Download this Paper Open PDF in Browser

Chief Financial Officer Succession and Corporate Financial Practices

46 Pages Posted: 23 Oct 2013 Last revised: 14 Jul 2017

Ellen Engel

University of Chicago Booth School of Business; University of Illinois at Chicago - College of Business Administration

Feng Gao

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Xue Wang

Ohio State University - Fisher College of Business

Date Written: June 1, 2015

Abstract

We examine the 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, relatively severe financial constraints, receipt of SEC comment letters, and late regulatory filings; (2) CFO successions following forced turnover are associated with subsequent improvements in these financial outcomes. Several of these findings are specific to CFO turnover and succession and not to CEO turnover and succession, suggesting that CFOs are responsible for the outcomes of financial activities in which they have more direct influence and that successor CFOs have a direct impact on the subsequent financial outcomes.

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

Suggested Citation

Engel, Ellen and Gao, Feng and Wang, Xue, Chief Financial Officer Succession and Corporate Financial Practices (June 1, 2015). Fisher College of Business Working Paper No. RP 2014-02-005. Available at SSRN: https://ssrn.com/abstract=2343898 or http://dx.doi.org/10.2139/ssrn.2343898

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)

University of Illinois at Chicago - College of Business Administration ( email )

601 South Morgan Street
11th Floor
Chicago, IL 60607
United States
312-413-3418 (Phone)

Feng Gao

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States

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)

Paper statistics

Downloads
378
Rank
64,388
Abstract Views
1,831