Chief Financial Officer Succession and Corporate Financial Practices
University of Chicago Booth School of Business
University of Illinois at Chicago
Ohio State University - Fisher College of Business
Fisher College of Business Working Paper No. RP 2014-02-005
We examine determinants and performance consequences of Chief Financial Officer (CFO) successions in years 2002-2008. We argue that if internal monitoring mechanisms are effective, forced CFO departures are more likely in firms with poor financial practices, followed by improvements in these financial practices. We find that (1) the probability of forced CFO turnover is associated with incidences of accounting restatements, internal control weaknesses, receipt of SEC comment letters, and late regulatory filings; (2) CFO successions following forced turnover are associated with subsequent improvements in these financial outcomes. Collectively, our empirical evidence is consistent with the notion that board monitoring of CFOs is effective in holding CFOs accountable for their specific financial reporting and regulatory duties and in choosing successor CFOs that are equipped to address failures in financial practices and outcomes.
Number of Pages in PDF File: 89
Keywords: CFO succession, CFO turnover, Board of director monitoring
Date posted: October 23, 2013 ; Last revised: January 15, 2015
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