Delegation and Chief Financial Officer Retention: Evidence from Chief Accounting Officers on the Executive Team

Abstract

In recent years, chief financial officer (CFO) responsibilities and resignations have increased. Given these trends, we examine whether delegating accounting is associated with CFO retention. We develop a methodology to identify voluntary CFO departures using the firm’s public messaging around the CFO’s exit. Our results suggest that CFOs are less likely to voluntarily depart when accounting is delegated. Further, we find evidence that the negative association between delegating accounting and voluntary CFO departures is stronger when accounting demands are higher. Moreover, we find evidence that delegating accounting increases the CFO’s human capital. When CFOs do leave, they are more likely to become a chief executive officer and less likely to make a lateral move to another CFO position. Taken together, this study finds evidence consistent with the delegation of accounting increasing CFO retention and human capital. This paper was accepted by Suraj Srinivasan, accounting. Funding: The authors appreciate research funding support from Coggin College of Business, University of North Florida and Tippie College of Business, University of Iowa. A. Rhodes gratefully acknowledges support from the Michael and Sandra Rocca Fellowship in Accounting. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.06802 .