CFO Effort and Public Firms’ Financial Information Environment

Posted: 23 Jul 2020

See all articles by Lee Biggerstaff

Lee Biggerstaff

Miami University of Ohio - Department of Finance

David C. Cicero

Harbert College of Business, Auburn University

Bradley A. Goldie

Miami University

Lauren C. Reid

Wake Forest University - Schools of Business

Date Written: May 19, 2020

Abstract

We test the association between Chief Financial Officer (CFO) effort and the quality of public firms’ financial information environments. We evaluate this relation using a measure of CFO leisure consumption – specifically, the amount of golf played – as an inverse proxy for effort. We find a negative relation between CFOs’ compensation incentives and golf play, suggesting they exert more effort when they have greater incentives to increase firm value. High CFO leisure consumption is associated with lower earnings quality, less accurate earnings guidance, and reduced CFO conference call participation. Additionally, CFO leisure appears to affect external monitors, as it is associated with greater analyst forecast dispersion and increased audit fees. We do not find similar relations when evaluating the amount of golf played by CEOs, suggesting the unique importance of CFO effort in the financial reporting process.

Keywords: CFO effort, financial information environment, earnings quality, earnings calls, management guidance, abnormal audit fees, analyst forecast dispersion

Suggested Citation

Biggerstaff, Lee and Cicero, David C. and Goldie, Bradley A. and Reid, Lauren C., CFO Effort and Public Firms’ Financial Information Environment (May 19, 2020). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3639513

Lee Biggerstaff

Miami University of Ohio - Department of Finance ( email )

Oxford, OH 45056
United States

David C. Cicero

Harbert College of Business, Auburn University ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States

Bradley A. Goldie

Miami University ( email )

2029 Farmer School of Business
800 E. High Street
Oxford, OH 45056
United States
(513) 529-3657 (Phone)
(513) 529-6992 (Fax)

Lauren C. Reid (Contact Author)

Wake Forest University - Schools of Business ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States

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