CFO financial expertise, financial statement comparability, and COVID-19 pandemic: International Evidence

Chief financial officers (CFOs) play critical roles on the executive team to help stabilise and navigate the firm position for high growth and strong financial health. As a member of the executive team, CFOs have substantial control over the firm’s financial-reporting practices via their expertise and capacity to determine when and what financial numbers require reporting, and whether annual performance targets are being met. In contrast, financial statement comparability helps financial statement users in understanding accounting information and thus taking informed decisions. In this study, we investigate whether and to what extent the financial expertise of Chief Financial Officers (CFOs) is related to financial statement comparability (FSC).
In particular, the numerous financial expertise of CFOs is likely to be linked with a higher level of FSC. First, an accumulation of professional accounting and financial expertise of CFOs grants them a competitive edge which enhances FSC. Second, CFOs with high expertise are better equipped to execute outstanding management practices and supervise financial policy implementation, resulting in enhanced firm-level governance and improved FSC.
We investigate several metrics of financial expertise of CFOs (educational qualifications, number of qualifications, experience as CFOs, and experience at another company) to understand whether these metrics are related to the FSC of the firms. We argue that firms with CFOs with higher financial expertise are more diligent to improve the FSC of firms.
In addition, we will examine the relationship between the financial expertise of CFOs and the FSC during the economic uncertain period. The COVID-19 pandemic, raises uncertainty regarding future cash flow, thereby increasing difficulty in making predictions. During the economic crisis period, CFOs are responsible to implement efficient financial strategies to put their companies on a sound financial footing in helping the firm emerge from the crisis. So it will be interesting to examine if the CFO’s financial expertise complement in FSC during the COVID-19 pandemic period.