|Author:||Edralin, Lolita T.|
|Title:||CFO profile - Does business experience matter? Evidence from S&P 500 companies|
|Subject:||Hong Kong Polytechnic University -- Dissertations|
Chief financial officers
Corporations -- Finance
Corporations -- Decision making
|Department:||Faculty of Business|
|Pages:||115 pages : illustrations|
|Abstract:||As the strategic business partnering role of the Chief Financial Officer grows in importance, there is a need to understand what CFO profile is needed to meet this challenge. This paper studies the association of different CFO profiles with firm risk-taking policies, firm value and performance (as measures of strategic business partnering), as well as with CFO compensation. I find strong empirical evidence that firms whose CFOs have business experience are positively associated with risk-taking policies (higher R&D, more firm focus and higher leverage), firm value, firm performance and CFO compensation. On the other hand, consistent with findings from previous scholars, firms whose CFOs are pure accountants are associated with more risk-averse policies such as lower R&D and less firm focus and have lower firm value and CFO pay. When I dig deeper into the background of accountant CFOs, I discover that although accountants are generally risk-averse, they behave differently when given business training and experience. Indeed, firms whose accountant CFOs have business experience show incrementally higher risk-taking polices in the form of higher R&D and more firm focus as well as better firm value and CFO compensation than firms with pure accountant CFOs. My findings provide new insights on the power of business experience and have important implications on future academic research and on corporate HR policies when recruiting and training CFOs.|
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