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

Houston voices

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.

------

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.

------

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.

------

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.

Ad Placement 300x100
Ad Placement 300x600

CultureMap Emails are Awesome

Property Showcase

6 Houston entrepreneurs land on coveted Inc. Female Founders 500 list

the future is female

Six Houston female entrepreneurs and innovators were named to the 2026 Female Founders 500 list.

The annual list compiled by Inc. Magazine recognizes female founders based in the U.S. who have built businesses that have moved their industries forward. The group collectively generated approximately $12.3 billion in 2025 revenue and $12.2 billion in funding to date, according to Inc. Five Houstonians were named to the list last year.

"Each year, we are increasingly amazed by the extraordinary leaders on our Inc. Female Founders 500 list," Bonny Ghosh, editorial director at Inc., said in a news release. "The honorees on this year's list include innovators in AI, beauty and wellness trendsetters winning devoted fans, and nonprofit leaders making a real impact in their communities. Together, they're showing all of us what trailblazing female leadership looks like."

The Houston founders are:

  • Sassie Duggleby, CEO and co-founder of Houston space tech and engine company Venus Aerospace. Duggleby also serves on the Texas Space Commission board of directors.
  • Stephanie Murphy, CEO and executive chairman of Aegis Aerospace, which provides space services, spaceflight product development, and engineering services. Murphy also serves as chair of the Texas Aerospace Research and Space Economy Consortium Executive Committee.
  • Laureen Meroueh, CEO and founder of Hertha Metals, which has developed a cost-effective and energy-efficient process that converts low-grade iron ore of any format directly into molten steel or high-purity iron in a single step.
  • LaToshia Norwood, managing partner of L'Renee & Associates (LRA), a full-service project management consulting firm.
  • Lauren Rottet, president and founding principal of Rottet Studio, an international architecture and design firm focused on corporate, lifestyle and hospitality projects
  • Nina Magon, founder and CEO of Nina Magon Studio / Nina Magon Consumer Products, a residential and commercial interior design company. She also co-founded KA Residences earlier this year.

"Grateful to be recognized again on the Inc. Female Founders 500," Duggleby said in a LinkedIn post. "The best part of building Venus Aerospace has been working with an incredible team pushing the boundaries of flight—and helping bring more women into aerospace along the way.

Meroueh, whose company emerged from stealth last year, voiced a similar push for bringing more women into the fold.

"We've seen a 7x jump in female-led IPOs over the last decade, from just two in 2014 (less than 1% of all IPOs) to 14 in 2024 (nearly 9% of all IPOs). Progress is happening," Meroueh shared in a LinkedIn post. "Yet, less than 1% of venture funding in hard tech goes to female-founded companies. But as my friend Ana Kraft says, the right man for the job may be a woman."

Twenty-nine Texas female founders made this list, including Amber Venz Box, founder of the Dallas-based LTK shopping platform, and Cheryl Sew Hoy, CEO and founder of Austin-based Tiny Health, a fast-growing at-home microbiome health platform. See the full list of winners here.

NASA clears Artemis moon rocket for April launch with 4 astronauts

3, 2, 1...

NASA has cleared its moon rocket on for an April launch with four astronauts after completing the latest round of repairs.

The 322-foot (98-meter) rocket will roll out of the hangar and back to the pad at Florida's Kennedy Space Center, leading to a launch attempt as early as April 1. It will mark humanity's first trip to the moon in more than 50 years.

The Artemis II crew should have blasted off on a lunar flyaround earlier this year, but fuel leaks and other problems with the Space Launch System rocket interfered.

Although NASA managed to plug the hydrogen fuel leaks at the pad in February, a helium-flow issue forced the space agency to return the rocket to the Vehicle Assembly Building for repairs, bumping the mission to April.

The space agency has only six days at the beginning of April to launch before standing down until April 30 into early May.

"It's a test flight and it is not without risk, but our team and our hardware are ready,” NASA's Lori Glaze told reporters at the end of the two-day flight readiness review.

Glaze and other NASA officials declined to provide the risk probabilities for the upcoming mission.

History has shown that a new rocket has essentially a 50% chance of success, said John Honeycutt, chair of the mission management team.

There's so much gap since the only other SLS flight — more than three years ago without anyone on board — that it's difficult to understand any risk assessment numbers, Honeycutt said.

“It's not the first flight," Glaze said. "But we're also not in a regular cadence. So we definitely have significantly more risk than a flight system that's flying all the time.”

Late last month NASA's new administrator, Jared Isaacman, announced a major overhaul of the Artemis program to speed things up and, by doing so, reduce risk.

Dissatisfied with the slow pace and lengthy gaps between lunar missions, he added an extra practice flight in orbit around Earth for next year. That is now the new Artemis III, with the moon landing by two astronauts shifted to Artemis IV. Isaacman is targeting one and maybe even two lunar landings in 2028.

NASA's Office of Inspector General warned in an audit that the space agency needs to come up with a rescue plan for its lunar crews. Landing near the moon's south pole will be riskier than it was for the Apollo astronauts closer to the equator given the rough polar terrain, according to the report.

The report cited the lunar landers as the top contributor for potential loss of crew during the first few Artemis moon landings. It listed the space agency’s loss-of-crew threshold at 1-in-40 for lunar operations and 1-in-30 for Artemis missions overall.

Contracted by NASA to provide the moon landers for astronauts, Elon Musk's SpaceX and Jeff Bezos' Blue Origin have accelerated work in order to meet the new 2028 target date. The inspector general's office said many technical challenges remain including refueling their landers in orbit around Earth before flying to the moon.

NASA sent 24 astronauts to the moon during Apollo, 12 of whom landed on it. All but one of the moonshots — Apollo 13 — achieved their prime objectives. The program ended with Apollo 17 in 1972.

Kinder leads 19 Houstonians on Forbes' World's Billionaires List 2026

World's Richest 2026

According to Forbes, there has “never been a better time to be a billionaire” than in 2026, and the publication's newest World’s Billionaires List has revealed the 19 Houston billionaires that have risen among the wealthiest worldwide.

Kinder Morgan chairman Richard Kinder surpassed hospitality honcho Tilman Fertitta as the richest billionaire in Houston, ranking No. 232 on the global list with an estimated net worth of $13 billion. His net worth has grown by $2.4 billion since last year.

Fertitta, 68, may not be the richest Houstonian anymore, but his wealth is still on the rise. He ranked 268th on the list with an estimated net worth of $11.7 billion, up from $11.3 billion last year.

Out of the 390 billionaire newbies that made their debut onto the list this year, one of them calls Houston home: restaurateur and commodities trader Ignacio Torras. Torras, 61, is the founder and CEO of global commodities trading company Tricon Energy, and he owns Michelin-starred local restaurant BCN Taste & Tradition and its sister eatery MAD. But that's not all he spends his time doing, according to Forbes.

"In 2024 Torras launched a soccer tournament for neurodivergent players called the Genuine Cup," his profile said. "Last year 800 players and 30 teams from around the world played at Rice University stadium."

Torras debuted as No. 2600 on the list with an estimated net worth of $1.5 billion.

Houston-born multi-hyphenate superstar Beyoncé Knowles-Carter also staked a claim among the world's richest people in 2026. She ranked No. 3332 on the list with a net worth of $1 billion, thanks to her "years of music sales, touring and collecting art with her already-billionaire husband Jay-Z (estimated net worth: $2.8 billion)," Forbes said.

"The majority of pop star Beyonce’s net worth comes from her roughly three decades as a solo performer and a member of the girl-group Destiny's Child," her profile said. "She holds the record for the most Grammy wins ever, with 35, and won her first Album of the Year trophy in 2025. She and her billionaire husband Jay-Z purchased a $200 million Malibu mansion in 2023, in what was the most expensive home sale in California history."

Beyoncé also ranks No. 21 in the publication's separate list of The World's Celebrity Billionaires.

Here's how the rest of Houston's billionaires fared on this year's list:

  • Toyota mega-dealer Dan Friedkin: No. 279; $11.4 billion, up from $7.7 billion
  • Pipeline heir Randa Duncan Williams: tied for No. 323 with an estimated net worth of $10.2 billion, up from $9.3 billion in 2025. Fellow pipeline heirs Dannine Avara and Milane Frantz tied for No. 332 globally. Each has an estimated net worth of $10.1 billion, up from $9.2 billion. Scott Duncan ranks No. 353 with a $9.8 billion estimated net worth, up from $9 billion in 2025.
  • Oil tycoon Jeffery Hildebrand: No. 341; $10 billion, up from $7.7 billion
  • Houston Texans owner Janice McNair and family: No. 528; $7.3 billion, up from $6.2 billion
  • Energy exploration chief exec George Bishop of The Woodlands: No. 908; $4.7 billion, down from $5 billion
  • Westlake Corporation co-owners Albert Chao, James Chao and their families: tied for No. 1074; $4 billion, flat from 2025
  • Hedge fund honcho John Arnold: No. 1504; $2.8 billion, down from $2.9 billion
  • Perry Homes executive chair Kathy Britton: No. 1611; $2.6 billion, flat from 2025
  • Houston Astros owner Jim Crane: No. 1676; $2.5 billion, up from $2.4 billion
  • Former Houston Rockets owner Leslie Alexander: No. 1834; $2.3 billion, up from $1.9 billion
  • Mercedes-Benz mega-dealer Joe Agresti: No. 3185; $1.1 billion, flat from 2025
  • Frontier Airlines chairman William Franke: No. 3332; $1 billion, down from $1.2 billion

Elsewhere in Texas

Austin billionaire Elon Musk was declared the world's richest person for the second consecutive year, and Forbes said his “grip on the top spot is as strong as it’s ever been.”

“Musk became the first person to hit $500 billion in wealth, in October,” Forbes said. “Then $600 billion and $700 billion, within four days in December. Then $800 billion, in February.”

The Tesla, SpaceX, and xAI founder’s current net worth has skyrocketed to $839 billion — a shocking $497 billion more than his 2025 net worth.

In Dallas-Fort Worth, Walmart heiress Alice Walton has maintained her elite status as the world’s richest woman for the third year in a row. Walton is the 14th richest person on the planet with a current net worth of $134 billion, an eye-catching $33 billion higher than her 2025 net worth. She is the first American woman worth $100 billion, and one of only 20 “centi-billionaires” worldwide claiming 12-figure fortunes, also known as the "$100 Billion Club."

Koch Inc. stakeholder Elaine Marshall and her family are the richest Dallas residents, ranking No. 71 globally with an estimated net worth of $30.9 billion. Her net worth has grown by $2.6 billion since last year.

---

This article originally appeared on CultureMap.com.

View All Listings