Steven R. Matsunaga

Does Appointing a Former CFO as CEO Influence a Firm’s Accounting Policies?

We study CEO successions for S&P1500 firms from 2003 to 2008 to examine whether CEOs with former CFO experience systematically influence firms‟ accounting policies (i.e., financial reporting, disclosure, and tax policies). Using firm-fixed effect regressions, we find that an exCFO is associated with smaller discretionary accruals, greater conservatism, more accurate management forecasts, improved analyst information environment, and lower cash effective tax rates. We also examine whether the appointment of an ex-CFO is associated with a demand for higher quality of financial information and whether such appointment is associated with systematic changes in accounting policies. We find that the decision to appoint an ex-CFO as CEO is consistent with higher demand for financial information before the appointment (e.g., increases in institutional ownership and analyst following) and is generally followed by predictable changes in firms‟ accounting policies after the appointment. * We thank the comments from workshop participants at the University of Oregon.

How Competitive Costs and Board Reputation Concerns Affect Disclosure: Evidence from Performance Targets

We use a 2006 Securities and Exchange Commission regulation that requires firms to disclose the numerical target for executive bonus plans to examine how firm-specific measures of proprietary costs and board member’s reputation concerns influence a firm’s disclosure decisions. Using a composite measure of board strength we find that in the first year of the requirement, board strength is positively associated with disclosure. This result suggests that board members who are more concerned about their reputation encourage disclosure to increase their standing with the SEC and stakeholders. Using unexpected earnings and the three-year average of industry-adjusted gross profit as firm-specific measures of proprietary costs, we find that both measures are negatively related to disclosure, but that strong boards are more likely to consider newly acquired proprietary advantage as reflected in unexpected earnings. As a result, the two measures appear to capture different aspects of perceived proprietary costs. Overall, our results provide insight into the influence of board members and firm-specific proprietary costs on a firm’s disclosure decisions.