Does Appointing a Former CFO as CEO Influence a Firm’s Accounting Policies?

49 Pages Posted: 25 Jan 2013 Last revised: 25 Oct 2013

See all articles by Steven R. Matsunaga

Steven R. Matsunaga

University of Oregon

Shan Wang

Loyola Marymount University

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: October 24, 2013

Abstract

We study CEO successions to investigate the factors that lead a firm to select an individual with CFO experience for their CEO and whether appointing a former CFO leads to systematic changes in financial reporting, disclosure, and tax policies relative to other CEO appointments. Consistent with the “fit/refit” model, we find that the selection of a former CFO is associated with several changes in firm characteristics leading up to the appointment, including increases in analyst coverage, analyst forecast dispersion, and absolute discretionary accruals. We also document improvements in the firms’ reporting and disclosure quality after the appointment of a CEO with CFO experience relative to appointments of other CEOs. Our study provides insight into the circumstances under which CFO experience is valued in the top leadership position of the firm and the reasons underlying the documented effect of individual CEOs on a firm’s accounting policies.

Keywords: CEO succession, CEO functional experience, financial reporting policy, disclosure policy, tax policy

Suggested Citation

Matsunaga, Steven R. and Wang, Shan and Yeung, P. Eric, Does Appointing a Former CFO as CEO Influence a Firm’s Accounting Policies? (October 24, 2013). Available at SSRN: https://ssrn.com/abstract=2206523 or http://dx.doi.org/10.2139/ssrn.2206523

Steven R. Matsunaga (Contact Author)

University of Oregon ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
503-346-3340 (Phone)
503-346-3341 (Fax)

Shan Wang

Loyola Marymount University ( email )

1 LMU Drive
Los Angeles, CA 90054
United States
3103387660 (Phone)
90045-2678 (Fax)

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

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