Does CFOs' style affect Accounting Outcomes? An empirical investigation in Italian Municipalities

Several studies in accounting have tried to examine the factors influencing accounting outcomes, but most have been carried out in the private sector. In this paper, on the contrary, we wish to investigate this issue with... [ view full abstract ]

Several studies in accounting have tried to examine the factors influencing accounting outcomes, but most have been carried out in the private sector. In this paper, on the contrary, we wish to investigate this issue with respect to public sector organizations. In particular, we focus on the potential impact exerted on accounting outcomes by CFO styles. CFOs may play an important role because they typically deal with decisions involving money and oversee the preparation and execution of accounting documents.

Our theoretical framework is based on upper echelon theory (Hambrick and Mason 1984; Hambrick 2007). Specifically, upper echelon theory posits that top managers’ individual characteristics affect the way they play their roles and make their decisions. Additionally, it suggests that this causal relationship is moderated by two sets of variables, that is, managerial discretion and executive job demands. So far, upper echelon theory has been generally applied to private-sector CEOs, with limited exceptions such as Ge et al. (2011), who have extended it to private-sector CFOs.

For our empirical analysis, we use panel data from the Italian municipalities with populations above 15,000. For accounting outcomes, we will use secondary data from the Ministry of the Interior, whereas the independent variables (such as CFO personal traits as well as constraints from auditors, politicians, and managers) are currently being collected by means of questionnaires administered to CFOs, other top managers, and aldermen in the selected set of local governments.

From the statistical analysis we expect to find that CFO styles do affect accounting outcomes, especially when their degree of discretion and level of job demand is high.