CSUF News Service
Meet Wonik Choi
Faculty Member Explores Insider Trading and the Tone of Disclosure
Sept. 4, 2014
Few would thank mandatory military service for setting them on their future career path, but Wonik Choi can.
The new assistant professor of accounting at Cal State Fullerton came to America after serving as senior KATUSA (Korean augmentation to the U.S. Army) sergeant and chief of the administrative division for two years in the Korean Army.
The experience of interacting with Americans — and the fact that he has family in America — convinced Choi to move to New York, where he completed a master's degree in statistics at Columbia University, then to Columbus, Ohio, to complete his doctorate in accounting at Ohio State University's Fisher College of Business.
But the desire to teach, particularly at a college campus, was always the goal for Choi, whose wife and brother-in-law also are college professors.
Choi, whose research focus is on financial disclosure and capital markets, insider training, earnings management and corporate diversification strategy, says he has received "great support from the [Mihaylo] college for my research in financial accounting."
Currently, he is examining insider trading activity in corporate spinoffs using textual analysis, specifically the tone of what managers say when discussing a prospectus for a subsidiary soon to be spun off.
"I use a measurement based on the negative and positive words to determine whether managers manipulate the tone to enhance profits from their transactions," Choi says. His research was the subject of "Disclosure Tone of the Spin-off Prospectus and Insider Trading," a paper he presented at the August American Accounting Association meeting in Atlanta.
"Over the past two decades, many companies have reduced their size by spinning off one or more business units. Spinoffs lead to the formation of a new public company and provide shareholders, including managers, with the opportunity to alter their stock holdings within the separate entities," Choi explains.
"Given the nonexistence of prior trading history and a lack of financial information, outside investors face great uncertainty in valuing the spun-off firm, especially relative to the firm's management. In this case, more informed firm management may exploit their private information for their personal benefit at the expense of less informed outside investors."
This fall, Choi is teaching an intermediate accounting course required of all undergraduate business administration majors pursuing an accounting concentration. "From the first class of this semester, I have been surprised at the students' passion to learn new things. This everyday experience really encourages my passion to prepare for more classes," he says. "In this semester, my goal is to help the students learn and understand course material that will help them progress in their careers."