Why do CFOs Become Involved in Material Accounting Manipulations?

Feng, Min; Ge, Weili; Luo, Shuqing; Shevlin, Terry

doi:10.2139/ssrn.1260368

Cited by 189 publications

(277 citation statements)

References 25 publications

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“…Management turnover, particularly CFO turnover, could also be related to the incentives of the CEO to pressure subordinates to manage earnings. Indeed,Feng et al (2011) present findings that suggest that CFOs involved in material accounting manipulations are often succumbing to pressure from CEOs.…”

mentioning

confidence: 61%

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Understanding investor perceptions of financial statement fraud and their use of red flags: evidence from the field

et al. 2015

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We surveyed 194 experienced, nonprofessional investors to examine the relations between their perceptions of the frequency of financial reporting fraud, their use of financial statement information, the importance they place on conducting their own fraud risk assessments, and their use of fraud red flags. We find that investors' perceptions of the frequency of fraud and their use of financial statement information positively influence the importance they place on conducting their own fraud risk assessments. Investors who place importance on assessing fraud risk make greater use of fraud red flags to avoid fraudulent investments. Red flags commonly relied upon include SEC investigations, pending litigation, violations of debt covenants, and high management turnover. Investors rely less on company size and age, the need for external financing, and the use of a non-Big 4 auditor. We also find evidence of positive associations between the use of specific red flags and investors' portfolio returns.

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confidence: 61%

“…Attitude-related red flags reveal management's propensity to rationalize fraud. If a subset of management has such a propensity, executives who do not share this attitude are likely to resign (Feng et al 2011). Thus high manager turnover may be viewed as a potential fraud red flag.…”

Section: Fraud Red Flagsmentioning

confidence: 99%

Understanding investor perceptions of financial statement fraud and their use of red flags: evidence from the field

et al. 2015

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“…Much of the extant work focuses on whether equity incentives align managers' interests with respect to financial reporting with those of shareholders, or whether equity incentives instead induce managers to manipulate accounting information for personal gain. More recently, a number of studies, including Feng et al (2009) andJiang et al (2010), examine the relationship between the incentives of the CFO and earnings management. Jiang et al (2010) argue that ''because CFOs' primary responsibility is financial reporting y CFO equity incentives should play a stronger role than those of the CEO in earnings management.''…”

Section: Executive Incentives and Financial And Tax Reportingmentioning

confidence: 99%

The incentives for tax planning

Armstrong

Blouin

Larcker

2012

Journal of Accounting and Economics

673

404

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“…Further, there is at least some evidence to suggest that CEOs achieve such influence by forcing CFOs to succumb to CEO influence, rather than CFOs seeking earnings management for personal financial benefit (Feng et al, 2011). In turn, CEOs appear to be targeted by the board in cases of financial misreporting.…”

Section: Ceos Cfos and Top Accounting Executivesmentioning

confidence: 99%