Does the Market Value the Accounting Expertise of Chief Financial Officers? Evidence from Market Value of Cash Holdings

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Abstract

Chief financial officers(CFOs) have received increasing attention recently and become the most influential officer next to CEOs in many firms. Among CFO hires in 2013, 18% were qualified Certified Public Accountants (CPAs), 34% and 29% in 2011 and 2012, respectively (Murphy, 2013). However, a large body of research has focused on the CFOs’ performance inside the financial reporting context. For example, prior literature has documented CFOs with accounting education background are related with higher financial reporting quality (e.g., Aier et al., 2005; Arthaud-Day et al., 2006; Bedard et al., 2014; Collins et al., 2009; Geiger and North, 2006; Hoitash et al., 2016; Menon and Williams, 2008), and firms with CFOs having accounting expertise are less likely to report earnings aggressively through discretionary accruals management (Rakhman,2009). In addition, existing studies also show that accountant CFOs are associated with better internal control over financial reporting (Li et al., 2010; Zhang et al., 2007).

Author

• Li Gao, University of Massachusetts-Boston