Do CFOs with accounting backgrounds perform better than their non-accountant counterparts? The short answer: it depends. Bentley University Professor Rani Hoitash, Gibbons Research Professor of Accountancy, explores this topic in a paper to be published in the Journal of Accounting and Economics.  The paper is co-authored by Udi Hoitash (Northeastern University) and Ahmet Kurt (Suffolk University).

In the wake of the Sarbanes-Oxley Act, the demand for CFOs with accounting backgrounds increased as companies sought finance chiefs that could help them navigate the complex financial reporting landscape. But in the last few years the demand for accountant CFOs has gone down. This could be attributed to what Hoitash and his co-authors found when they examined more than 5,000 CFOs during the period 2000-2010. They found evidence suggesting:

• Accountant CFOs overall do not perform as well as non-accountant CFOs in high-growth industries such as pharmaceutical products and electronic equipment. They find that the value of firms with accountant CFOs in high-growth industries is lower by 4.4 percent compared to firms with non-accountant CFOs.

  • This may be the result of the way accounting professionals are trained which leads to more conservative and risk-averse behavior. These are not bad attributes in the world of financial reporting, budgeting and cost control. However, risk aversion can also impede growth in industries where investment in growth is crucial.

• The good news for accountant CFOs: they overall perform better than non-accountant CFOs in low-growth industries such as heavy manufacturing and transportation, which may actually benefit from having more conservative CFOs who can better control expenditures.

"There is no one-size-fits-all strategy for appointing a new CFO," explained Hoitash. "Our research indicated the negative firm value implication of having accountant CFOs in high-growth industries and the positive value of having CFOs in low-growth industries, helping us to conclude that CFOs with accounting backgrounds do not always perform better than their non-accountant counterparts."  

The paper will appear in the May issue of Journal of Accounting and Economics.