Going beyond Theory in the World of Finance

The finance and accounting industry is one that is alive and dynamic, literally changing from day to day. Most finance theories written decades ago have lost much of their relevance in the light of a globalised world where information is instantaneous.

Professor Ferdinand A. Gul - School of Business
Professor Ferdinand A. Gul - School of Business

Professor Ferdinand A Gul from Monash University Sunway campus (MUSC) believes that to effectively teach finance and accounting today, one has to go beyond the theories and instead demonstrate the real-world application of the subject. Prof Gul is the Professor of Accounting and Corporate Governance and Head of the Accounting and Finance discipline in MUSC.

“Because of this contagion effect where everything is now borderless including funds, it’s very difficult to teach finance. The ideas and theories need to be updated so quickly or they become outdated.

“For example, theories developed more than 30 years ago did not see the effect of different institutions in our new globalized financial world, with funds moving across boundaries and the effect of the internet and the instantaneous transmission of information,” he said.

Globalisation and development of information systems has made finance and accounting “very complex”, hence the need to bring these ideas into the classroom, he said.

“Academics need to be very discerning. Because we only have 12 weeks of lessons, you need to be selective about what you bring into the classroom. It becomes a challenge to teach up-to-date and relevant issues but I believe we’re doing pretty well here by bringing real ideas and changes into the classroom,” said Prof Gul.

One of the ways that Monash University Sunway campus is striving to bridge the gap between the classroom and the real world of finance is with the introduction of the Trading Room.

Interactive learning in the MUSSTLab - a first of it's kind in Malaysia.
Interactive learning in the MUSSTLab - a first of its kind in Malaysia.

The Trading Room, the first of its kind in Malaysia, allows students to have first hand knowledge of how to trade and of the implications of their trading decisions.

“In the Trading Room, we ask students to imagine they are investors and see how they would react to various pieces of information.

“There’s a spectrum of information that’s available to an average investor, apart from financial information, like annual reports, news on corporate governance and many more. They all have some implications on stock prices,” said Prof Gul.

Students are required to make investment decisions based on all the information made available to them about the listed companies, which are often actual Malaysian corporations.

“There are lots of finance theories that have been developed on trying to explain the links between certain types of information, and how the stock market reacts. Psychological theories such as herding behaviour are also introduced.

“So we have all these various theories and students have to try and visualise and think about how these relationships work out in practise. But when we use the Trading Room, they are bringing those theories to practice, and hence that’s how we bring the real world into the classroom,” he said.

Prof Gul said the Trading Room also reinforces the idea that finance is dynamic.

“Finance is an area of study where we probably only understand like 5% of total knowledge. It’s really something that is ever changing, and nobody can really say they know exactly how it works,” he said.

The Trading Room, which was officially launched in February by CEO of Bursa Malaysia, Datuk Tajuddin Atan, is now fully operational and student response has so far been very encouraging.

“The students find it really great exposure. This is  a great way to teach students and acclimatise them to the real world,” said Prof Gul.

Prof Gul, who has wide practical and academic experience, said he aims to bring the relevance of theories to students in his accounting and auditing classrooms.

“I want students to see the link between what they are learning, and stock prices. If they don’t see that, there’s a disconnect,” he said.

Students are also taken on site visits to Bursa Malaysia, audit firms and manufacturing firms, on top of having invited speakers from the corporate world holding talks on campus.

Later this year, students taking the Financial Institutions and Markets paper will be treated to a one-hour lecture by an economist from the Japanese embassy “who is the expert on Japanese financial markets”, said Prof Gul.

“It’s critical that you have to bring outsiders to bridge the gap between the classroom and the real world.”

Connecting the dots between the real world and theory doesn’t just stop at the classroom for Prof Gul, who on top of a deep passion for academia has a love for knowledge of various fields from science to religion and economy.

Prof Gul has made Monash history as the first person to be conferred the Doctor of Economics in Monash University’s 55-year history.

He was presented with the higher doctorate degree by publications for his distinguished contribution to knowledge, recognising his published works that have appeared in A-star journals including The Accounting Review, Journal of Accounting and Economics, Journal of Accounting Research and The Journal of Financial Economics.

“The broader your interests, the more relevance you can bring to solving a problem,” he said.

“Problems are never isolated, they are multi faceted. So the more you know, the better you are in resolving them.”

He says this ethos is passed on to many of his PhD students, whom he proudly says share much of his pursuit for a deeper understanding of the world around us.