The economy and demand for finance Ph.D.s:
1989–2001
David K. Ding
a,∗, Sheng-Syan Chen
baDivision of Banking and Finance, Nanyang Business School, Nanyang Technological University, S3-1A-19
Nanyang Avenue, Singapore 639798, Singapore
bYuan Ze University, Taiwan
Received 15 August 2003; accepted 12 December 2003
Abstract
We investigate the demand for new finance Ph.D.s from 1989 to 2001. Three categories of schools (Top 20, Top 21–50, and Other Finance Departments) are explored and the differences between private and public institutions are reported. The demand for assistant professors is the greatest and most institutions require an earned Ph.D. While most do not specify the position type, there is some evidence that tenure-tracked ones are on the rise. The most desired areas of expertise are corporate/business finance, investments, and bank management/financial markets and institutions. The total demand is positively related to the Gross Domestic Product and Dow Jones.
© 2004 Elsevier B.V. All rights reserved.
JEL classification: E32; J44
Keywords: Finance Ph.D.; Academic job market; Areas of expertise
1. Introduction
Ph.D.s make up a small segment of the workforce. In 1995, only 1 percent of the US work-force held a Ph.D. degree (Bertin and Zivney, 1991). The typical candidate is a 34-year-old, married, Caucasian male with US citizenship (Bertin et al., 1999).Lahey and Vihtelic (2000)
find that the most common rank is full professor. Colleges and universities have been and
∗Corresponding author. Tel.:+65 6790 4927; fax: +65 6791 3697.
E-mail address: akyding@ntu.edu.sg (D.K. Ding).
0275-5319/$ – see front matter © 2004 Elsevier B.V. All rights reserved. doi:10.1016/j.ribaf.2003.12.003
still are the primary employers of Ph.D.s, although non-academic job opportunities have been growing.
No single organization keeps up-to-date statistics on the academic job market. This makes projection difficult and can create problems when economic condition changes. Thus, aca-demics are cautious about predicting the trend of the academic labor market. Tompkins et al. (1996)note that finance doctorates, faculty administrators and prospective doctoral students all have great difficulty in collecting useful information on the expectations and resources associated with new finance faculty positions at the different types of school. They have minimal information that would indicate what is required from the labor market to base their selling efforts.
The existing literature on the academic labor market has examined only limited as-pects of the issues. For example,Hansen et al. (1980),Carson and Navarro (1988), and
Barbezat (1992)analyze the market for economic doctorates. Numerous studies of under-graduate finance majors and MBAs have also been done. Examples includeGrablowsky and Brewer (1975),McCarty and Scherer (1977), andClaiborn and Collins (1978). These studies generally investigate employers’ attitude towards finance majors (Grablowsky and Brewer, 1975), the relationship between finance majors and the demand for their ser-vices in the financial institutions (McCarty and Scherer, 1977); and the entry-level fi-nance positions in both financial institutions and industrial firms (Claiborn and Collins, 1978).
To date, however, there are few similar studies on the finance doctorate labor market. The only exceptions are those ofTaube and MacDonald (1989),Bertin and Zivney (1991), andCheng and Davidson (1995). Taube and MacDonald use survey data to examine which characteristics of finance job candidates lead to site visits and ultimately to offers. Bertin and Zivney survey finance candidates in the 1991 job market and provide insights on the factors affecting the number of interviews at the Financial Management Association (FMA) Annual Meeting and the salary of accepted offers. Cheng and Davidson mainly focus on the supply side of the finance doctorate market by investigating the characteristics of the job candidates listed in the FMA’s Resume Book.Eaton and Nofsinger (2000)examine the reasons why finance faculty decide to accept an academic position. They find that faculty accepting their first academic position ranked teaching load, compatibility with colleagues, and research support as the three most important criteria in accepting the position while relocating faculty ranked teaching load, compatibility with colleagues and base salary as the three most important criteria.
Although these studies are insightful, a comprehensive study on the demand for finance Ph.D.s is largely ignored. Also, hardly any research papers were written to examine if the well-being of the economy affects the academic demand for finance professors. In par-ticular, little or no relevant study was done to find out if more finance professors would be demanded during a boom and whether the demand will decline in times of reces-sion.
The objective of this paper is to provide a current and comprehensive study of the de-mand for finance Ph.D.s over a 13-year-period from 1989 through 2001. In particular, we examine the new hire market, which is defined as assistant, assistant/associate and open positions. Our purpose is to increase the level of information available to both academic employers and finance doctorates. Our findings should be of interest to academic
employ-ers by providing a greater undemploy-erstanding of the marketplace, telling something about how the competitors are hiring, and offering a basis for comparing institutional practices.1For current job candidates, our results provide information on what the employers are looking for. Finally, our findings will provide potential doctoral candidates with better informa-tion on the trends of the academic job market and their potential job prospects when they graduate.
In this paper, we examine the characteristics of the available positions in the job mar-ket for finance Ph.D.s as advertised in the FMA’s Directory of Positions Available,
Fi-nancial Management, the Journal of Business, and the Journal of Finance. We focus our
attention on characteristics such as the title of the position, tenure-track or unspecified position, degree requirements, and areas of expertise required. Most of such information comes from the FMA’s Directory. We concentrate mainly on the FMA annual job mar-ket since this is well recognized as the major recruiting arena in finance and maintains one of the largest clearinghouses for doctoral qualified positions and candidates in the finance community. This restriction will result in a sample that is more homogenous in nature. We also classify the whole sample into three sub-samples: the Top 20, Top 21–50, and Other Finance Departments. This will enable us to find out the differences in de-mand for finance Ph.D.s among the different categories of schools. In addition, we in-vestigate the impact of the economy on the finance academic market. We separate the schools into private and public universities. The government funds a large portion of the budget of public universities while private universities’ funding comes mainly from en-dowment funds—as well as the high tuition fees charged. Therefore, we will expect a difference in their demand for finance faculties when faced with the same economic situa-tion.
This paper is organized as follows. A review of the related literature is provided in
Section 2. InSection 3, we present and discuss our hypotheses.Section 4describes the data and the methodology. We report the results inSection 5andSection 6concludes.
2. Literature review
2.1. General conditions of the overall academic job market for Ph.D.s
In his study on the overall academic job market for Ph.D.s,Barkume (1997)finds that, although academia remains the primary employer, the proportion of new Ph.D.s who ob-tained academic appointments after graduation declined steadily from 62 percent in 1974 to 52 percent in 1994. Growth in college enrollments slowed down in the 1970s and col-leges and universities greatly reduced their hiring. Consequently, doctoral degree holders faced greater competition for available permanent academic jobs. He concludes that grad-uates from doctoral programs, including finance doctoral programs, face very stiff com-petition for faculty positions. Budgetary constraints experienced by the US institutions of higher education have contributed to a weak academic job market. Although the US federal
1 As noted byBertin and Zivney (1991), even finance department chairpersons can struggle to stay abreast of
government’s share of funding for colleges and universities has held stable since the early 1980s, state support has declined, forcing many institutions to raise tuition and increasingly rely on private funding. Cutbacks had badly affected the job market for hopeful applicants as, in an effort to cut costs, many colleges and universities have adopted various measures, such as increasing class sizes, cutting low priority programs, and relying more heavily on part-time faculty. Decreases in research and development budgets have also had an adverse effect on hiring. Along with lower levels of funding, the US federal government has be-come more stringent in controlling costs. In the past, the US federal government allocated block grants to an institution; now, however, institutions are required to clearly justify all expenses.
According toMagner (1999), the decrease in the number of doctorates across all faculties should ease the problems that graduates faced in finding tenure-track jobs during the 1990s. She also found that 25 percent of the doctorates in 1998 went into postdoctoral positions, 63 percent already had jobs, while the remaining 12 percent were still uncertain of their career path.
2.2. The academic job market for finance Ph.D.s 2.2.1. Overall conditions
Throughout most of the 1980s, there was a persistent shortage of new finance academics. The Resume Bookpublished by FMA generally had fewer candidates than available posi-tions. As a result, starting salaries of new finance doctorates have risen.Dyl (1992)reports that, at AACSB-accredited institutions, the mean starting salary rose from US$ 38,200 in 1985–1986 to US$ 62,300 in 1991–1992, whereas at unaccredited institutions salaries ranged from US$ 36,000 to 52,800 over the same time periods. Much of this increase may be attributed to the imbalance between supply and demand, where demand significantly exceeds supply (Cheng and Davidson, 1995).
Much of the early 1990s, however, saw the supply of academics exceeding their demand.
Cheng and Davidson (1995)in their study on the supply side of the job market note that the number of job candidates with finance doctorates listed in the FMA’s Resume Book increased from 138 in 1986 to 269 in 1992. On the other hand, the number of university positions decreased from 174 in 1986 to 109 in 1992 based on the FMA’s Directory of
Positions Available.Bertin et al. (1999)find that, between 1991 and 1998, the new-hire finance market in terms of new doctoral candidates and positions offers has shrunk by one-third and one-half, respectively.
Cheng and Davidson (1995)also find that the real salary grew at an increasing rate in the 1980s but declined in the early 1990s. The range in salaries continues to widen substantially lending support to the notion of a segmented finance labor market.Bertin et al. (1999)find that, over the 1990–1995 period, mean starting salaries in accredited institutions rose by roughly 18.5 percent and in unaccredited institutions by only 9.7 percent (Agarwal and Yochum, 2000). Despite the larger shrinkage on the demand side, new-hire finance salaries have risen in nominal terms, although they have declined in real terms. The current market appears to indicate a reversal of this trend with demand exceeding supply and with increasing salary. Such patterns of salary and structural changes are consistent with the cobweb cycle (Freeman, 1975, 1976).
2.2.2. The Characteristics
Taube and MacDonald (1989)examine the characteristics of finance job candidates that lead to campus visits and ultimately to offers. They find that gender, age, publications, academic rank, and the number of interviews at academic meetings influence the probability of campus visits. Candidates’ age, gender, academic rank, and the number of campus visits affect the probability of obtaining an employment offer.Bertin and Zivney (1991)show that age and alphabetical listing in the FMA’s Resume Book influence the number of interviews at the FMA annual meeting. They also find that the salary of accepted offers is affected by the candidates’ nationality and specialization as well as the rankings of their programs.Bertin et al. (1999)confirm that age, teaching experience, specializations, research productivity, and potential are important determinants of the number of offers and the dollar amount of the offers a candidate gets.
Cheng and Davidson (1995)examine the characteristics of the job candidates in the Resume Book. They show that the majority of candidates are new job candidates and are from higher-ranked universities. They also document that around 45 percent of resumes are from international students and that many of them have repeat resumes.
2.3. The economy and the academic job market
There is very limited literature on the economy’s impact on the academic job market.
Yemma (1997)notes that, at a time when overall unemployment has fallen to around 5 percent, high-level scientists experience double-digit unemployment. He also finds that only about 1100 new mathematics Ph.D.s are produced each year in the United States but, through much of this decade, mathematicians have experienced unemployment of more than 14 percent—more than twice the rate of the overall economy.
3. Discussion of the hypotheses
In this paper, we focus on the demand side of the academic job market for finance Ph.D. holders. We examine the following four characteristics: the title of position, whether the position is tenure-track or unspecified, degree requirements, and areas of expertise required.2 We also explore how the economy’s well-being affects the demand for finance faculty. Here, we separate the list of schools into private and public universities. Since they are funded by different sources, we expect the demand for finance Ph.D.s to differ even within the same economic situation. We develop the hypotheses as follows. The health of the economy is represented by three economic variables, namely, the Gross Domestic Product (GDP), Unemployment rate (UNM), and the Dow Jones Industrial Average (DJ).
2 We also collected the data on teaching responsibilities, teaching and industry experience, research and
lan-guage skill expectations, and salary range. We note that most schools require teaching at both the undergraduate and master’s levels. A negligible number of schools, however, provide information on the other items that it becomes impossible to extract any meaningful interpretations to it. These items are therefore excluded from the analysis.
3.1. The title of position
The job openings are largely expected to be at the entry-level. InBertin and Zivney (1991), nearly all positions are at the assistant level, with the exception of the five associate positions offered by Californian schools.Ehrenberg (1992)finds that there is smaller variability across institutions of salaries at the assistant professor than at the full professor level, suggesting that there is greater competition by these institutions at the entry faculty level. At the new assistant professor level, finance is the highest paid discipline, indicating high student demand for instruction and also highly paid non-academic employment opportunities for the faculty. Moreover,Ehrenberg et al. (1991)report that full professors’ probability of leaving their institutions is relatively low. Therefore, we hypothesize that the demand for assistant professors is greater than that for associate and full professors.
3.2. Degree requirements
Ehrenberg et al. (1998), in their study of Economics Ph.D.s, report that each year only approximately 20–25 percent of the offers go to individuals who have yet to complete their Ph.D. (ABD).Bertin and Zivney (1991), in their survey of the new hire market for finance, find that graduates with position offers have the Ph.D. as their primary type of degree: 65 compared to only four ABDs. Therefore, we hypothesize that there is a preference for graduates with an earned Ph.D. than for those who are ABDs.
3.3. Type of contract offered
Within the academic community, faculty rank and tenure are often considered measures of success. However, there seems to be trends of a two-tier labor market. Faculty members are employed on either the tenure-track or non-tenure-track contract. As reported byEhrenberg (1992), tenure decisions are made during the sixth or seventh year of an individual’s initial tenure-track appointment and, especially in doctoral-granting institutions, substantial effort is required to work on research ideas and bring them to fruition before the tenure decision is made.
Tripathy and Ganesh (1996)find that research productivity is considered to be the sin-gle most important activity for career advancement, especially for promotions and tenure decisions of Ph.D. degree-granting schools. All tenutrack appointments entail full re-sponsibility for teaching, research, student advising, and performing professional and uni-versity service. Appointments can be at the professor, associate or assistant level. Ap-pointments at the professor or associate level normally require an earned doctoral degree or equivalent and demonstrated sustained quality teaching, wide recognition for schol-arly activities, and substantial service to the university. At the assistant level, the appoint-ment would require an earned doctorate and potential for excellence in teaching and re-search.
The traditional career path of a new Ph.D. is to find a tenure-track job, win tenure, and move up the ladder to full professorship. However,Barkume (1997)reports that the number of non-tenure-track faculty members has been growing.Bennett (1994)notes that more institutions are rely on teaching assistants and adjunct faculty while cutting back
on tenure-track posts. Thus, we hypothesize that the availability of tenure-tracked finance positions is less than non-tenure tracked or unspecified ones.
3.4. Areas of specialization
There is growing dominance of international financial institutions in the world’s financial markets. With increasing globalization and deregulation, it is expected that there will be a growing demand for graduates who specialize in corporate/business finance, derivatives, financial markets and institutions (FMI), international finance, or investment management. Such courses have been gaining increasing popularity among college students.Tripathy and Ganesh (1996), in their survey on the perceived and desired weights given to teaching, research and service activity find a high research concentration in the mainstream areas of corporate finance, investments, and financial markets and institutions. However, very often, asEhrenberg (1992) finds out, the choice of undergraduate major is important because, in many fields, students usually enter doctoral study from an undergraduate major in the same, or a closely related field. We therefore hypothesize that the demand for graduates who specialize in corporate/business finance, investments, or financial markets and institutions is stronger than the demand for those who specialize in other areas of finance.
3.5. The economy’s impact on the overall academic job market
The well-being of the economy has an intimate relationship with the number of jobs available in the market. We investigate the relationship between the health of the economy and the demand for finance Ph.D.s in the academic job market. There are two competing hypothesis in this case. First, when the economy is doing well, the government will be able to allocate more funds to the universities, especially for those that are publicly funded. With a larger budget, universities will be able to hire more professors. Therefore, a rising economy should be associated with a higher demand for finance faculty.
On the other hand, in times of prosperity, there will inevitably be more jobs available in the professional job market. There will be less incentive for graduates to pursue a higher education since highly paid jobs are readily available. With fewer individuals pursuing post-graduate education, there will be a smaller demand for faculty staffing. Thus, when the economy is faring well, there will be smaller demand for finance professors. We investigate which of the two competing hypotheses holds.
3.6. The economy’s impact on private and public universities
To examine in greater detail, we separate the universities into public and private univer-sities. Public schools all over the world are highly dependent on the government for funds.
Coble (2001)finds that higher education budgets are of higher priority now, but are also more subject to economic swings. He highlights that recent figures compiled by the Na-tional Conference of State Legislatures in Denver show that higher education’s slice of state budget pies (share of aggregate general fund appropriations) dropped from 13.7 percent in fiscal year 1986 to 12.3 percent in fiscal 1996. However, in subsequent years, most legis-latures appropriated funds to public colleges and universities at a rate significantly ahead
of inflation rates. The president of State Policy Research observes that higher education receives higher-than-average appropriations when times are good (as in the late 1990s) and lower-than-average appropriations when times are bad (as in the late 1980s and early 1990s). If the growth rate is remarkable, more funds will be set aside for the public universi-ties to hire more faculty members. However, if the growth rate slows down and government deficits set in, chances are that there will be shrinkage in the budget for universities as well. Therefore, we hypothesize that the demand for finance Ph.D.s among public institutions is positively correlated to the health of the economy. On the other hand, the budget for private schools comes mainly from endowment funds, which are independent of the state of the economy. We expect the demand for finance Ph.D.s among private universities to be unrelated or even negatively related to the economy’s well-being.
4. Data and methodology
We examine the characteristics of the available positions in the job market for finance Ph.D.s that are advertised in the FMA’s Directory of Positions Available, Financial Man-agement, the Journal of Business, and the Journal of Finance.3 Any repetitive position announcement in the four sources by the same college or university in the same year is treated as one such position only. If a school advertises for more than one position but does not state exactly how many are demanded, we take the most conservative estimate of two positions demanded. Almost 80 percent of such information is found in the FMA’s Directory, with the remaining 20 percent from the three journals. This concentration also results in a sample that is more homogenous in nature as the FMA’s Directory format has been standardized as much as possible.4We investigate a 13-year sample period from 1989 to 2001, inclusive.
Data on such characteristics as the title of position, tenure-track or unspecified position, degree requirements, and areas of expertise required are collected. The appendix shows that the schools are classified into three groups based on the rankings byFishe (1998)total impact of the research criterion: (1) Top 20 Finance Departments; (2) Top 21–50 Finance
Departments and (3) Other Finance Departments (a total of 397 schools). In addition, we
classify the universities into public and private schools. This is to see if there are differences in the hiring patterns between the two types of colleges. In particular, we are interested in whether public or private schools hire more finance Ph.D.s when the economy is good and vice versa. We also investigate if public schools employ more entry-level, tenure-track positions than private schools. Furthermore, we find out if public or private schools are more willing to accept ABDs and the types of specialization that each type of institutions
3 One should note that, just because an institution advertises an opening, it does not mean that it will actually fill
it. Most ads caution applicants that the job depends on “Budgetary Approval and Appropriate Funding.” Certain top institutions may also prefer to hire directly through private arrangements and may not advertise in their positions. Finally, some may list one but have more than one opening.
4 Note that the number of positions available in the Directory may not be completely accurate as some
univer-sities do not recruit at the FMA meetings, while others do not know they have a position at that time to have a listing in the Directory. However, as mentioned byCheng and Davidson (1995), the Directory is still a reasonably accurate method of estimating the demand for finance faculty candidates.
is keener to fill. The purpose of classifying the data into three categories is to find if there are differences in demand among the different groups of schools. However, there is one limitation: certain top schools may not advertise when they have an opening as they may fill the void through private arrangements.
We first use the Analysis of Variance (ANOVA) procedure to determine if differences exist among two or more groups. This technique analyzes the variance of the data to determine whether we can infer that the population means of the various groups differ, (Keller and Warrack, 1999). Where there is a significant difference among the means, the Tukey multiple comparison technique is then used to ascertain which pair(s) is (are) significantly different. Next, we investigate the relationship between the economy and the demand for all positions, as well as the demand for entry-level positions by applying the following regression model: Demand= β0+ β1Year+ β2PPDum+ β3Rank+ β4Economy+ ∈ (1) We select three variables, which provide a good representation of the state of the economy. The first variable is the Gross Domestic Product (GDP). We obtain the 13-year data for GDP from the Bureau of Economic Analysis. The Research Department of the Federal Reserve Bank of Cleveland find that information about the relationships between GDP, unemployment, and inflation can be uncovered by separating the data into two distinct components—trend and cyclical.
The trend component can be defined by statistical techniques that draw a smooth line through the central tendency of the data. The cyclical component is then measured as the deviation of the variable from its trend. During recessions, GDP is typically below trend, which implies that the cyclical component exhibits a negative deviation. During booms, the opposite is true, i.e., GDP is above the trend and the cyclical component exhibits a positive deviation. Therefore, there is a positive relationship between GDP and the state of the economy.
The second variable, unemployment rate, tells whether the economy is operating above or below its normal level. In most countries, there is a clear relation between the change in unemployment and GDP growth. High output growth leads to high employment growth as firms hire more workers to produce more. High employment growth leads to a decrease in unemployment. Hence, high output growth is typically associated with a decrease in the unemployment rate. Also, nearing the end of a recession (and hence the start of a recovery), unemployment is typically well above trend showing that the unemployment rate is link between the unemployment rate and the health of the economy as well. This justifies the use of the unemployment rate as one of the three variables. We obtain the 13-year unemployment data from the US Bureau of Labor Statistics.
The third variable we choose is the Dow Jones Industrial Average (DJIA). The data is also obtained from Dow Jones Indexes. DJIA, being the best-known price-weighted series, is the most popular stock-market indicator series. Although it is difficult to conceive that 30 non-randomly selected blue-chip stocks can be representative of the 3000 stocks listed on the New York Stock Exchange (NYSE), beyond the limited number, the stocks included are the largest and most prestigious companies in various industries (Brown and Reilly, 2000). Therefore, DJIA reflects price movements for large, mature, blue chip firms rather than for the typical company listed on the NYSE. The state of the stock index is reflective of the well being of the economy.
We performed a multiple regression to examine the relationship between the total and entry-level demand for finance academics and the Gross Domestic Product (GDP), Un-employment and Dow Jones Industrial Average (DJ). We use 12 different models in this study. In the first four models, the demand for finance Ph.D.s is regressed against the Gross Domestic Product. We use the current year GDP, the GDP in the past one and two years and well as the GDP in the following year. In the next four models, the demand for finance professors is regressed against the unemployment rate. In the last four models, the demand for finance academics is regressed against the DJ. In the regression model, we control for the year, whether the school is a private or public institution (PPDum= 1 if public, 0 other-wise), and the ranking of the school. The Top 20 Finance Departments, are assigned a value of 1, the Top 21–50 Finance Departments, a value of 2, and Other Finance Departments, a value of 3.
5. Results
5.1. The title of position
5.1.1. The overall finance hire market
In Table 1, Panel A1, we report that 60 percent of the overall total position openings are for assistant professors or assistant/associate professors. Open positions represent 30 percent of the total in the 13-year-period. In an average year, there are around 168 open-ings in all levels, of which 50 advertised openopen-ings are for assistant professors only, and 51 are open positions. On average, there is only one opening each for associate and full professor from the total number of positions advertised each year. It is also observed that the openings that specifically exclude assistant professors represent only 11 percent of the total number of positions advertised over the 13 years. Panel A2 and A3 provide the break-down of the results according to private and public universities, respectively. On average, private universities demand for 44 positions, whereas, public universities demand for 125 positions. On the whole, there are more openings for entry-level positions for both types of schools.
5.1.2. Top 20 finance departments
FromTable 1, Panel B1, we can see that there are no openings specifically asking for associate professors among the Top 20 Finance Departments. There are also no advertised job openings for both senior positions and department chair and head. This is mainly because the Top 20 Finance Departments frequently appoint internally or use private channels to fill these positions. The bulk of the positions advertised are for assistant professors or open positions. The total number of positions reached the highest level in both 1996 and 2000 at eight positions and the lowest in 1994 and in 1995 at only three positions.
Among private schools (Table 1, Panel B2), an average of 82 percent of the demand is for assistant professors, 11 percent for assistant/associate and 7 percent for the open category. However, majority of the positions demanded by public schools (Table 1, Panel B3) is for the open category (53 percent), followed by assistant professors (33 percent) and assistant/associate (13 percent).
5.1.3. Top 21–50 finance departments
Table 1, Panel C1, shows that most of the position openings among the Top 21–50
Fi-nance Departments seek entry-level assistant professors or are open positions. The assistant
level and open positions account for 72 percent of the entire 13-year sample period. In 1992 and 2001, the number of advertised openings for assistant professors reached a high of 10 openings for each of the 2 years and captured 42 percent of the total number of positions available in each of those years. In 1990, there is only one associate professor specifically demanded by the institutions, but such openings are not available in other years. Full
pro-Table 1
Table 1 (Continued )
fessors only are also not actively sought after by this group of institutions, where only one opening is demanded over the whole 13-year sample period (specifically in 1989). The total number of chairs and head positions available averages less than one opening a year, which is comparable to the Top 20 Finance Departments where there are no openings at all. The highest number of total positions in the Top 21–50 group is 24 in 1992 and 2001 and the lowest is 12 in 1995. In an average year, there are only two positions demanded by the private schools (Table 1, Panel C2), whereas, 16 are demanded by the public schools (Table 1, Panel C3).
5.1.4. Other finance departments
As reported in Panel D1 ofTable 1, the total number of positions demanded by the Other
Table 1 (Continued )
before picking up in 1996. The demand in 2000 returned to its peak of 204 positions but this number declined to 150 positions in 2001. For associate professors only, the total number of positions available over the 13-year sample period is 13, with the highest in 1991 and 1998 at four positions whereas, for full professors only, it is also 13, with the highest in 1989 at four positions. Finally, there are a hefty total of 101 openings for chair or head of department, which represents 5 percent of the total number of positions advertised over the 13-year sample period. However, the numbers have declined from a high of 13 positions in 1989 to only five positions in 2001. As shown inTable 1, Panel D2 and D3, the entry-level positions accounts for about 90 percent of the total positions demanded.
We see from the results that all three groups of private and public schools demand more entry-level positions than senior positions. This overwhelmingly supports our hypothesis that the demand for assistant professors is greater than associate or full professors.
Table 1 (Continued )
5.1.5. Comparisons across three groups of schools
As shown inTable 1, Panel E, the demand for positions differs significantly at the 1 percent level between Top 20 and Other Finance Department and between Top 21–50 and Other Finance Department. Among private universities, the distribution for finance openings for assistant, associate, assistant/associate, associate/full, open, and chair ranks differ significantly among the three groups of schools. The results show that there is a significant difference at the 1 percent level among the three groups of schools for each type of positions except for full positions. The Tukey’s multiple comparison results show that there is significant difference between the Top 20 and Other groups of schools as well as between the Top 21–50 and Other groups of schools in the demand for the various ranks of professors. Within the public universities, the results reveal that openings for all ranks with the exception of associate professors, differ at the 1 percent level. The multiple-comparison
Table 1 (Continued )
test shows significant difference between the Top 20 and Other groups of schools as well as between the Top 21–50 and Other groups of schools.
The results forTable 1, Panel F1, F2 and F3 reveal significant differences in the proportion of faculty opening among various ranks across the three groups of finance departments. This finding is significant at the 1 percent level across all three categories and types of schools. In particular, the Tukey’s multiple comparison results for both private schools and public schools (Table 1, Panel F2 and F3) show significant difference among the assistant and associate, assistant and full, assistant and associate/full, assistant and chair, and assistant and others across the three groups of schools. However, there seems to be no difference between the assistant and assistant/associate and between the assistant and open ranks that are demanded across the three categories of schools. The Tukey’s multiple comparison results are similar for that of both the private and public universities combined (Table 1, Panel F1).
Table 1, Panel G, shows that there is significant difference between the private and public universities’ demand for the various ranks of professors. In particular, there are differences in their demand for the assistant, assistant/associate rank and in their demand for the open rank. Panel A2 and A3 show that, over the 13-year-period, only 185
as-sistant professors are demanded by the private universities, whereas 467 asas-sistant pro-fessors are demanded by the public universities. Private universities demanded 153 as-sistant/associate positions, while public universities demanded 493 similar positions. In contrast, private universities have a total of 161 open positions, whereas public universities have 501.
There are significant differences among the three groups of schools in terms of their demand for the various positions of finance professors. Even within each group of schools, there are significant differences in the positions demanded. Lastly, there is a significant dif-ference between the private and public schools’ demand for the various ranks of professors. Despite these differences, more entry-level finance professors are demanded in all three groups of both private and public universities.
5.2. Degree requirements
Table 2, Panel A1, reveals a majority of 60 percent of the hiring institutions that re-quire candidates with at least a Ph.D. The demand for Ph.D.s only was particularly high at 76 percent in 1994 and at 74 percent in 1993. It appears that there was an oversup-ply of new Ph.D. candidates during these 2 years. In general, both private and public schools (Table 2, Panel A2 and A3) prefer candidates who have completed their doctorate degree.
Similar trends of hiring Ph.D. graduates are also noticed in the Top 20 Finance
Depart-ments (Table 2, Panel B1, B2 and B3) where an average of at least 60 percent of the openings during the 13-year-period requires an earned Ph.D. In 1994, the percentage of openings re-quiring the Ph.D. degree hit a low of around 33 percent among private schools in the Top 20
Finance Departments. This could be due to a smaller supply of job candidates in that year.
In all years, with the exception of 1997, the Top 21–50 group recorded at least 50 percent of the positions requiring a Ph.D. degree. Hence, it is clear that both the private and public institutions in this group also require their professors to be equipped with at least a Ph.D. degree to be considered for a job offer.
Similarly, in Panel D1 ofTable 2, we note that there is a peak in demand for graduates with an earned Ph.D. in 1994 (78 percent) and 1993 (73 percent) in the Other group. However, this requirement appears to be relaxed in 1997, where only 45 percent of the positions required an earned Ph.D. Such a phenomenon seems to be consistent with the tightening of the finance doctoral labor supply in the late 1990s.
The results in Table 2, Panel E, show that the demand for Ph.D.s versus ABDs dif-fers significantly at the 5 percent level for the Top 20 Finance Departments, and 1 per-cent for the Top 21–50 and Other Finance Departments. Overall, all groups of private and public schools prefer candidates who have obtained their doctorate degree at the time of application rather than near completion. This is in line with our hypothesis that there is a preference for graduates with an earned Ph.D. than those who are ABDs. Table 2
also reveals that there is a significant difference at the 1 percent level for the Top 20 and
Other groups of private universities and at the 5 percent significance for the Top 21–50
group in their criteria of candidates’ degree requirements. As for the public universi-ties, the candidates’ degree requirements also differ for both the Top 21–50 and Other groups.
T able 2 Candidates’ de gree requirements
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Table 2, Panel F, shows that across all groups of schools, there is a significant difference among the private and public universities’ demand for candidates’ degree requirements.
Table 2, Panel A2 and A3 show that the total demand for Ph.D.s by the private universities is 355, whereas the total demand for Ph.D.s by the public universities is 955 in the overall finance hire market.
There is a significant difference in the demand for Ph.D. holders and ABD holders within the three groups of schools and between private and public universities’ degree requirements for candidates. However, all groups of private and public universities have a preference for candidates who have completed their doctorate.
5.3. Type of contracts offered
Out of the total openings in our sample period, it is observed inTable 3, Panel A1, that 52 percent of them promise tenure-track contracts. However, this percentage varies from year to year, hitting a low of 38 percent in 1992 and a high of 68 percent in 1999. There is no clear trend for the types of contracts offered for both the private and public institutions (Table 3, Panel A2 and A3). Similarly, the Top 20 Finance Departments (Table 3, Panel B1, B2 and B3) show that there is no clear trend for the in the type of contract offered. However, we can see that the percentage of tenure-track contracts offered is mostly not above 60 percent. In much of the sample period, tenure-track positions available in the Top
20 Finance Departments are indeed not the norm.5 As the figures in this category have largely fluctuated, we cannot conclude that tenure-tracked positions are on a decline over time, as they have been fairly consistent.
Among the Top 21–50 Finance Departments (Table 3, Panel C1), the mean demand for tenure-track positions is 10, whereas, the mean demand for the unspecified positions is eight. In Panel C2 and C3, we note that private schools advertised for fewer tenure-track positions (36 percent) than public schools (59 percent). As for the Other Finance Departments, the number of tenure-track positions available is highest at 132 (65 percent) in 2000 and the lowest at 40 (35 percent) in 1992 (Table 3, Panel D1). The number of tenure-track positions offered bottomed out in 1992 but experienced an upward trend till 2000 before falling in 2001. Out of a total number of 1897 positions advertised by this group of schools over the 13-year sample period, 989 (52 percent) are tenure-tracked.
There appears to be no definite trend in the types of contract offered by the universities. We are therefore unable to conclude that the availability of tenure-tracked finance posi-tions is less than non tenure-tracked ones. In fact, in the more recent years, the number of tenure-tracked positions being offered by public universities has been increasing. Overall, the results (Table 3, Panel E1, E2 and E3) show no definitive trend for the type of positions advertised, but it does seem that tenure-track ones are slowly on the rise in recent years.
Table 3, Panel F shows significant differences in the types of positions advertised for by the private and the public universities.Table 3, Panel A2 and A3 show that private universities in the overall finance hire market advertised for 299 tenure-track positions whereas public universities advertised for 849 tenure-track positions.
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5.4. Areas of expertise required 5.4.1. Overall finance hire market
In an average year, there are 375 positions advertised (Table 4, Panel A1) and each opening requires candidates to possess an average of 2.2 areas of expertise.6This implies that a new candidate seeking faculty employment should have at least two areas of expertise to increase their chances of receiving an offer. The area of expertise required seems fairly stable with no apparent trends.Table 4, Panel A1, shows that the top three areas of expertise highly demanded among all schools over 1989–2001 are in corporate/business finance (25 percent), investments (19 percent), and bank management/FMI (16 percent). This trend is similar at both private and public universities (Table 4, Panel A2 and A3) in that the three most desired expertise account for at least 60 percent of the total demand.
5.4.2. Top 20 finance departments
We note fromTable 4, Panel B1, that the average number of expertise areas per opening demanded by the Top 20 Finance Departments is 2.2. Over the 13-year-period, there is no particular demand in the areas of derivative securities, health finance, entrepreneurship, and econometrics. Although one might have expected derivative securities to be an area of expertise desired by these institutions, our results do not concur. It is likely that the derivatives area is considered by the institutions within the broader field of investments and not a separate area of expertise in finance.
The four most highly demanded specific areas of expertise by the Top 20 hiring institutions (see Table 4, Panel B1) are in investments (25 percent), corporate/business finance (24 percent), open category (20 percent) and bank management/FMI (18 percent). These results are consistent with our expectations that, when the global financial markets become more integrated, the demand for professors with their areas of expertise in these areas will increase. Over the whole 13-year-period, the total number of openings is 132, with 1989 having the highest number of openings at 16 and the lowest at six in 1995. During this period, only two (2 percent) openings did not specify the areas of expertise desired. Corporate/Business finance (25 percent) and investments (27 percent) are the two most desired areas of expertise for the private schools in the Top 20 Finance Departments (Table 4, Panel B2), whereas, the open category (35 percent) is the most highly demanded among the top 20 public institutions.
5.4.3. Top 21–50 finance departments
Among the Top 21–50 Finance Departments, there are totally no advertised openings seeking candidates with expertise in health finance, and entrepreneurship (Table 4, Panel C1). There also exists no demand for expertise in insurance in 10 of the sample years. In the earlier half of the sample period (1989–1994), the two most desired expertise areas are corporate/business finance and investments. On average, the three most desired areas of expertise by the Top 21–50 Finance Departments are in corporate/business finance (23 percent), investments (23 percent), and bank management/financial markets and institutions (17 percent). In total, there are 519 openings within this group over the 13-year-period, with 1998 having the highest number of openings at 56 and the lowest at 23 in 1989 and 1991.
6 The total of 4874 areas of expertise fromTable 4, Panel A1, is divided by the total number of available
T able 4 Areas of expertise desired
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Open positions, where the area of expertise is not specified, accounts for 73 openings (14 percent).Table 4, Panel C2 and C3 provide the breakdown of the areas of expertise demanded by the Top 21–50private and public schools.
5.4.4. Other finance departments
In the Other group (Table 4, Panel D1), corporate/business finance (25 percent), invest-ments (19 percent), and bank management/FMI (16 percent), are the same three areas that employers look for. This is followed by international finance, real estate, and insurance, albeit at a lower frequency. Health finance, entrepreneurship, and econometrics are de-manded by a negligible number of institutions. Very often, employers prefer candidates with at least two areas of expertise that includes at least one of the four most popular areas of specialization. Over 1989–2001, there are 4189 openings in this group, with 2000 having the highest number at 492 and the 1995 the lowest 184. There are 306 openings that do not specify a particular area of expertise, representing seven percent of the total openings for this category of schools.Table 4, Panel D2 and D3 show that corporate/business finance, investments, and bank management/FMI account for about 60 percent of the total demand. The results support our hypothesis that the demand for graduates who specialize in corporate/business finance, investments or financial markets and institutions is stronger than the demand for those who specialize in other areas of finance. The demand for these three areas of expertise accounts for about 60 percent of the total demand.
5.4.5. Comparison across school types
The results forTable 4, Panel E1, E2 and E3 show significant differences among the three groups of schools across all expertise, with the exception of entrepreneurship and econo-metrics for the private universities. The Tukey’s multiple-comparison test tells us that the demand is significantly different between the Top 20 and Other groups of schools, as well as between the Top 21–50 and Other groups of schools. There is basically no difference between the Top 20 and the Top 21–50 schools in their demand for the different areas of specialization.
Table 4, Panel F1, F2, and F3 show significant difference among selected areas of ex-pertise across the three groups of schools. The results are significant at the 1 percent level. The multiple-comparison test shows that the differences come mainly from the difference in demand between corporate finance and the open specialization, corporate finance and international finance, investments and international finance, and bank management/FMI and international finance. There is little or no significant difference between investments and bank management/FMI, and bank management/FMI and the open areas of expertise across the three categories of private and public universities.
Table 4, Panel G shows significant differences in all areas of expertise demanded between the private and the public universities across all groups of schools, except for health finance, entrepreneurship, and others. Specifically, their demand for corporate/business finance, real estate, investments, bank management/FMI, and derivatives differ within each group of school.
There is significant difference among the three groups of schools in terms of the areas of expertise they require. There is also significant difference among the areas of expertise within the three groups of schools. Furthermore, private and public universities have different demand for the various areas of expertise. Despite these differences, corporate/business
finance, investments, and bank management/FMI are still the three most highly demanded specializations.
5.5. Relationship between the economy and the academic job market
We employ three variables, namely the Gross Domestic Product (GDP), the unemploy-ment rate (UNM), and the Dow Jones Industrial Average (DJ) to represent the overall performance of the economy. The higher the GDP, the lower the unemployment rate and the higher the stock index as represented by DJ, the better the health of the economy. From the correlation matrix inTable 5, all three variables are highly correlated with each other. In the analysis, we control for the year, the type of university (private or public), as well as the ranking of schools.
We use 12 models to investigate the relationship between the economy and the total academic demand for finance Ph.D. holders (Table 6, Panel A) as well as the relationship between the economy and the demand for entry-level positions (Table 6, Panel B). The first four models investigate the relationship between the demand for finance academics and GDP, while controlling for the year, the school type and ranking. The next four investigate the relationship with the unemployment level. Similar, the last four examine the relationship between the demand for Ph.D.s and the performance of the stock market index.
The results for all the 12 models are significant at the 1 percent level. The first four models show that the total demand for finance Ph.D.s as well as for entry-level positions is positively related to GDP. The higher the GDP, the better is the economy performing and the higher the demand for finance Ph.D.s. Of the four models, Model 3 is the most significant. It has the highest adjusted R-squared and F-statistic values. The t-statistic of GDPtis significant at the 5 percent level. This shows that the higher the GDP is in a year, the more finance academics will be demanded that year.
In models 5–8, the total demand of finance Ph.D.s is negatively related to the unemploy-ment level of the economy. The lower the unemployunemploy-ment level, the better the performance of the economy and the higher the demand for finance academics. Similarly, models 9–12 show a positive impact from the performance of the stock market on the total demand as well as the entry-level demand of finance Ph.D.s. The better the stock market performs, the better the economy performs, and the higher the demand for finance academics. Model 10 is the most significant in this set of models. It displays the highest adjusted R-squared as well as the highest F-value. The t-statistic of DJt−1is also significant at the 5 percent level. This is not surprising because the stock market tends to react faster than the real market. The positive performance of the economy will be first reflected in the stock market before it is reflected in the GDP level. This is because the real market is more rigid and takes a longer time to react to positive news.
All three sets of models present a consistent result. The better the health of the economy, the more finance Ph.D.s are being demanded. This supports our hypothesis that a rising economy should be associated with a higher demand for finance faculty. The results show no significant difference across the years in the number of finance professors demanded. The coefficient of PPDum in all models is significant at the 1 percent level. This shows that there is a difference in the demand between the public and private universities for finance Ph.D.s. The public universities have a greater demand for finance academics when
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the economy is doing well as compared to the private universities. This is consistent with our hypothesis. When the economy is doing well, the government will have more funds that can be channelled to the public universities. With a larger budget, the public universities will have the financial capability to hire more professors, resulting in a larger demand for finance academics. The results for the rank of schools are all significant at the 1 percent level, where the lower the ranking of schools, the higher the demand for finance Ph.D.s.
6. Conclusion
This study examines the market demand for finance Ph.D.s over a 13-year-period from 1989 to 2001. Information on the number of positions available, areas of specialization, availability of tenure-track positions, and degree requirements is obtained from data com-piled in the FMA’s Directory of Positions Available, Financial Management, the Journal of
Business, and the Journal of Finance. Knowledge of these factors is useful for finance Ph.D.s
in obtaining a better match between their qualifications and expertise, and available posi-tions. Those with an interest in doctoral education will also have better information on the state of the academic job market. University administrators should find our results useful for a better understanding of the marketplace, including the knowledge of how their competitors are hiring. Furthermore, the study offers a basis for comparing institutional practices.
In the overall finance hire market, 60 percent of the total positions advertised are for assistant professors and assistant/associate professors. Open positions represent 30 percent of the total in the 13-year-period of the study. It is observed that job openings for positions excluding assistant professors represent only 11 percent of the total number advertised over the 13 years. There are differences in their demand for the Assistant/Associate rank and in their demand for the Open rank among the private and public universities. There is a majority of 60 percent of the hiring institutions that want candidates with an earned Ph.D. There is a significant difference among the private and public universities’ demand for candidates’ degree requirements. Out of the total openings in our sample period, it is observed that 52 percent of them are tenure-track ones. However, this percentage varies from year to year. There is a significant difference in the types of contracts advertised for by the private and the public universities. The most desired areas of expertise are in corporate/business finance, investments, and bank management/FMI. A new candidate seeking a faculty appointment needs more than two areas of expertise to have higher chances of receiving an offer. The areas of expertise required by the hiring institutions seem fairly stable, with no distinguishing upward or downward trend. Among the three groups of schools across all expertise, there is a significant difference among the Top 20 and Other group of schools and among the Top
21-50 and Other group of schools. The demand of finance Ph.D. is positively related to the
level of GDP and the stock market represented by the Dow Jones, but is negatively related to the level of unemployment.
Acknowledgements
The authors acknowledge the helpful suggestions and comments from Louis Cheng and participants of the NTU Finance Faculty Workshop and the 2000 FMA Conference.
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