Abstract

http://ssrn.com/abstract=2343898
 


 



CFO Succession and Corporate Financial Practices


Ellen Engel


University of Chicago Booth School of Business

Feng Gao


University of Illinois at Chicago

Xue Wang


Ohio State University - Fisher College of Business

October 1, 2013


Abstract:     
We examine the determinants and financial performance consequences of Chief Financial Officer (CFO) successions. We argue that if internal monitoring mechanisms are effective, there should be a greater probability of forced CFO departures in firms with poor financial reporting and capital management performance, and resulting improvements in financial practices following forced turnovers. We test these hypotheses over the period 2002 to 2008. We find that (1) the incidences of accounting restatements and debt covenant violations are significantly associated with the probability of forced CFO turnovers; (2) firms are more likely to hire successor CFOs from outside the firm following accounting restatements, especially those due to irregularities; (3) the hiring of outside CFOs is associated with improved financial reporting quality. Further, these findings are concentrated in firms with majority independent boards, suggesting that outside directors play a greater role in monitoring CFOs than inside board members.

Number of Pages in PDF File: 42

Keywords: CFO succession, CFO turnover, Board of director monitoring

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Date posted: October 23, 2013  

Suggested Citation

Engel, Ellen and Gao, Feng and Wang, Xue, CFO Succession and Corporate Financial Practices (October 1, 2013). Available at SSRN: http://ssrn.com/abstract=2343898 or http://dx.doi.org/10.2139/ssrn.2343898

Contact Information

Ellen Engel (Contact Author)
University of Chicago Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-0966 (Phone)
866-377-52152 (Fax)
Feng Gao
University of Illinois at Chicago ( email )
Accounting Department
Chicago, IL 60305
Xue Wang
Ohio State University - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-1330 (Phone)
614-292-2118 (Fax)
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