Firm-Manager Matching and the Tradeoffs of CFO Accounting Expertise

56 Pages Posted: 25 Oct 2016 Last revised: 23 Sep 2019

See all articles by Darren Bernard

Darren Bernard

London Business School - Department of Accounting

Weili Ge

University of Washington - Michael G. Foster School of Business

Dawn A. Matsumoto

University of Washington - Department of Accounting

Sara Toynbee

University of Texas at Austin

Date Written: September 20, 2019

Abstract

We present evidence that, while individuals with accounting expertise bring key skills to financial reporting responsibilities of the CFO position, they tend to lack educational and career experiences relevant to non-accounting responsibilities (e.g., operations and strategy). We find that these differences in CFO backgrounds shape executive employment decisions in several ways, highlighting tradeoffs of CFO accounting expertise. Firms with greater demand for non-accounting expertise are less likely to hire an accounting expert CFO, consistent with ex ante firm-manager matching. Ex post, accounting expert CFOs are less likely to become CEOs, and significant declines in firm-manager fit after appointment predict CFO turnover and other compensating changes in the composition of the senior management team. Collectively, the results suggest important tradeoffs inherent to CFO accounting expertise that shape the structure of the senior management team.

Keywords: Firm-manager matching, CFO expertise, top management team, Chief Financial Officer

JEL Classification: M41, M54, J24

Suggested Citation

Bernard, Darren and Ge, Weili and Matsumoto, Dawn and Toynbee, Sara, Firm-Manager Matching and the Tradeoffs of CFO Accounting Expertise (September 20, 2019). Available at SSRN: https://ssrn.com/abstract=2858681 or http://dx.doi.org/10.2139/ssrn.2858681

Darren Bernard

London Business School - Department of Accounting ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

Weili Ge

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

Box 353200
Seattle, WA 98195-3200
United States

Dawn Matsumoto (Contact Author)

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)

Sara Toynbee

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

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