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Firm CFO board membership and departures

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  • Mobbs, Shawn

Abstract

I investigate firm financial management when the CFO has greater authority by being on the board and the corresponding changes when the CFO position leaves the board. After the 2002 regulatory changes to board composition requirements, determinants of CFO board membership shift from being driven by firm financing needs to being driven by managerial transition and the local supply of outside directors. Shareholders react negatively to CFO board departure announcements, especially in the post-Sarbanes-Oxley period and when the firm is expected to have their CFO on the board. When the CFO is on the board, firms have lower cash holdings, exhibit faster adjustment toward their optimal capital structure following shocks and are less financially constrained. These measures of greater financial flexibility diminish when the CFO position leaves the board, particularly for cash management activities. In sum, board membership is an important CFO characteristic affecting firm financial management decisions.

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  • Mobbs, Shawn, 2018. "Firm CFO board membership and departures," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 316-331.
    • Handle: RePEc:eee:corfin:v:51:y:2018:i:c:p:316-331
    DOI: 10.1016/j.jcorpfin.2018.06.006
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    More about this item

    Keywords

    CFO; Inside directors; Financial expertise; Financial policy; Boards;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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