Determinants of accounting choice: do CFOs’ characteristics matter?

Purpose - The purpose of this paper is to examine associations between observable characteristics of Chief Financial Officer (CFO) and accounting choices. Design/methodology/approach - The dependent variable is an index that measures a manager's propensity to choose accounting policies that increase earnings and/or operating cash flow (OCF). The index consists of ten accounting policies collected from the financial statements of 175 entities located in Germany, Brazil and the UK (2010-2016). Findings - The results demonstrate that the observable characteristics of CFOs partially explain their accounting choices. Specifically, entities that tend to adopt accounting policies that increase earnings and/or OCF have CFOs that lack graduate education or greater internationalization. Practical implications - CFOs can use the flexibility inherent in accounting choices to adopt accounting policies that increase earnings and/or OCF in ways that fit their personal characteristics. Therefore, it may be beneficial to reflect on the potential benefits of reducing the use of certain accounting policies that affect financial statements. Originality/value - This paper contributes to the literature by identifying which CFOs characteristics determine the choices of a set of accounting policies that affect companies’ earnings and/or OCF in countries with different economic, social and cultural realities.