An Empirical Study on the Relationship Between CEO Financial Expertise and Operating Performance and Earnings Quality

• Main Authors: Ka-Lap Tam, 譚家立
• Other Authors: 李艷榕
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/08069866451783371179

碩士 === 國立臺灣大學 === 會計學研究所 === 103 === This paper examines the relationship between CEO financial expertise and the firm’s operating performance and earnings quality. Using a sample of listed companies in Taiwan from 2006 to 2013, I find that CEO financial expertise is not significantly related to firm performance as proxied by return on assets (ROA) in the full sample. However, it is positively associated with firm performance when CFO of the firm is not a financial expert. This finding is consistent with the idea that when the CFO is not a financial expert, CEO’s financial expertise can compensate the lack of financial experience of the CFO. In addition, using the number of departments as the proxy of operating complexity, I find that CEO financial expertise is positively associated with firm performance for firms with more complex operating environments. Using the absolute value of discretionary accruals (DA), as measured by the Modified Jones Model as the proxy for earnings management level, I find that CEO financial expertise is not significantly associated with earnings management in the full sample and in the subsamples of firms with positive DA. However, CEO financial expertise is positively associated with the earnings management level in the subsample of firms with negative DA. This finding may be attributed to a more conservative accounting management caused by the Sarbanes Oxley Act which imposes more stringent legal responsibilities to CEOs.