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Financial executive qualifications, financial executive turnover, and adverse SOX 404 opinions

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Listed:
  • Li, Chan
  • Sun, Lili
  • Ettredge, Michael

Abstract

This study attempts to provide a comprehensive understanding of the interrelationships among chief financial officers' (CFOs') professional qualifications, SOX Section 404 internal control weakness, CFOs' turnover, CFOs' qualification improvement, and correction of material weaknesses. We find that firms receiving initial adverse SOX 404 opinions for 2004 have less qualified CFOs. Adverse SOX 404 opinion recipients experience more CFO turnover in 2005, and these firms are more likely to hire CFOs having improved qualifications. Results show that simply hiring a new CFO is not associated with SOX 404 opinion improvement. Opinion improvement requires hiring a better qualified CFO.

Suggested Citation

  • Li, Chan & Sun, Lili & Ettredge, Michael, 2010. "Financial executive qualifications, financial executive turnover, and adverse SOX 404 opinions," Journal of Accounting and Economics, Elsevier, vol. 50(1), pages 93-110, May.
  • Handle: RePEc:eee:jaecon:v:50:y:2010:i:1:p:93-110
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    References listed on IDEAS

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    2. Martin Hiebl, 2014. "Upper echelons theory in management accounting and control research," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(3), pages 223-240, January.
    3. repec:eee:advacc:v:46:y:2019:i:c:013 is not listed on IDEAS
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    6. repec:eee:advacc:v:30:y:2014:i:2:p:283-297 is not listed on IDEAS
    7. Michael Ettredge & Susan Scholz & Kevin R. Smith & Lili Sun, 2010. "How Do Restatements Begin? Evidence of Earnings Management Preceding Restated Financial Reports," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(3-4), pages 332-355.
    8. repec:bla:acctfi:v:57:y:2017:i:4:p:1101-1125 is not listed on IDEAS
    9. Andreas Venus & Andreas Engelen, 2012. "A Strategy Perspective on the Performance Relevance of the CFO," SFB 649 Discussion Papers SFB649DP2012-021, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    10. Shelagh Campbell & Yingqi Li & Junli Yu & Zhou Zhang, 2016. "The Impact of Occupational Community on the Quality of Internal Control," Journal of Business Ethics, Springer, vol. 139(2), pages 271-285, December.
    11. repec:oup:rfinst:v:29:y:2016:i:12:p:3245-3277. is not listed on IDEAS
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    14. DeFond, Mark & Zhang, Jieying, 2014. "A review of archival auditing research," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 275-326.
    15. Hiebl, Martin R.W., 2013. "Bean counter or strategist? Differences in the role of the CFO in family and non-family businesses," Journal of Family Business Strategy, Elsevier, vol. 4(2), pages 147-161.
    16. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.
    17. Su, Lixin (Nancy) & Zhao, Xuezhou (Rachel) & Zhou, Gaoguang (Stephen), 2014. "Do customers respond to the disclosure of internal control weakness?," Journal of Business Research, Elsevier, vol. 67(7), pages 1508-1518.
    18. Barbara Voußem & Utz Schäffer & Denis Schweizer, 2015. "Top management turnover under the influence of activist investors," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(3), pages 709-739, August.
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    21. Friedman, Henry L., 2014. "Implications of power: When the CEO can pressure the CFO to bias reports," Journal of Accounting and Economics, Elsevier, vol. 58(1), pages 117-141.
    22. Cheng, Mei & Dhaliwal, Dan & Zhang, Yuan, 2013. "Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?," Journal of Accounting and Economics, Elsevier, vol. 56(1), pages 1-18.
    23. Mai Dao & Hua-Wei Huang & Ken Y. Chen & Ting-Chiao Huang, 2014. "Can Management Turnover Restore the Financial Statement Credibility of Restating Firms? Further Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(7-8), pages 893-925, September.
    24. repec:ibf:ijmmre:v:11:y:2018:i:1:p:1-17 is not listed on IDEAS

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