CFO Turnover, Firm’s Debt-Equity Choice and Information Environment Dissertation

(2016). CFO Turnover, Firm’s Debt-Equity Choice and Information Environment . 10.25148/etd.FIDC000708

thesis or dissertation chair


  • Talukdar, Muhammad Bakhtear U


  • The CEO and CFO are the two key executives of a firm. They work cohesively to ensure the growth of the firm. After the adoption of the Sarbanes Oxley Act (SOX) in 2002, the importance of CFOs has increased due to their personal legal obligation in certifying the accuracy of financial statements. Only a few papers such as Mian (2001), Fee and Hadlock (2004), and Geiger and North (2006) focus on CFOs in the pre-SOX era. However, a vacuum exists in research focusing exclusively on CFOs in the post-SOX era. The purpose of this dissertation is to delve into a comprehensive investigation of the CFOs. More specifically, I answer three questions: a) does the CEO change lead to the CFO change? b) does the CFO appointment type affect the firm’s debt-equity choice? and c) does the CFO appointment affect the firm’s information environment?

    I use Shumway’s (2001) dynamic hazard model in answering question ‘a’. For question ‘b’, I use instrumental variable (IV) regression under various estimation techniques to control for endogeneity. For part ‘c’, I use the cross sectional difference-in-difference (DND) methodology by pairing treatment firms with control firms chosen by the propensity scores matching (PSM).

    I find there is about a 70% probability of CFO replacement after the CEO replacement. Both of their replacements are affected by prior year’s poor performance. In addition, as a custodian of the firm’s financial reporting, the CFO is replaced proactively due to a probability of restatement of earnings. I find firms with internal CFO hires issue more equity in the year of appointment than firms with external hires. The promoted CFO significantly improves the firm’s overall governance which helps the firm obtain external financing from equity issue. However, I find that CFO turnover does not significantly affect the firm’s information environment. To ensure that my finding is not due to mixing up of samples of good and distressed firms together, I separated distressed firms and re-ran my models and my finding still holds.

    This dissertation fills the gap in the literature with regards to CFOs and their post SOX relationship with the firm.

publication date

  • June 29, 2016


  • CFO Turnover
  • CFO and Debt Equity choice
  • CFO and Information Environment
  • Difference-in-Difference (DND) Model
  • Dynamic Hazard Model
  • F-Score
  • Fixed Effect Logit Model
  • Generalized Method of Moments (GMM)

Digital Object Identifier (DOI)