Does CFO Ethnicity Influence Accounting Conservatism?

• In Event: Conservatism

Abstract

I examine the association between the ethnicity of a CFO and the magnitude of her accounting conservatism. I find that firms headed by CFOs of non-White ethnicities exhibit lower degrees of accounting conservatism than firms headed by White CFOs. This documented effect is especially pronounced for firms in which the CFO and CEO have the same ethnic background. This association is also more pronounced in firms that are subject to less external monitoring. My results contribute to the extant knowledge on the determinants of accounting conservatism and, in particular, the effects of a salient top manager characteristic. In addition, the findings of this study imply that the value of companies’ workplace diversification efforts extend beyond that of just public image and perception; doing so can also serve to benefit financial reporting outcomes, which holds significant implications on the capital market.

Author

• Cody Lu, University of Massachusetts-Amherst