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An Empirical Investigation of the Effect of CFO Power on Disclosure Quality

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  • Lutfa Tilat Ferdous
  • Kamran Ahmed
  • Darren Henry

Abstract

We examine the association between chief financial officer (CFO) power and disclosure quality, measured using financial statement disaggregation disclosure and analyst forecast disclosure. Empirically, we validate that CFO power, measured by multiple dimensions, is positively associated with firms’ disclosure quality. We also find that this positive association between CFO power and disclosure quality is stronger when firms exhibit higher governance monitoring and accounting quality. Further analysis shows that our main results hold across multiple disclosure quality tests. Our findings are robust to addressing endogeneity issues using two‐stage least squares, Heckman selection bias, and propensity score matching analyses. The results highlight the importance of CFO power for the accounting reporting process and decision‐making.

Suggested Citation

  • Lutfa Tilat Ferdous & Kamran Ahmed & Darren Henry, 2023. "An Empirical Investigation of the Effect of CFO Power on Disclosure Quality," Abacus, Accounting Foundation, University of Sydney, vol. 59(2), pages 606-649, June.
    • Handle: RePEc:bla:abacus:v:59:y:2023:i:2:p:606-649
    DOI: 10.1111/abac.12288
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