The Impact of Chief Financial Officers’ Financial Expertise on Securities and Exchange Commission Comment Letters
48 Pages Posted: 25 Apr 2018
Date Written: Jan 17, 2019
In this study, we explore the expanded role of chief financial officers (CFOs) in facilitating corporate disclosure by examining how they involve in resolving Securities and Exchange Commission (SEC) comment letters issued on 10-K reports. We find that CFOs are more likely to be involved in the resolution process when the comment letter raises concern on accounting and disclosure related issues. We also document that CFOs’ financial expertise exercised during the process leads to more effective resolution of SEC’s comments. In addition, we provide evidence that the resolution of comment letter improves investors’ perceptions on earnings, particularly when CFOs’ financial expertise is involved in the resolution process. Considered together, this study highlights the importance of CFOs’ role and function in regulatory compliance.
Keywords: CFOs, Financial Expertise, Accounting Rules, Disclosure Issues, SEC Comment Letters, Earnings Response Coefficient (ERC)
JEL Classification: G14, G30, M40, M41, M48
Suggested Citation: Suggested Citation