Abstract

https://ssrn.com/abstract=1260368
 
 

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Why do CFOs Become Involved in Material Accounting Manipulations?


Mei Feng


University of Pittsburgh - Katz Graduate School of Business

Weili Ge


University of Washington - Michael G. Foster School of Business

Shuqing Luo


National University of Singapore

Terry J. Shevlin


University of California-Irvine

May 12, 2010

AAA 2009 Financial Accounting and Reporting Section (FARS) Paper

Abstract:     
This paper examines why CFOs become involved in material accounting manipulations. We find that while CFOs bear substantial legal costs when involved in accounting manipulations, these CFOs have similar equity incentives to the CFOs of matched non-manipulation firms. In contrast, CEOs of manipulation firms have higher equity incentives and more power than CEOs of matched firms. Taken together, our findings are consistent with the explanation that CFOs are involved in material accounting manipulations because they succumb to pressure from CEOs, rather than because they seek immediate personal financial benefit from their equity incentives. AAER content analysis reinforces this conclusion.

Number of Pages in PDF File: 43

Keywords: earnings quality, accounting manipulation, CFO turnover, CEO power, incentive compensation

JEL Classification: G34, G38, M41, M43, K22


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Date posted: September 1, 2008 ; Last revised: January 29, 2013

Suggested Citation

Feng, Mei and Ge, Weili and Luo, Shuqing and Shevlin, Terry J., Why do CFOs Become Involved in Material Accounting Manipulations? (May 12, 2010). AAA 2009 Financial Accounting and Reporting Section (FARS) Paper. Available at SSRN: https://ssrn.com/abstract=1260368 or http://dx.doi.org/10.2139/ssrn.1260368

Contact Information

Mei Feng
University of Pittsburgh - Katz Graduate School of Business ( email )
Pittsburgh, PA 15260
United States
Weili Ge (Contact Author)
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
Shuqing Luo
National University of Singapore ( email )
BIZ1, #07-20
15 Kent Ridge Drive, NUS Business School
Singapore, 119245
Singapore
65-65167435 (Phone)
Terry J. Shevlin
University of California-Irvine ( email )
Paul Merage School of Business
Irvine, CA 92697-3125
United States
949-824-6149 (Phone)
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