Restatement Likelihood and Accounting Conservatism: Evidence from CFO Style

Posted: 13 Mar 2018

See all articles by Jeong-Bon Kim

Jeong-Bon Kim

City University of Hong Kong

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Felix Canitz

University of Oldenburg

Date Written: February 16, 2018

Abstract

Recent accounting research examines the impact of the individual style of corporate decision-makers on corporate accounting policies. Based on this line of research, we explore how a chief financial officer’s (CFO) preference for accounting conservatism affects accounting quality. We provide evidence that CFOs significantly influence accounting conservatism at firm level and find that firms with a conservative CFO are less likely to restate their annual accounts and to receive an SEC comment letter addressing their 10-K filings. Our results are robust to a variety of sensitivity checks and hold independently of the economic consequences of restatements, firm-level accounting conservatism, the use of different proxies for accounting quality, and CFO conservatism. Also, our results are unaffected by the enactment of the Sarbanes–Oxley Act (SOX).

Keywords: Accounting Quality, Accounting Conservatism, CFO, CFO Style

JEL Classification: G34, M14, M41, M51

Suggested Citation

Kim, Jeong-Bon and Lopatta, Kerstin and Canitz, Felix, Restatement Likelihood and Accounting Conservatism: Evidence from CFO Style (February 16, 2018). Available at SSRN: https://ssrn.com/abstract=3132027

Jeong-Bon Kim

City University of Hong Kong ( email )

Department of Accountancy
83 Tat Chee Avenue
Kowloon Tong
Hong Kong
852-3442-7909 (Phone)

Kerstin Lopatta (Contact Author)

University of Hamburg - Faculty of Business, Economics, and Social Sciences ( email )

Von-Melle-Park 9
Hamburg, 20146
Germany

Felix Canitz

University of Oldenburg ( email )

Ammerländer Heerstraße 114-118
Oldenburg, D-26111
Germany

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