Do Chief Financial Officers need to be qualified accountants? A study of whether and when accounting qualification may not be necessary for CFOs.

• Main Author: LIM, Vincent Boon Seng
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: CFO accounting qualification; CFO signalling theory; CFO job fit; accounting qualification; qualified accountants; company size; accounting bodies; CFO; Accounting; Management Sciences and Quantitative Methods
• Online Access: https://ink.library.smu.edu.sg/etd_coll/456; https://ink.library.smu.edu.sg/context/etd_coll/article/1454/viewcontent/GPGM_AY2018_PhD_Vincent_Lim_Boon_Seng.pdf
• Institution: Singapore Management University

Many empirical research studies suggest that Chief Financial Officers (CFOs) with accounting qualifications improve company performance in various ways such as through better financial reporting accuracy (Aier et al., 2005), internal control (Li et al., 2010), corporate governance (Sun et al., 2015) and tax efficiency (Chen et al., 2020). This suggests that CFOs should be qualified in accounting. However, this study found that this may not always be the case. By looking at the top listed companies in Singapore, it was found that a significant percentage of CFOs are not accounting qualified, which indicates a significant gap. The study conducted interviews with five groups of stakeholders and found that people who believe in the importance of CFOs’ accounting qualifications view it as a way for companies to signal their financial strength, which aligns with signalling theory. However, those who believe there is no need for CFOs to be accounting qualified tend to believe person-job fit (PJ-Fit) is a more important factor. The study found that when the company size is large, PJ-Fit is more important than signalling. This is because larger companies tend to have more resources to invest in identifying specific attributes of their CFO candidate than relying on the signalling effect. They also have stronger legitimacy and more availability of staff with accounting qualifications. This study’s findings help deepen the understanding between prior research and the implications for practising managers. This study also suggested areas for future research.