NBS Seminar Series - The Effect of Cross-industry CFO Turnover Network Centrality on Corporate Financial Reporting Quality
Dr Carl Shen visits the Newcastle Business School to discuss his paper “The Effect of Cross-industry CFO Turnover Network Centrality on Corporate Financial Reporting Quality”.
This paper shows that:
- Cross-industry CFO turnovers have grown markedly over the past three decades and
- Out-of-industry learning opportunities, as proxied by cross-industry CFO turnover network centrality, is an important driver of corporate financial reporting quality and helps to significantly improve reporting quality.
The impact of cross-industry CFO turnover network centrality on financial reporting quality is found to be especially strong for young and growing firms, when the industry is undergoing significant economic disruptions, and when the firm hired an out-of-industry CFO in the recent past. Our findings are robust to using alternative measures of financial reporting quality and to various endogeneity concerns, suggesting that the effect of cross-industry CFO turnover network centrality on improving financial reporting quality is likely causal. Further, consistent with the evidence on financial reporting quality, greater cross-industry CFO turnover network centrality is found to lower the likelihood that independent auditor identifies material internal control weakness and decrease the information asymmetry associated with the firm in the capital markets.
- XG18 and ELI217