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CFO Effort and Public Firms' Financial Information Environment *
Author(s) -
Biggerstaff Lee E.,
Cicero David C.,
Goldie Brad,
Reid Lauren C.,
Ge Weili,
Moon Keehea
Publication year - 2021
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1111/1911-3846.12624
Subject(s) - proxy (statistics) , business , earnings , incentive , consumption (sociology) , accounting , quality (philosophy) , audit , compensation (psychology) , finance , economics , microeconomics , psychology , social science , philosophy , epistemology , machine learning , sociology , computer science , psychoanalysis
We test the association between CFO effort and the quality of public firms' financial information environments. We evaluate this relation using a measure of CFO leisure consumption—specifically, the amount of golf played—as an inverse proxy for effort. We find a negative relation between CFOs' compensation incentives and golf play, suggesting they exert more effort when they have greater incentives to increase firm value. High CFO leisure consumption is associated with lower earnings quality, less accurate earnings guidance, and reduced CFO conference call participation. Additionally, CFO leisure appears to affect external monitors, as it is associated with greater analyst forecast dispersion and increased audit fees. We do not find similar relations when evaluating the amount of golf played by CEOs, suggesting the unique importance of CFO effort in the financial reporting process.