CFO Ethnicity and Financial Reporting Conservatism

Advances in Accounting Behavioral Research, Accepted

50 Pages Posted: 30 Nov 2023 Last revised: 3 Apr 2024

See all articles by Huan Kuang

Huan Kuang

Bryant University

Huimin Li

University of New Hampshire - Department of Accounting & Finance

Cody Lu

University of Massachusetts Lowell - Department of Accounting

Bo Xu

Harbin Institute of Technology (Shenzhen)

Date Written: September 1, 2023

Abstract

Demographic characteristics such as race and ethnicity have long been shown to affect individuals’ decision-making and can be associated with various behavioral outcomes. In this paper, we examine the association between the ethnicity of a chief financial officer (CFO) and financial reporting conservatism in a large sample of U.S. public firms. We find that firms headed by CFOs of non-White ethnicities exhibit less conservative financial reporting than firms headed by White CFOs; however, this effect is attenuated for firms facing greater external scrutiny. Moreover, non-White CFOs in our sample recognize a higher level of discretionary accruals than White CFOs. Our study contributes to the literature on financial reporting and answers the call for more studies on top manager ethnicity effects. More importantly, our findings hold implications for both regulators and investors, given the prevalence and significance of diversity initiatives in today’s globalized business environment.

Keywords: Ethnicity, Financial Reporting, CFO, Diversity

JEL Classification: M41, G38, D83

Suggested Citation

Kuang, Huan and Li, Huimin and Lu, Cody and Xu, Bo, CFO Ethnicity and Financial Reporting Conservatism (September 1, 2023). Advances in Accounting Behavioral Research, Accepted, Available at SSRN: https://ssrn.com/abstract=4632856

Huan Kuang

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917
United States

HOME PAGE: http://www.bryant.edu/academics/faculty/kuang-huan

Huimin Li

University of New Hampshire - Department of Accounting & Finance ( email )

Durham, NH 03824
United States

Cody Lu

University of Massachusetts Lowell - Department of Accounting ( email )

One University Avenue
Lowell, MA 01854
United States

Bo Xu (Contact Author)

Harbin Institute of Technology (Shenzhen) ( email )

Xili University Town
Nanshan District
Shenzhen, Guangdong 518055
China
518055 (Fax)

HOME PAGE: http://faculty.hitsz.edu.cn/xubo?lang=en

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

Paper statistics

Downloads
44
Abstract Views
224
PlumX Metrics