No. 48: Who matters more? The incremental effect of CEOs versus CFOs on financial misreporting


This study examines the relative importance of CEOs and CFOs for firms’ financial misreporting. We leverage the concept of “manager style” to investigate to what extent CEOs versus CFOs incrementally affect financial misreporting after controlling for known determinants and an extensive set of fixed effects. Specifically, we construct a manager-firm matched panel data set that tracks individual CEOs and CFOs across firms over the period 1995-2016 and combine three different methods to identify style effects, i.e., the manager mobility method, the connectedness method, and the spell method. Irrespective of the method applied, we document that CFOs play a more relevant role in firms’ financial misreporting than CEOs. Moreover, we find that the larger relative influence of CFOs vis-à-vis CEOs is even more pronounced in cases of fraudulent misreporting. Overall, our study highlights the importance of the CFO as the key player in the beyond-GAAP setting.

Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, WHU – Otto Beisheim School of Management, ESMT Berlin, Goethe University Frankfurt and Carl von Ossietzky University Oldenburg who share the same research agenda.