Houston research on asset valuation reveals importance of 'opinion shopping'

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New research reveals that companies often “opinion shop” to shape their financial reality. Photo via rice.edu

Firms often have to estimate the “fair value” of their investments, meaning they have to declare what an asset is worth on the market. To avoid the potential for bias and manipulation, companies will use third-party services to provide an objective estimate of their assets’ fair value.

But nothing prevents a company from seeking multiple third-party estimates and choosing whichever one suits their purpose.

In a recent study, Shiva Sivaramakrishnan (Rice Business) and co-authors Minjae Koo (The Chinese University of Hong Kong) and Yuping Zhao (University of Houston) examine two motives for switching third-party evaluators: “opinion shopping” and “objective valuation.”

Firms that opinion shop are looking for a third-party source to make their investments look better on paper. For example, if Service A says an asset is worth $80 — and that means the company would have to take an accounting loss — the company might switch to Service B, which says the asset is worth $90. By using the higher estimate from Service B, the company avoids a loss.

Opinion shopping can be a dangerous practice, both on a macro level and for the specific firms that engage in it. Not only does it reduce the quality of fair value estimates for everyone, it means some company assets are potentially overvalued. And if those assets ever decline in value for real, the company will eventually take a loss.

Moreover, opinion shopping opens the door to managerial opportunism. If assets are valued more highly, managers are likely to receive credit and potentially use that perceived accomplishment to advance their careers.

There are reasons for companies to go the other way. In the hypothetical scenario above, our company might switch from Service B ($90) to Service A ($80) to receive a more accurate and objective estimate. The “objective valuation” motive helps companies meet regulatory requirements and ensure estimates reflect true market value. What’s more, the objective valuation motive helps curb managerial buccaneering.

The study looks at when and why life insurance companies will switch their third-party review service. The team finds that both motives — opinion shopping and objective valuation — are common. Sometimes companies want to better align their fair value estimates with what similar assets are trading for in the market. Other times, they want assets to look better on paper.

Of the two motives, opinion shopping is the more dominant, particularly when they are in conflict with each other. On the whole, evidence suggests that companies switch price sources strategically to inflate estimates and avoid losses, rather than to get more accurate estimates.

The study has implications for investors, regulators and researchers. “Opinion shopping” could be prevalent in non-financial industries, as well — especially public firms with capital market incentives. More disclosure around price sources could improve estimate reliability.

Future research could examine asset valuation practices and motives in other sectors such as banking, real estate and equity investments. Are some industries more prone to opinion shopping than others? What factors make opinion shopping or objective valuation more likely? Are there certain signals or patterns that indicate when a company is opinion shopping versus seeking objectivity?

Answers to these questions could help discern acceptable from unacceptable third-party source switching. And understanding if certain types of companies are more at risk could help regulators and auditors focus their efforts.

The bottom line:

Accurate accounting matters. While external sources are better for measuring the fair value of any given asset, companies can distort the very concept of fair value estimates by changing their source. More rigor, transparency and auditing around price sources could curb manipulation and improve estimate reliability.

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This article originally ran on Rice Business Wisdom and was based on research from Shiva Sivaramakrishnan, the Henry Gardiner Symonds Professor of Accounting at Rice Business.

Research shows that some corporate executives skew earnings to influence the market and inflate share price. Photo via Pexels

Rice University research finds market outliers at risk of misreporting

houston voices

Say a company called CoolConsumerGoodsCo has just released its quarterly earnings report, revealing significantly higher profits than its consumer goods industry counterparts.

That result might spur analysts to slap a buy rating on the stock and investors to snap up shares. In an ideal world, the market wouldn't have to consider the possibility that the numbers aren't legit — but then again, it's not an ideal world. (Enron, anyone?)

Rice Business professors Brian R. Rountree and Shiva Sivaramakrishnan, along with Andrew B. Jackson at UNSW in Australia, studied what makes business leaders more likely to engage in fraudulent earnings reporting. Specifically, they focused on the relationship between this kind of misrepresentation and the degree to which a company's earnings are in line with the rest of its industry — a variable the researchers term "co-movements."

Many people are familiar with a similar variable, calculated using stock returns often referred to as a company's beta. The authors adapted the stock return beta to corporate earnings to see how a company's earnings move with earnings at the industry level.

The researchers hypothesized that the less in sync a company's earnings are with its industry, the higher the chance a company's leaders will manipulate earnings reports. They started with the well-accepted premise that corporations try to skew earnings reports to influence the market. The primary motive is typically to raise the company's stock price, as when an executive tries to "choose a level of bias" that balances potential fallout of getting caught against the benefits of a higher stock price.

To test their prediction, the professors analyzed a sample of enforcement actions taken by the U.S. Securities and Exchange Commission against companies for problematic financial reporting from 1970 to 2011 — although they noted that given the SEC's limited resources, the number of enforcement actions probably underestimates the actual amount of earnings manipulation in the market.

Their analysis revealed that firms with low earnings co-movements (meaning their earnings were out of sync with industry peers) were more likely to be accused by the SEC of reporting misdeeds. They concluded that the degree of earnings co-movement determines the probability of earnings manipulation. Put another way, earnings co-movements are a "causal factor" in the chances of earnings manipulations — and to a significant degree. The researchers found that firms who don't co-move with the market are more than 50 percent more likely to face an SEC enforcement action, compared with firms who are perfectly aligned with the market.

The researchers drilled deeper into the data to study whether the odds changed depending on the industry, since past research has indicated that the amount of competition in an industry works to constrain misreporting. That premise seems to hold true, the researchers concluded. In industries with more competitive markets, the impact of low co-movement on earnings manipulation is moderated.

They also studied whether the age of a firm played a part in the likelihood of earnings manipulation. Newer firms often rely more on stock compensation, which could be a motive for manipulating earnings reporting to drive up share price. Indeed, younger firms were more susceptible to misreporting when their earnings were out of whack with the rest of the marketplace.

Every firm faces some risk of misreporting, however. Even for public companies under analyst scrutiny, low co-movement proved to be a driver of earnings manipulation. But companies known for conservative reporting tend to be less likely to exaggerate their earnings, in general; these firms typically recognize losses in a more timely manner, the professors found.

These findings suggest a number of future lines of research. For example: When do executives underreport earnings? And can analyzing patterns related to cash flow reporting help better isolate earnings manipulation?

In the meantime, if you come across a company like CoolConsumerGoodsCo with an earnings report that's widely out of sync with the rest of its industry, you might think twice before rushing to buy in.

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This article originally ran on Rice Business Wisdom and is based on research from Brian R. Rountree, an associate professor of accounting at the Jones Graduate School of Business at Rice University, and Shiva Sivaramakrishnan is the Henry Gardiner Symonds Professor of Accounting at Rice Business.

In a recent study, a Rice Business professor found that board members actually need incentives — both short- and long-term — to act in stakeholders' best interests. Getty Images

Rice University research finds executive board members are driven by incentives

Houston voices

If you're a stockholder, you may envision your investment helmed by a benevolent, all-knowing board of directors, sitting around a long finely-grained wooden table, drinking coffee, their heads buried in PowerPoint charts as they labor to plot the best course for the company. Too often, however, you can't take for granted that a company's board will steer it wisely.

Companies choose directors because they offer rich and varied experience in the business world. Many who serve on boards, moreover, are CEOs of other corporations, or have headed big companies in the past. As of October 2018, for example, six of the 11 directors on Walmart's board and eight of 13 on AT&T's board hold CEO or CFO positions in other firms. So it's easy to assume that board members will act in the best interests of stockholders.

But in a recent study, Rice Business professor Shiva Sivaramakrishnan found that board members actually need incentives — both short- and long-term — to act in stakeholders' best interests.

Corporations usually compensate board members with stock options, grants, equity stakes, meeting fees, and cash retainers. How important is such compensation, and what sort of incentives do board members need to perform in the very best interests of a company? Sivaramakrishnan joined co-author George Drymiotes to trace how compensation impacts various aspects of board performance.

Recent literature in corporate governance has already stressed the need to give boards of directors explicit incentives in order to safeguard shareholder welfare. Some observers have even proposed requiring outside board members to hold substantial equity interests. The National Association of Corporate Directors, for example, recommended that boards pay their directors solely with cash or stock, with equity representing a substantial portion of the total, up to 100 percent.

To the extent that directors hold stock in a company, their actions are likely influenced by a variety of long-and short-term incentives. And while the literature has focused mainly on the useful long-term impact of equity awards, the consequences of short-term incentives haven't been as clear. Moreover, according to surveys, most directors view advising as their primary role. But this role also has received little attention.

To scrutinize these issues, the scholars used a simple model, which assumes the board of directors perform three roles: contracting, monitoring and consulting. The board contracts with management to provide productive input that improves a firm's performance. By monitoring management, the board improves the quality of the information conveyed to managers. By serving in a consulting role, the board makes managers more productive, which, in turn, means higher expected firm output.

This model allowed the scholars to better understand the relationship between the board of directors and the company's managers, as well as with shareholders. The former was particularly important to take into account, because conflict between a board and managers is typically unobservable and can be costly.

The results were surprising. Without short-term incentives, the researchers found, boards did not effectively fulfill their multiple roles. Long-term inducements could make a difference, they found, but only in some aspects of board performance.

While board members were better advisors when given long-term motivations, short-term incentives were better motivators for performing well in their other corporate governance roles, according to the research, which tied specific aspects of board compensation to particular board functions.

Restricted equity awards provided the necessary long-term incentives to improve the efficacy of the board's advisory role, the scholars found, but only the short-term incentives, awarding an unrestricted share or a bonus based on short-term performance, motivated conscientious monitoring.

The scholars also examined managerial misconduct. Board monitoring, they concluded, lowered the cost of preventing such wrongdoing — but only if the board had strong short-term incentives in place.

Even at the highest rungs of the corporate ladder, in other words, short-term self-interest is the greatest motivator. Maybe it's not surprising. In the corporate world, acting for one's own benefit is a given — so stockholders need to look more closely at those at the very top. Like everyone else, board directors need occasional brass rings within easy reach to do their best.

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This story originally ran on Rice Business Wisdom.

Shiva Sivaramakrishnan is the Henry Gardiner Symonds Professor in Accounting at the Jesse H. Jones Graduate School of Business at Rice University.

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Rice biotech studio secures investment from Modi Ventures, adds founder to board

fresh funding

RBL LLC, which supports commercialization for ventures formed at the Rice University Biotech Launch Pad, has secured an investment from Houston-based Modi Ventures.

Additionally, RBL announced that it has named Sahir Ali, founder and general partner of Modi Ventures, to its board of directors.

Modi Ventures invests in biotech companies that are working to advance diagnostics, engineered therapeutics and AI-driven drug discovery. The firm has $134 million under management after closing an oversubscribed round this summer.

RBL launched in 2024 and is based out of Houston’s Texas Medical Center Helix Park. William McKeon, president and CEO of the TMC, previously called the launch of RBL a “critical step forward” for Houston’s life sciences ecosystem.

“RBL is dedicated to building companies focused on pioneering and intelligent bioelectronic therapeutics,” Ali said in a LinkedIn post. “This partnership strengthens the Houston biotech ecosystem and accelerates the transition of groundbreaking lab discoveries into impactful therapies.”

Ali will join board members like managing partner Paul Wotton, Rice bioengineering professor Omid Veiseh, scientist and partner at KdT Ventures Rima Chakrabarti, Rice alum John Jaggers, CEO of Arbor Biotechnologies Devyn Smith, and veteran executive in the life sciences sector James Watson.

Ali has led transformative work and built companies across AI, cloud computing and precision medicine. Ali also serves on the board of directors of the Drug Information Association, which helps to collaborate in drug, device and diagnostics developments.

“This investment by Modi Ventures will be instrumental to RBL’s growth as it reinforces confidence in our venture creation model and accelerates our ability to develop successful biotech startups,” Wotton said in the announcement. "Sahir’s addition to the board will also amplify this collaboration with Modi. His strategic counsel and deep understanding of field-defining technologies will be invaluable as we continue to grow and deliver on our mission.”

New peer-to-peer grocery app launches in Katy with plans to expand

local goods

If computer scientist and mobile applications developer Arfhan Ahmad has his way, his burgeoning Houston-based startup, QuickPantri, will be directly responsible for adding to the definition of what it truly means to be neighborly.

“Fast delivery from next door” — that’s the tagline for Ahmad’s hyperlocal grocery platform, which focuses on solving last-mile access, neighborhood commerce and food affordability.

“I’m passionate about combining technology with real-world problems, especially those that impact working families and underserved communities,” Ahmad says. “I moved to Houston two years ago, and here I realized that grocery stores are far from the neighborhoods.”

Ahmad envisions QuickPantri will help people who need grocery items urgently, sparing them a trip to the store or costly delivery fees by letting them source items directly from their neighbors’ cupboards.

With his new peer-to-peer app, members — especially those tethered to their residence due to disability or immobility or those unable to make grocery runs with children in tow — can simply log on to QuickPantri and purchase grocery items from their own neighbors.

“My initial thought was, 'What if we have an app that allows people to open a grocery store at their own home and sell any essential items to other neighbors?'” Ahmad says. “So, after having this idea in my mind, I asked my neighbors, 'If I sell groceries from my home, would you buy them from me?' And most of them gave me positive responses. After doing some surveys online on the Nextdoor app and Facebook, I started building this app.”

And like a good neighbor, Ahmad launched QuickPantri in his own neighborhood in Katy.

He then looked at scaling, first by securing approvals from Harris County to sell pre-packaged grocery items from his home. The response exceeded his own expectations. In the last two months, Ahmad estimates that he has delivered to 250 homes in the Katy area. Ahmad has seen that most customers use the app in search of late-night snacks and drinks.

“Ninety-five percent of those orders were delivered in 15 to 30 minutes … Our plan is to expand in other high-risk communities and other cities,” Ahmad says.

To date, Ahmad has obtained approvals from Arizona, Utah and Nevada.

He’s in the process of launching version two. Starting September 1, other sellers will be able to join the app and apply to sell goods to their neighbors. Ahmad says he currently has 50 sellers on the waitlist.

Each seller is allotted a potential selling radius of 10 minutes to ensure swift delivery. Also, sellers are required to deliver the goods via bicycle or on foot, making QuickPantri a pollution-free delivery option.

Currently, the app only sells pre-packaged items and sellers are required to show the expiration date in photos. The app utilizes AI to check pricing for goods in the area, and Ahmad says the app typically lists prices lower than what AI predicts.

Outside of geographic reach and number of buyers and sellers, Ahmad also hopes to expand the list of items that can be sold on the app to include clothes, electronics and cleaning supplies.

“We want our seller to be the ultimate source,” Ahmad says.

2 Houston universities excel on 2026 list of best U.S. colleges

Best in Class

Two top-tier Houston universities have been inducted into a new "hall of fame" list of the best colleges in the U.S. for 2026.

Rice University and the University of Houston were both praised in The Princeton Review's "The Best 391 Colleges: 2026 Edition."

Released August 12, the comprehensive guide annually ranks the best universities across 50 categories based on a survey of 170,000 current college students. Survey questions cover topics such as a school's academics and administration, student quality of life, politics, campus life, city life, extracurricular opportunities, and social environment.

The Princeton Review did not numerically rank the schools overall, but it does report the top 25 schools (out of the total 391) for each of the 50 different categories. The report also clarifies that while schools did not pay to be included in the guide, they could pay for a "featured" designation. Neither Houston university paid to be featured on the list.

Rice University, Houston's most prestigious private institution, appeared in the overall 391 best colleges list, and it also appeared in the regional "Best Southwest" list, the "Best Value Colleges" list, and the "Colleges That Create Futures" list. Rice's overall quality and its academic integrity are what students say are its greatest strengths. Students are additionally encouraged to think creatively — and even unconventionally — about how to approach course assignments.

"There's also an outside-the-box thinking when it comes to assessments, like 'the option to make a 30 minute scientific podcast instead of taking the final,' explains one sophomore," the school's profile says. "This isn't unusual for first-years either; one notes that 'instead of doing a bunch of writing and essays, I was tasked with creating...a TED Talk, which really lit a creative flame in me.'"

Rice students can brag about attending a school with the seventh best college newspaper and the 10th best college dorms and quality of life out of all colleges nationwide. The university's financial aid is also the ninth best in the country.

Here's how Rice fared in other Princeton Review rankings:

  • No. 14 – Top 50 Best Value Private Colleges
  • No. 14 – Lots of Race/Class Interaction
  • No. 17 – Best College Radio Station
  • No. 18 – Top 20 Best Value Private Colleges without Financial Aid
  • No. 19 – Best Science Lab Facilities
  • No. 23 – Best-Run Colleges
  • No. 25 – Students Study the Most

Rice has recently earned praise in a separate 2026 ranking of the best universities in the world, and its MBA program scored highly in The Princeton Review's 2025 best business schools list.

University of Houston also appeared in The Princeton Review's "Best Value Colleges," "Best Southwest," "Green Colleges," and "Colleges That Create Futures" lists. Students at this university also benefit from having the No. 1 undergraduate entrepreneurship program in the nation.

"Whether you're in or out-of-state, students consider their school to be 'not very expensive for the quality of education you're getting,' and the constant improvements help 'you feel like your degree is appreciating in value over time along with the school itself," the university's profile says.

Here's how University of Houston performed in other rankings:

  • No. 20 – Students Love Their School Teams
  • No. 21 – Scotch and Soda, Hold the Scotch (this list measured schools based on "the use of hard liquor" as reported by student surveys)
  • No. 22 – Cancel the Keg (this list measured "how widely beer is used" at schools based on student survey results)
  • No. 22 – Pot's Not Hot (this list ranked colleges with the "least marijuana usage based on ratings from real students about the popularity of marijuana on campus")
  • No. 25 – Most Politically Moderate Students
  • No. 42 – Top 50 Best Value Public Colleges
Unfortunately, UH ranked No. 11 in The Princeton Review's ranking of schools where financial aid is "not so great." However, there is plenty else to appreciate about this high performing university.

Other Texas universities included in The Princeton Review are:

  • University of Texas at Austin
  • Southwestern University in Georgetown
  • Texas State University in San Marcos
  • Trinity University in San Antonio
  • Texas A&M University in College Station
  • Angelo State University in San Angelo
  • Baylor University in Waco
  • Texas Christian University in Fort Worth
  • Southern Methodist University in Dallas
  • The University of Texas at Dallas in Richardson
  • University of Dallas in Irving
  • Austin College in Sherman
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This article originally appeared on CultureMap.com.

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