IIMA study says MBAs need to look beyond mgmt

IIMA study says MBAs need to look beyond mgmt


Do you think studying at a top management college enables you to learn handling financial crisis in a real life situation? While your college authorities may claim so, a study by the Indian Institute of Management, Ahmedabad (IIMA) has concluded that in order to make an MBA graduate competent to handle real life crises, a typical MBA programme needs to integrate insights from other disciplines also.
'Finance Teaching and Research after the Global Financial Crisis,' the study conducted by the IIMA, suggests that to teach students to handle or avert financial crisis, an MBA programme needs to integrate insights from disciplines like sociology, evolutionary biology, neurosciences, financial history and the multidisciplinary field of networks theory.
IIM-A Prof Jayant Varma, who undertook the study, observed that typical MBA programmes have failed to keep pace with the developments in finance theories in the last decade or more. Therefore, they need to be more comprehensive now.
"Finance theory itself is constantly evolving and needs to draw on insights from several other disciplines to enrich itself. Behavioural finance has succeeded in integrating several models from psychology into mainstream finance, but the global crisis has demonstrated that many phenomena have their roots in sociological factors," Prof Varma said.
Professor Varma says that apart from sociology, finance must learn from evolutionary biology, neurosciences, financial history and the multidisciplinary field of network theory. "Above all, the increasingly complex world of finance needs more sophisticated mathematical models and statistical tools," he adds.
The professor insists that financial history should be made part of the MBA programme where history of around 100 years is taught. "Financial history provides vital inputs in econometric procedures. Since high quality data do not usually go back to more than a few decades, we cannot fit econometric models directly to centuries of data," he says.
"However," Prof Varma adds, "it is not sensible to limit the estimation process to only the limited sample duration that is available. We need to favour robust models that are qualitatively consistent with decades if not centuries of historical experience. Such models should not only provide a good fit to the high quality data of the recent past, but also allow us to extrapolate far beyond recent experience."
The study states that a lot needs to be changed in finance teaching and finance theory is also due for some changes.Many ideas that are well understood within certain subfields in finance need to be better assimilated into mainstream models. For example, many concepts in market microstructure must become part of the core tool kit of finance, suggests the paper.