Firm-Manager Matching and the Tradeoffs of CFO Accounting Expertise

47 Pages Posted: 25 Oct 2016 Last revised: 27 Jan 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: January 22, 2019

Abstract

We examine whether CFO accounting expertise involves significant tradeoffs to the firm and influence firm-manager matching decisions. We expect and find evidence that accounting experts lack educational and career experiences in non-accounting areas that would provide them with expertise necessary to fulfill non-accounting related responsibilities of the CFO position (e.g., operations and strategy). We find these differences in expertise represent an important tradeoff to firms as reflected in a variety of executive employment decisions, including the CFO hiring decision––firms with greater demand for accounting (non-accounting) expertise are more (less) likely to hire an accounting expert CFO. We also link significant declines in firm-manager fit after initial appointment to a higher probability of CFO turnover and other compensating changes in the composition of the top management team. Collectively, the results suggest boards recognize the tradeoffs in CFOs’ skill sets and accounting expertise is a carefully weighed attribute of CFO hires that affects firm-manager fit in multiple executive positions.

Keywords: Firm-manager matching, accounting expertise, 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 (January 22, 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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