Are Accountants the Best CFOs?

By Elizabeth Kennedy
June 1, 2016

New research from Bentley University in Waltham, Mass., analyzes the factors involved in companies’ evaluations of CFOs with accounting backgrounds. According to the study, demand for CFOs with accounting backgrounds increased following the passage of the Sarbanes-Oxley Act of 2002 so that organizations could competently manage the complex rules it introduced. But Rani Hoitash, Gibbons Research Professor of Accountancy and coauthor of the paper, suggests that this trend has since diminished. Examining the results of more than 5,000 CFOs for 2000–2010, findings show that the performance of CFOs depended on their respective industries.

In high-growth industries such as electronics and pharmaceutical products, accountant CFOs were found to be more risk averse than nonaccountant managers, resulting in more conservative corporate outcomes. CFOs in these environments were reported to invest less in R&D and capital expenditures and to be less inclined to engage external financing. Given the central role that risk taking plays in high-growth industries, their results revealed a negative association between CFOs with accounting backgrounds and overall firm value.


In low-growth industries such as transportation and manufacturing, on the other hand, the study suggests a positive relation between accountant CFOs and firm value. Accountant CFOs were associated with greater cost efficiency in these industries, and their conservatism allowed for better control of expenditures. In short, Hoitash states, “There is no one-size-fits-all strategy for appointing a new CFO.”

Elizabeth Kennedy is the feature editor at IMA. You can reach her at ekennedy@imanet.org.
2 + Show Comments
    Lissette July 10, 2016 AT 10:41 pm

    Yes, as an accountant i UNDERSTAND the risks and the cost EFFECTIVE strategy . But every situation is Different and it must Be evaluated as such .

    Reggie aLexis July 10, 2016 AT 8:55 pm

    Great insight shared here as i have found this information to be very true.

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