Why does research in finance have so little impact?

Abstract

The quantity of finance research has grown enormously over the past two decades, yet questions remain over its breadth and ability to benefit the economy and society beyond academia. Using multisource data, we argue that individual and institutional incentives have fostered insularity and a consequent homogeneity in the discipline. We examine the characteristics of research that is published and cited in the leading field journals in finance, arguing that the work has become abstract and unrelated to real world issues. The work published in the 'top' journals makes increasing use of US data, even where the researchers are drawn from different countries. Using information from impact assessment, publication patterns, and grant capture, we illustrate that this narrow agenda lacks relevance to the financial services sector, the economy or wider society compared to other areas of business and management research. In particular, we highlight the relative absence of research on ethics in academic finance and discuss the likely consequences for the discipline including its relevance to society. P a g e | 1 citation database of peer-reviewed academic studies, 4 and funding data from the Economic and Social Research Council (ESRC, the main UK government funding body for social science research).The two UK research evaluation exercises both provided a panel-based assessment of the 'quality' of research undertaken by UK higher education institutions separately for each subject (referred to as a panel, or more accurately in RAE / REF parlance as a sub-panel). Data from the RAE2008 and REF2014 provide snapshots at those specific points in time of the panels' assessments of the 'quality' of work being undertaken in UK universities over the previous six years in each case (2002-2007 and 2008-2013 respectively). The RAE / REF only take place periodically and thus data are only available for these specific intervals. While the work being assessed comprises publications in (peer-reviewed) journals, monographs, book chapters and working papers, our analysis concentrates on those outputs submitted to the RAE/REF that represent publications in peer-reviewed journals. The nature and purpose of the RAE and REF are summarised nicely in Brooks et al. (2014, p. 991): 'The RAE [and REF are] evaluation[s] of the 'quality'

Topics and trends in finance research: What is published, who publishes it and what gets cited?

“…Questions have been raised about whether the response of the academic finance community to the global financial crisis has been sufficient (Gendron and Smith-Lacroix, 2015), as it appears from the outside as if it has been very much 'business as usual' for scholars, continuing their work as if nothing had happened and relatedly, Brooks et al (2017) argue that scholarly finance research is excessively elitist, failing to engage sufficiently with real-world problems. By examining changes in the subjectspecific words used in abstracts and author-selected keywords, we are able to provide evidence to test this conjecture.…”

Abundant Publications but Minuscule Impact: The Irrelevance of Academic Accounting Research on Practice and the Profession

“…Another issue impacting the gap between research and practice is the focus on 'finding a gap in the literature'. Brooks et al [13] argue that most research in business schools originates from a 'gap-spotting mentality', where research becomes aimed at an increasingly narrow and purely academic audience. Many PhD candidates experienced first-hand the issue of the 'gap-spotting mentality' [75].…”

“…What is changing is the way in which national governments will fund academic research in the future [13][14][15][16][17]. This change is coming via the implementation of performance-based research funding systems (PRFSs), which seeks to make more effective use of funding by evaluating the relevance (usefulness) of academic research to societal needs.…”

Relating Financial Systems to Sustainability Transitions: Challenges, Demands and Dimensions

“…Several systematic reviews of high ranked accounting and finance journals show that finance research focuses mainly on the post-2008 financial crisis covering topics such as asset pricing, bankruptcy, credit issues, governance and risk management (Lagoarde-Segot, 2015;Aspinall et al, 2015;Diaz-Rianey, et al, 2016;Brooks et al, 2018). Despite the climate breakdown being classified as one of the top five global risks facing the economic system (WEF, 2018), finance researchers appear not to be engaging on these issues adequately according to these systematic reviews (Goodall, 2008;Patenaude, 2011;Aspinall et al, 2015;Diaz-Rianey et al, 2016).…”

“…The directional changes and systems-level impacts that (Perez, 2002). While new reorientations in investment management such as impact investing, sustainable and green finance exist (Brooks et al, 2018), pursuing the optimal risk-return investment profile remains the dominant pre-occupation of bankers (Spratt, 2015;Lagoarde-Segot, 2015 Schumpeter (1942) diagnosed the banker as one who acts independently of other influences in the economy, making possible radical changes through the bankers' decisions. At the same time, significant economic losses over recurrent financial crises are directly attributed to the investment behaviours of bankers (Reinhardt & Rogoff, 2009;Griffith-Jones et al, 2010).…”