Implied Tradeoffs of Chief Financial Officer Accounting Expertise: Evidence from Firm-Manager Matching

Darren Bernard (), Weili Ge (), Dawn Matsumoto () and Sara Toynbee ()
Additional contact information
Darren Bernard: Department of Accounting, Foster School of Business, University of Washington, Seattle, Washington 98195
Weili Ge: Department of Accounting, Foster School of Business, University of Washington, Seattle, Washington 98195
Dawn Matsumoto: Department of Accounting, Foster School of Business, University of Washington, Seattle, Washington 98195
Sara Toynbee: Department of Accounting, McCombs School of Business, University of Texas at Austin, Austin, Texas 78712

Management Science, 2021, vol. 67, issue 9, 5776-5799

Abstract: We present evidence that although individuals with accounting expertise bring key skills to the financial reporting responsibilities of the chief financial officer (CFO) position, they tend to lack educational and career experiences relevant to nonaccounting responsibilities (e.g., operations and strategy). Assuming boards’ perceptions of CFO accounting expertise are correct on average, we provide evidence of tradeoffs of CFO accounting expertise by examining how differences in CFO backgrounds shape executive employment decisions. Firms with greater demand for nonaccounting expertise are less likely to hire an accounting expert CFO, consistent with ex ante firm-manager matching. Ex post, significant declines in firm-manager fit predict CFO turnover and other compensating changes in the composition of the senior management team. Accounting expert CFOs are also less likely to become chief executive officers, suggesting that CFO experience does not fully mitigate these tradeoffs. Collectively, the results suggest important tradeoffs inherent to CFO accounting expertise that shape the structure of the senior management team.

Keywords: accounting; firm-manager matching; CFO appointment; CFO turnover; top management team (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2020.3738 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:9:p:5776-5799

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().