Mind the Gap: The Knowledge Gap

When I saw this week’s Discover Challenge, I actually heard the big bang that occurred with the collision of my two careers. I received my doctorate degree in Business/Finance in 1988 and taught on a university level for many years. Writing is a second career that began with academic writing during my university career but expanded during and after that time into both non-fiction and fiction writing.

The concept of Mind the Gap┬áis a familiar one to doctoral students. Our real purpose is to learn to do original research, not learn to teach, which is simply a by-product of our education. We learn to teach because we have to learn the material in our fields in order to do effective original research. That doesn’t mean we all become good teachers. That is another essay for another time.

My field was and is finance; specifically, corporate finance and financial institutions. Simply put, I studied larger business and big banks. Everything about larger business. What makes them tick. How to analyze their operations. How to advise them. How to value them. And much more. When I finished my courses in finance, banking, and statistics and was ready to write my dissertation, that is when “mind the gap” really became an issue. Doctoral students have written many papers up to that time. But there is nothing more important than the dissertation, which is nothing more or less than a book that you write about an original concept in your field. Not to mention the fact that you have to write a dissertation in order to graduate.

“Mind the gap” is the gap between existing knowledge, in my case, in corporate finance and banking and knowledge that is yet to be determined. I know that sounds very esoteric but in everything, there is knowledge yet to be determined. Business, science, technology….you get the picture. Else, we would never have the next iPhone. So, my task was to determine what my topic would be for my dissertation. Where did I think there was a gap in the knowledge in my field.

At that time, banking regulation was going out the window. Banks were beginning to merge and expand and the big regional banks we have today were being born. Banking executives seemed to think that bigger was better. At least, they thought it was more profitable and earned their shareholders more money. There was my topic. Was that true? There was the “gap.” No one yet knew if bigger was, indeed, better in banking.

I will spare you the details of my dissertation. (Trust me, you do not want to know.) But, in general, what I studied was whether or not banking expansion caused increased and even abnormal returns in banking. The bottom line was yes, in the short run, but no, in the long run. Think about this. I finished my dissertation on this topic in 1988. The financial crash that almost took down our economy that we all remember was at the end of 2007. What happened? The big banks were engaging in activities that were earning abnormal returns for them. It worked, in the short run. In the long run, many of them failed and many more were bailed out by the federal government.

There again is the “gap” I’m speaking of. The gap in the banking literature in 1988 was in the research on bank returns in the absence of the regulations they had always been under. By 2007, the premise I had studied in my dissertation had been addressed in the “real world” and had been proven to be correct. That gap in knowledge had been filled in. I had proven in my dissertation that banks do not earn excess returns in the long run as they become increasingly unregulated. They did, but only for a short time. Unfortunately, it seems to be happening again. #amwriting #amblogging #writing #banking

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