Are There Costs to Hiring an Accounting Expert CFO?
This paper examines the effects of hiring an accounting expert CFO on firm outcomes for non-accounting related job responsibilities. We use the CPA designation to proxy for a CFO’s accounting expertise. We first provide evidence suggesting that acquiring accounting expertise requires a trade-off in terms of acquiring other skills and knowledge (e.g., finance or general management). Next we find some evidence suggesting that CPA-CFOs are less adept at managing the investor relations aspect of the CFO position; however, we find little cost to hiring CPA-CFOs with respect to firm-level outcomes on strategy, operations, and finance. It also appears that CPA-CFOs are actually paid less than their non-CPA CFO counterparts and are less likely to be promoted to the CEO position within five years. We provide some preliminary evidence suggesting that at least two factors contribute to these findings: (1) firms compensate for manager-specific weaknesses (e.g., a CPA-CFO’s lack of operation expertise) by employing management team members with compensating strengths (e.g., COOs); (2) CPA-CFOs have lower “status” (e.g., holding a degree from an elite university), which negatively influences their labor market outcomes. Taken together, our findings contribute to the literature on accounting expertise, as well as the management literature on top management teams.
This seminar is organised by the Erasmus Accounting Research Group.