world-wide. Another of Ross’s best-known papers was co-authored with Jerry Zimmerman and published in the Journal of Law and Economics in 1983: “Agency problems, auditing and the theory of the firm: some evidence”. It traced the development of Anglo-American accounting and how it changed as the nature of business changed over the centuries. The evidence cited strongly suggested that financial statements were not directed at valuing the firm per se, but rather they were significantly influenced by the demand for corporate control as well as inputs into valuations.
In more recent years Ross has focused on conservatism in accounting, a theme that has taken him back to the history of accounting and corporate control. His two “explanatory” papers on accounting conservatism, published in 2004 in Accounting Horizons, have almost 3,000 citations between them.
Ross Watts’s scholarship extends beyond the accounting literature. One of his best known papers is “The investment opportunity set and corporate financing, dividend, and compensation policies” which was written with Cliff Smith and published in the Journal of Financial Economics in 1992. It is also noteworthy that the finance literature has recognised conservatism as an important governance control variable.
In a long career at Rochester Ross Watts was Rochester Telephone Corporation Professor of Business Administration in the William E. Simon Graduate School of Business Administration, University of Rochester, from 1986 until 1998 and William H. Meckling Professor of Business Administration, from 1998 until 2005.
In 2005 Ross Watts resigned from the University of Rochester and took a professorial position in the accounting group at the Sloan School, Massachusetts Institute of Technology (MIT). From 2008 until 2013 he was Erwin H. Schell Professor of Management, and Professor of Accounting at MIT. While at MIT he published another five papers in leading accounting journals in Europe and North America.
The total number of Google Scholar citations of books and papers written or co-written by Ross Watts is close to 32,000. This is undoubtedly among the highest citation counts for an accounting academic globally.
Ross Watts has received myriad awards during his long years in academia including the University of Newcastle Alumni Medal for Professional Excellence in October 2013; the American Accounting Association FARS Inaugural Lifetime Achievement Award, January 2013; the American Accounting Association Seminal Contribution to Accounting Literature Award (with Jerold L. Zimmerman), August 2004; the American Accounting Association Outstanding Accounting Educator Award, August 2000 and the American Institute of Certified Public Accountants Award for Notable Contribution to Accounting Literature (in 1978 and again in 1979 for papers with Jerold L. Zimmerman).
Ross Watt’s editorial contribution at various times is similarly extensive and includes founding co-editor of the Journal of Accounting & Economics; director, Accounting Research Network, Division of Social Science Research Network and founding editor, Journal of Accounting Abstracts;consulting editor, Journal of Contemporary Accounting & Economics; consulting editor, Asia-Pacific Journal of Accounting & Economics; board member, Australian Journal of Management; member, Advisory Board, Journal of Applied Corporate Finance; member, Advisory Board, Journal of Financial Abstracts; associate editor, Journal of Financial Economics; member, Advisory Board, Midland Corporate Finance Journal; member, Editorial Board, Contemporary Accounting Research; member, Advisory Board, Chase Financial Quarterly and associate editor, Journal of Accounting Research.
Ross Watts has chaired the PhD committees of more than 20 PhD graduates and has also been a member of the PhD committee of about 20 others. Many of these candidates have subsequently made major contributions to accounting research among them being Robert Holthausen, Thomas Lys, Paul Healy, Douglas Skinner, Amy Hutton, Richard Sloan, Patricia Dechow and Richard Leftwich. Visiting university appointments include the AGSM - UNSW, Monash, Otago, MIT and Northwestern.