The Role of CEOs versus CFOs in Firms’ Financial Misreporting

73 Pages Posted: 18 Feb 2021 Last revised: 30 Apr 2021

See all articles by Denny Kutter

Denny Kutter

University of Potsdam

Katharina Weiß

Ludwig Maximilian University of Munich (LMU)

Date Written: January 30, 2021


This study examines whether, and to what extent, individual CEOs and CFOs affect firms’ financial misreporting after controlling for known time-varying firm-specific determinants, year fixed effects, and firm fixed effects. We construct a manager-firm matched panel data set that tracks individual CEOs and CFOs across firms over the period 1995-2016 and use three different methods to identify manager-specific effects, i.e., the manager mobility method, the connectedness method, and the spell method. Irrespective of the method applied, we document that both CEO-specific and CFO-specific effects explain a statistically and economically significant proportion of the cross-sectional variation in firms’ financial misreporting. Our results further indicate that CFOs play an economically larger role in firms’ financial misreporting than CEOs, and this CFO effect is even more pronounced for fraudulent irregularities. Overall, our study highlights the important role of CEOs and, especially, CFOs in determining firms’ beyond-GAAP reporting outcomes.

Keywords: Financial Misreporting, Fraud, Individual Managers, Manager Fixed Effects, Manager Mobility Method, Manager Connectedness Method

JEL Classification: M41, M48, M51

Suggested Citation

Kutter, Denny and Weiß, Katharina, The Role of CEOs versus CFOs in Firms’ Financial Misreporting (January 30, 2021). TRR 266 Accounting for Transparency Working Paper Series No. 48, Available at SSRN: or

Denny Kutter (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482

Katharina Weiß

Ludwig Maximilian University of Munich (LMU)

Ludwigstr. 28 RG IV
Munich, Bavaria 80539

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