The Strategic CFO? Implications of the CFO's Role and Responsibilities

35 Pages Posted: 11 Oct 2012 Last revised: 29 Sep 2015

See all articles by Henry L. Friedman

Henry L. Friedman

University of California, Los Angeles (UCLA) - Accounting Area

Date Written: August 18, 2014

Abstract

CFOs wear many hats, as the primary agents responsible for financial reporting and control and as strategic partners within firms' top management teams. This paper uses an agency model to investigate how the role and responsibilities of the CFO affect reporting quality, firm value, and incentive compensation. In the model, a risk-neutral principal hires the risk-averse CEO and CFO. The CEO is mainly responsible for production, while the CFO is responsible for financial reporting and productive activities. Furthermore, the CEO and CFO may act independently or collaboratively. Results highlight the importance of CFO responsibilities besides financial reporting, and situations where CEO-CFO collaboration is more or less preferable. Results also contradict existing practitioner literature that espouses universal benefits to having a CFO who is purely a strategic partner in the top management team.

Keywords: CFO, responsibilities, role, collaboration

JEL Classification: M52, G32, M12

Suggested Citation

Friedman, Henry L., The Strategic CFO? Implications of the CFO's Role and Responsibilities (August 18, 2014). AAA 2015 Management Accounting Section (MAS) Meeting. Available at SSRN: https://ssrn.com/abstract=2160046 or http://dx.doi.org/10.2139/ssrn.2160046

Henry L. Friedman (Contact Author)

University of California, Los Angeles (UCLA) - Accounting Area ( email )

D406 Anderson Complex
Los Angeles, CA 90095-1481
United States

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