The Downside of CFO Function-Based Language Incongruity

Academy of Management Journal, Forthcoming

59 Pages Posted: 28 Oct 2021

See all articles by Cyril Taewoong Um

Cyril Taewoong Um

Purdue University

Shiau-Ling Guo

Purdue University

Fabrice Lumineau

University of Hong Kong

Wei Shi

University of Miami

Ruixiang Song

Auburn University

Date Written: September 17, 2021

Abstract

The prior literature on role congruity theory has revolved around demographic-based expectations, emphasizing role incongruity derived from a mismatch between prescriptive expectations of distinct roles. In this paper, we depart from this traditional focus on between-role incongruity and explore an alternative source of role incongruity by examining how language can trigger the within-role incongruity of function-based expectations. Through an analysis of conference call transcripts and contracts for 7,649 deals during 2003–2018, we show that the incongruity of function-based expectations manifested through the language of the CFO increases banks’ perceived hazards, leading them to employ more debt contract covenants. In addition, by investigating the moderating effects of corresponding CEO language and media sentiment, we show how the social context and sentiment toward the firm weaken this incongruity effect. We discuss the theoretical implications of our study for future research on the sources of role incongruity and the antecedents of contract design.

Keywords: Contract design, Communication, CFO, Role incongruity

Suggested Citation

Um, Cyril Taewoong and Guo, Shiau-Ling and Lumineau, Fabrice and Shi, Wei and Song, Ruixiang, The Downside of CFO Function-Based Language Incongruity (September 17, 2021). Academy of Management Journal, Forthcoming , Available at SSRN: https://ssrn.com/abstract=3925305

Cyril Taewoong Um

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Shiau-Ling Guo

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Fabrice Lumineau (Contact Author)

University of Hong Kong ( email )

HKU Business School
Hong Kong
Hong Kong

Wei Shi

University of Miami ( email )

Coral Gables, FL 33124
United States

Ruixiang Song

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
12
Abstract Views
51
PlumX Metrics