CFO Outside Directorship and Financial Misstatements
Accounting Horizons, Forthcoming
37 Pages Posted: 27 Apr 2019
Date Written: March 28, 2019
I study an important accounting consequence—financial misstatements—of CFO outside board membership. I find that firms with CFOs holding outside directorships have a lower likelihood of misstatements. These results likely reflect the benefits accruing to CFOs’ home firms in terms of improved financial reporting quality. These findings are based on several methods that control for unobserved factors that may affect both incidence of CFO outside directorships and a firm’s financial misstatements. I also provide some preliminary insights into CFO and home-firm characteristics that determine CFO outside board directorships. My findings are consistent with the inter-organizational embeddedness perspective, suggesting that inter-firm networks provide sources for counseling and learning opportunities, which executives can use to improve their home firms’ performance.
Keywords: CFO; outside directorship; financial misstatements; diffusion of knowledge
JEL Classification: M41
Suggested Citation: Suggested Citation