Do Higher Rankings Empower CFOs to Better Fulfill their Responsibilities? Empirical Evidence from China

Posted: 18 Oct 2016 Last revised: 20 Oct 2016

See all articles by Hanwen Chen

Hanwen Chen

University of International Business and Economics

Siyi Liu

Xiamen University - Accounting Department

Hongda Ren

Tsinghua University - School of Economics & Management

Donghui Wu

The Chinese University of Hong Kong; Center for Institutions and Governance

Date Written: October 16, 2016

Abstract

In Chinese culture, the listing order (the ranking) of individuals reflects their social status and power accorded in an organization. Unlike other countries where corporate executive names are usually listed alphabetically in the annual reports, Chinese public companies’ listing order of executive names follows this social norm. In this context, we examine whether and how CFOs’ rankings in annual reports influence their managerial responsibilities fulfilled. We find that higher CFO rankings decrease the companies’ overinvestment (Investment Function), cost stickiness (Cost Function), real earnings management (Information Function), and improve tax-avoidance ability (Tax Function). Our analysis also reveals that CFO-ranking effects on these outcomes vary by state ownership, corporate governance, and CFOs’ personal backgrounds. Overall, our evidence suggests that higher rankings empower CFOs to better fulfill their responsibilities.

Keywords: Chief Financial Officer; Ranking; Corporate governance

JEL Classification: G24, G32, G34, M4

Suggested Citation

Chen, Hanwen and Liu, Siyi and Ren, Hongda and Wu, Donghui, Do Higher Rankings Empower CFOs to Better Fulfill their Responsibilities? Empirical Evidence from China (October 16, 2016). Available at SSRN: https://ssrn.com/abstract=2852949

Hanwen Chen (Contact Author)

University of International Business and Economics ( email )

10# Huixin East Street,Chaoyang District
Beijing, Beijing 100029
China

Siyi Liu

Xiamen University - Accounting Department ( email )

Siming South Road
Duxing Building No.2
Xiamen, Fujian 361005
China

Hongda Ren

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Donghui Wu

The Chinese University of Hong Kong ( email )

Sha Tin
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Hong Kong
852-3943 7836 (Phone)
852-2603 5114 (Fax)

HOME PAGE: http://www.bschool.cuhk.edu.hk/staff/wu-donghui/

Center for Institutions and Governance ( email )

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HOME PAGE: http://www.bschool.cuhk.edu.hk/centres/centre-for-institutions-and-governance/

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