Search results

The authors investigate whether the different tenure phases of executives have a differential effect on audit pricing. Two alternate views – career concern and power – can explain the effect of executives’ tenure on audit pricing. This paper aims to determine, which viewpoint dominates in explaining the relationship between audit pricing and executive tenure phases.

Using a sample of 11,198 firm-year observations from 2007 to 2016, the authors adopt an ordinary least squares regression model to assess the impact of the middle and long phases of executives’ tenure on audit fees.

Audit fees are significantly lower when executives enter the middle and long phases of tenure. The reduction in audit fees is greatest as both chief executive officers and chief financial officers enter the long tenure phase. Although audit fees gradually decrease as executive tenure is extended, they start increasing two years before the end of executive tenure. Furthermore, the negative association between the executive tenure phase and audit fees is greater when the executive is appointed externally. Finally, the long phase of executive tenure also mitigates the positive relationship between audit fees and internal control weaknesses.

This study is based on US data. Future research may extend this study to other countries.

The findings are important to firms, practitioners and academicians, particularly, as the length of tenure of top executives has increased in recent years. By documenting that executives’ middle and long tenure phases reduce audit fees, the findings highlight the importance of maintaining executives in the firm. Finally, the findings have implications for investors, policymakers and auditors to identify companies with high audit risk.

This study is the first to document the impact of executives’ middle and long tenure phases on audit fees.

This paper aims to examine the relationship between characteristics of chief financial officers (CFOs) and enterprise resource planning (ERP) system adoption. Following upper echelons theory, the authors theorize that CFO age, education, tenure and recruitment influence ERP system adoption, and that this relationship is moderated by the CFO being responsible for firm-wide information technology (IT) functions.

The empirical analysis is based on a survey of 296 large and medium-sized Austrian firms. Logistic regression analyses were used to test the association between CFO characteristics and ERP system adoption.

The authors find that firms with externally recruited CFOs have adopted ERP systems significantly more often than firms with internally promoted CFOs. Surprisingly, the results indicate that firms with less educated CFOs more often adopted an ERP system, and that the relationship between CFO characteristics and ERP system adoption is not moderated by the CFO being responsible for IT.

This paper adds to the literature by corroborating case-based evidence that CFOs and their characteristics influence ERP system adoption. Extending previous research which indicates that CFO characteristics influence accounting practices, the authors show that CFO characteristics also influence technological innovation such as the adoption of ERP systems. Future research on technological innovation may therefore pay closer attention to the influence of CFOs.

This paper is the first to quantitatively test the influence of CFO characteristics on ERP system adoption.

The purpose of this study is to examine the association between the financial expertise of the chief financial officer (CFO) and concerns about corporate governance.

Consistent with prior research, the authors used four variables, including certified public accountant (CPA) certification, Master of Business Administration degree, age of CFO and length of CFO tenure, to measure CFO’s financial expertise. The authors hypothesize a negative association between CFO expertise and concerns about corporate governance.

Regression analysis revealed that the CPA certification is negatively associated with governance concerns at a significant level. The results suggest that stakeholders show less concerns about a company’s corporate governance mechanism when the CFO has a CPA certification. In particular, the results support the recommendation by the American Institute of Certified Public Accountants that a CFO of a public firm should have a CPA certification.

The study is important in the following ways. First, the study delivers new evidence on the link between CFO financial expertise and corporate governance. This contributes to the CFO financial expertise literature and the corporate governance literature. Second, according to Standard and Poor’s, equity index investing has grown more popular over the past 30 years. The study delivers useful information to index investors who invest in S & P SmallCap 600 Index. Third, regulators have put a large amount of resources to discover ways to strengthen firms’ corporate governance. Thus, the results should be of interest to policy makers who design and implement guidelines on corporate governance mechanisms.

The article aims to study the relationship between the assignments of financial management responsibilities and the level of financial literacy within married and cohabitating couples.

The link between household financial management and the financial literacy of union partners was examined using dyadic survey data. In the dyadic multilevel regression analysis, the financial management process was scrutinized, and two distinct measures of financial literacy (tested and self-assessed) were used as the outcomes in the analysis.

The extent to which married and cohabitating individuals engage in household financial management was found to positively correlate with their financial literacy. Self-reports about the division of financial management responsibilities were found to be biased with individuals typically overestimating their share in household financial management. Consequently, the status of household financial manager was not as crucial for financial literacy as was the self-perception of engagement in household financial management. Despite the benefits of intrahousehold labor specialization, delegation of sole responsibility for household financial matters may place the person who waives the responsibility at a serious risk of self-exclusion from lifelong financial learning.

The article uses dyadic data (from married and cohabiting couples), which ensures more rigorous and accurate evidence for the link between the household financial management and financial literacy. A novel approach to the analytical treatment of partners' contradictory reports on the role of couple's financial manager is also proposed. The breadth of household financial management is captured by analyzing three stages of the process: proposing, decision-making and implementation of financial solutions or actions.

This paper aims to investigate the impact of Australian Chief Financial Officers (CFOs) as board insiders on firm performance and earnings quality with reference to agency theory and theory of friendly board.

The ordinary least square, two-stage least-squares and propensity score matching regressions are performed with various proxies for firm performance and accruals quality.

Firms with CFOs as board insiders experience significantly lower firm performance and earnings quality. In firms with powerful CEOs, the negative impact of CFO board membership on earnings quality is further magnified. Additionally, the negative impact of CFO board membership on firm values and earnings quality is only present in firms with bigger boards or firms with less outside directors. The findings are consistent with the agency perspective and in sharp contrast to the US market.

This is the first Australian study to examine the impact of CFO board membership on firm performance and earnings quality. The findings suggest that the monitoring of executives is best done by a small or independent board and that the insider board membership should be optimised.

According to the chief financial officer (CFO) of IBM Global Survey (2010), only few integrated finance organizations (IFOs) and only some CFOs’ role (Value Integrators) allow companies to generate value so as to outperform their peers. The purpose of this study is to gather additional insights on how the CFOs and finance organizations effectively promote value creation in for-profit organizations.

The authors’ study has been developed through the methodology of case studies. The method, despite its intrinsic limitations, offers a much deeper understanding of the organizational context within which value creation takes place. The authors’ analysis is based on nine selected case studies of Italian industrial companies, selected to assure comparability with the IBM sample. All companies outperform their peers.

The authors observed that not only IFOs and value integrator CFOs support the value generation process. The authors’ sample suggests a variety of other relevant and likely alternatives for value creation deriving from both finance functions (FFs) and the roles of CFOs. Their findings indicate that FFs adopt three distinct patterns to add value for the shareholders. The first option involves the FF taking the lead in setting a common language across functions, management processes, management and stakeholders. The second value creation pattern is when the FF establishes a strong and relevant support to business. The third option implies that the FF acts as an advisor assuring independent compliance. The authors also concluded that regardless of the CFO’s roles, influential CFOs are older, with a deep functional company and industry experience. They also observe that some of this influence derives from “proximity” to shareholders, as all the more influential CFOs sit on the Board, enjoying a closer relationship with the shareholders.

This study was based on clinical cases, the findings can be generalized reliably only for the population studied here. More research is needed for further tests and explorations of these findings, especially in the area of CFO incentives and governance mechanisms.

This study supports modern advice given to organizations in terms of the array of available alternatives to promote value creation with patterns and processes within the domain of the finance organization and CFO’s personal characteristics.

The paper contributes to untangle some gender issues, as the authors found that more influential CFOs are male. The authors have also contributed to explain some dynamics of the “labor” market development for finance professionals: the authors observed that the promotion for most influential CFOs comes through the ranks of a specific company, and this questions if a market really exits for such professionals in Italy, and more generally in Europe.

These results provide some useful support of prior findings and some modifications and extensions that further the authors’ understanding in this area of importance both to researchers and practitioners.

The purpose of this paper is to explore the impact of the top management team (TMT) characteristics and historical financial performance on strategic management accounting (SMA) usage.

Objective data were extracted from annual financial statements, as well as data from questionnaires in a sample of 94 enterprises were used.

Data analysis showed that one of the most important factors that influence the level of usage of SMA techniques is lagging historical performance of the enterprises. Those organizations that had low profitability in the past, due to the economic crisis, adopted and used innovative SMA tools more extensively, to improve their financial performance in the future. Based on Upper Echelons theory and Role theory, it was found that TMT characteristics (educational background, tenure, creativity) affect the adoption and the usage of SMA tools.

First, this research was performed on one sector. Second, only a few SMA techniques were included. Third, some TMT characteristics were measured with only one item. As a result, it was not possible to check for reliability and validity of the measurements.

First, TMT characteristics influence the decision-making process and management control. This should be taken into account during the process of the selection of top managers. Moreover, SMA tools can be effectively used not only by CEOs and the managers of the accounting department, but from marketing managers as well. Consequently, a better communication between marketing and accounting managers is deemed essential to improve the performance of the company.

Previous research has studied the effect of CEOs and CFOs characteristics in the design of Management Control Systems. The authors explored for the first time, the effect of the characteristics of one more member of Board of the TMT, that is, Chief Marketing Officer (CMO), in the adoption and use of management accounting innovations (MAIs). Second, the authors studied one more characteristic of top level managers from Role theory, that is, creativity. Although many studies link creativity to the adoption of MAIs, this is the first time, to the best of the authors’ knowledge, that creativity is studied as an additional parameter that influences the adoption and use of SMA. Furthermore, this research provides additional knowledge about the effect of historical performance in MAIs usage. For the first time, it used objective data from annual financial statements, it calculated financial ratios, to measure historical financial performance. Moreover, this study provides knowledge about the effect of TMT characteristics in accounting choices in geographical areas, outside the USA.

This paper aims to examine whether conditional conservatism is affected by chief financial officer (CFO) attributes as this issue is understudied in Malaysia. Given that CFOs have a direct responsibility for financial reporting, therefore, their individual attributes are important in influencing conservatism in financial reporting.

This study uses non-financial listed firms in the Main Market of Bursa Malaysia from the years 2016 until 2019.

The results show that CFOs’ attributes, namely, gender, age, education level and ethnicity, affect earnings conservatism. To test for robustness, the authors use difference-in-difference, propensity score-matching and unconditional conservatism, namely, market-to-book ratio and the authors find the results hold with an exception for age and education level. Further, the effect of these attributes is more profound in non-Big4 audited firms, suggesting that CFO attributes act as a substitute mechanism for lower audit quality.

This study complements existing studies by documenting the first evidence on the significant effects of CFOs’ attributes in influencing accounting conservatism in an emerging country, namely, Malaysia. This is the first paper, to the humble knowledge, that examines CFOs’ attributes on accounting conservatism in Malaysia.

This paper aims to examine whether the cooperation between female chief financial officers (CFO) and the proportion of female directors would impact investment efficiency. The investigation is grounded in the increasing number of female top managers globally and the notion that female tends to cooperate more with other female than with male.

This study uses publicly listed firms in Bursa Malaysia from 2016 to 2020, which yielded a sample of 2,022 firm-year observations. The authors used multivariate ordinary least square regression to test the relationship, and to correct for the selection bias, the Heckman selection and PSM test were used.

The authors find a positive relationship between female CFOs and investment efficiency. A higher proportion of female directors accentuates this result. The findings support the homophily argument that similar characteristics (gender) promote cooperation. This shows that cooperation between female CFOs and directors improves investment efficiency. The results suggest that the improvement in investment efficiency could relate to higher managerial discretion for female CFOs and their ability to collaborate with female directors. These results are robust to a series of additional endogeneity tests. The findings have important implications for policymakers and firms to encourage more appointments of females in top management positions.

By highlighting the cooperation between female CFOs and female directors, this study contributes to the understanding that cooperation among females improves investment efficiency.

This study aims to examine trends in audit committee characteristics of companies and associates characteristics subject to major change with a fee-based proxy for audit committee effectiveness.

The research adopts an empirical approach. Using descriptive and inferential statistics, observations for 253 Financial Times Stock Exchange 350 companies’ audit committee characteristics gathered from annual reports at the beginning and end of a five-year period are evaluated against averaged non-audit fees (NAF) as a proportion of total audit fees.

Audit committee composition shows an increased incidence of female membership and of members with previous audit experience. The increase in members with previous audit experience is more marked where this is gained with the incumbent auditor. An increase is also shown in chief financial officers with previous audit experience. Previous audit experience is associated with reduced NAF as a proportion of total fees. This is marked where audit experience has been gained with the incumbent auditor. These results suggest that the benefits of financial expertise gained from audit experience outweigh impairments to independence due to social ties. Nevertheless, other studies indicate concerns about independence are still well-founded.

This paper’s original contribution is to evaluate the potential effect of previous audit experience on those involved in audit committees in light of concerns raised in the literature and by regulators that external auditor independence should be maintained. The innovative fee-based proxy for audit committee effectiveness facilitates an evaluation as to which influence prevails.