Are CFOs Effective Operators? An Empirical Analysis of CFO/COO Duality

Posted: 7 Aug 2018

See all articles by Steve Buchheit

Steve Buchheit

University of Alabama

Austin L. Reitenga

University of Alabama

George W. Ruch

University of Denver - School of Accountancy

Daniel Street

Bucknell University

Date Written: June 21, 2018

Abstract

While the popular press has documented Chief Financial Officer (CFO) role expansion into traditional operations functions, recent research suggests that time spent on non-core CFO activities harms financial reporting quality. We examine the operational acumen of CFOs and the potential negative reporting consequences stemming from one person simultaneously holding the role of CFO and Chief Operations Officer (COO); henceforth, “CFO/COO duality”. Empirically, CFO/COO duality occurs with increasing frequency during our sample period (2000 through 2016) and duality is not uncommon (among firms with a COO, over 10% have a unified CFO/COO executive). We find no evidence that combining the CFO and COO positions adversely affects operations. Regarding financial reporting quality, we find some evidence that CFO/COO duality firms have relatively more volatile discretionary accruals; however, these accruals are also relatively more predictive of future cash flows. Collectively, our results suggest that unifying control of operations and reporting can be an effective corporate reconfiguration.

Suggested Citation

Buchheit, Steve and Reitenga, Austin L. and Ruch, George W. and Street, Daniel, Are CFOs Effective Operators? An Empirical Analysis of CFO/COO Duality (June 21, 2018). Journal of Management Accounting Research, Forthcoming (doi.org/10.2308/jmar-52168), Available at SSRN: https://ssrn.com/abstract=3215426

Steve Buchheit (Contact Author)

University of Alabama ( email )

101 Paul W. Bryant Dr.
Box 870382
Tuscaloosa, AL 35487
United States

Austin L. Reitenga

University of Alabama ( email )

Culverhouse College of Commerce
Box 870223
Tuscaloosa, AL 78249
United States
205-348-5780 (Phone)

George W. Ruch

University of Denver - School of Accountancy ( email )

2101 South University
Boulevard, Suite 355
Denver, CO 80208-8921
United States

Daniel Street

Bucknell University ( email )

701 Moore Ave.
Lewisburg, PA 17837
United States

HOME PAGE: http://https://www.bucknell.edu/fac-staff/daniel-street

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