Do CFOs Matter? Evidence from the M&A Process

Abstract

This study examines the effect of Chief Financial Officers (CFOs) on mergers and acquisitions using an innovative CFO Influence Index. We use the U.K. for our analysis because the perceived influence of CFOs is high. We find that more influential CFOs as measured by experience, stature, and pay are associated with more deal completions and the pursuit of smaller, domestic targets. High influence CFOs complete their due diligence more quickly and are able to identify higher quality targets for which they pay less. We also discover that firms with high influence CFOs enjoy greater long-term operating and financial performance post-merger. We conclude that influential CFOs are effective in creating shareholder value during M&A, especially when the deal is complex.

Keywords: CFO; mergers; acquisitions; performance

JEL Classification: G3; G34; G4