CFO gaps: Determinants and impact on the corporate information environment

• Main Authors: CHEN, Xia, LI, Na, LIN, An-ping
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: CFO gaps; CFO turnovers; information environment; Accounting; Corporate Finance; Organizational Behavior and Theory
• Online Access: https://ink.library.smu.edu.sg/soa_research/1948; https://ink.library.smu.edu.sg/context/soa_research/article/2975/viewcontent/CFO_Gaps_sv.pdf
• Institution: Singapore Management University

A CFO gap arises when the CFO position is left vacant for a period between the departure of the old CFO and the appointment of a new CFO. We find that CFO gaps are fairly common; over the sample period 2004–2016, approximately one-third of CFO turnovers are associated with a CFO gap, lasting on average two quarters and two months. CFO gaps are more likely for firms that face more labor market search frictions and with financial reporting and performance issues, and are less likely for firms with succession plans and with greater growth opportunities. While CFO gaps are not associated with significant changes in firms’ financial reporting quality, they are associated with significantly negative changes in firms’ voluntary disclosure frequency and analysts’ forecast quality. Our findings shed light on the factors that influence top executive gaps and the impact of such gaps on firms’ information environment.