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Journal of Accounting and Economics Vol. 51 No. 1-2 2011

Why do CFOs become involved in material accounting manipulations?

Mei Feng1; Weili Ge2,3; Shuqing Luo4; Terry Shevlin3,2

1 University of Pittsburgh · 2 Paccar (United States) · 3 University of Washington · 4 National University of Singapore

Abstract

This paper examines why CFOs become involved in material accounting manipulations. We find that while CFOs bear substantial legal costs when involved in accounting manipulations, these CFOs have similar equity incentives to the CFOs of matched non-manipulation firms. In contrast, CEOs of manipulation firms have higher equity incentives and more power than CEOs of matched firms. Taken together, our findings are consistent with the explanation that CFOs are involved in material accounting manipulations because they succumb to pressure from CEOs, rather than because they seek immediate personal financial benefit from their equity incentives. AAER content analysis reinforces this conclusion.

DOI
10.1016/j.jacceco.2010.09.005
Volume
51
Issue
1-2
Pages
21-36
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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