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Do CFOs Have Styles of Their Own? An Empirical Investigation of the Effect of Individual CFOs on Financial Reporting Practices

59 Pages Posted: 11 Sep 2008 Last revised: 27 Oct 2010

Weili Ge

University of Washington - Michael G. Foster School of Business

Dawn A. Matsumoto

University of Washington - Department of Accounting

Jenny Li Zhang

University of British Columbia - Sauder School of Business

Date Written: September 28, 2008

Abstract

This paper examines the effect of Chief Financial Officers’ (CFOs’) individual philosophy or “style” on corporate accounting choices. We track 359 CFOs across different firms over time and investigate whether CFO-specific factors explain a firm’s accounting choices. We find that, across a wide range of accounting choices, individual CFOs are an important determinant of accounting practices. Moreover, the effect of CFO styles appears to be stronger under conditions of high CFO discretion and high CFO job demands. We also trace the CFO style to observable CFO characteristics by examining whether CFOs’ gender, age, and educational background affect their styles. We find limited evidence of the impact of these CFO characteristics on accounting choices, suggesting that these common and observable characteristics capture only a small portion of CFO styles.

Keywords: Chief Financial Officer, Managerial Style, Management Turnover, Accounting Choice

JEL Classification: M41, M44, G34

Suggested Citation

Ge, Weili and Matsumoto, Dawn A. and Zhang, Jenny Li, Do CFOs Have Styles of Their Own? An Empirical Investigation of the Effect of Individual CFOs on Financial Reporting Practices (September 28, 2008). AAA 2009 Financial Accounting and Reporting Section (FARS) Paper. Available at SSRN: https://ssrn.com/abstract=1266893 or http://dx.doi.org/10.2139/ssrn.1266893

Weili Ge (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Dawn Matsumoto

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States
206-543-4454 (Phone)
206-685-9392 (Fax)

Jenny Li Zhang

University of British Columbia - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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