Powerful CFOs and investment efficiency

Md Kamrul Hasan Chy () and Obed Nana Buadi ()
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Md Kamrul Hasan Chy: University of Central Arkansas
Obed Nana Buadi: The University of Texas at El Paso

Journal of Economics and Finance, 2025, vol. 49, issue 1, No 6, 119-140

Abstract: Abstract We examine how powerful CFOs influence investment efficiency, addressing the gap in research on the role of CFO power in corporate financial decisions. Existing literature primarily focuses on CEO power, often highlighting its contribution to overinvestment, but the impact of CFO power is less understood. Using data from S&P 1500 firms from 2001–2019, we assess the relationship between CFO power and investment outcomes. Our results indicate that powerful CFOs tend to adopt conservative investment strategies, leading to underinvestment and negatively impacting investment efficiency. These results highlight the significant role of CFOs in shaping corporate investment policies and suggest that the power dynamics within the executive team can critically influence firm outcomes.

Keywords: Powerful CFOs; Investment efficiency; Underinvestment; Overinvestment; Corporate governance; Product market (search for similar items in EconPapers)
JEL-codes: G14 G30 G31 G34 M12 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s12197-024-09698-3

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