CFO Social Ties to Non-CEO Senior Managers and Financial Restatements
Accounting and Business Research, Forthcoming
50 Pages Posted: 7 Nov 2020
Date Written: June 19, 2020
In this study, we examine how a CFO’s social ties with non-CEO senior managers in the same firm affect the likelihood of financial restatements. We categorize social ties as either professional or personal, and find that the two types of ties have distinct effects. Our findings show that CFOs’ professional ties with senior managers are associated with a lower likelihood of financial restatements. Interestingly, the effects of CFO personal ties are related to a firm’s operational performance, in that such ties are associated with a higher (lower) likelihood of financial restatements when operational performance is poor (good). Overall, our findings are consistent with the notion that CFO social ties with senior managers may give rise to both information sharing and arm-in-arm behavior.
Keywords: CFO, Social Ties, Financial Restatements, Financial Reporting Quality
JEL Classification: M40, M41
Suggested Citation: Suggested Citation