Abstract/Details

Endogenous-quality reporting systems and managerial power in a CEO-CFO setting


2012 2012

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Abstract (summary)

I formulate and analyze agency models that capture several features relevant in the CEO-CFO setting. The main feature is that the quality (i.e., precision and accuracy) of the contractible performance measure depends on the reporting system, which is controlled by the CFO. The CFO's main role is informational, in facilitating monitoring and incentive contracting that motivates productive effort from the CEO. After reviewing the related literature, I present and analyze several variations of the principal-CEO-CFO agency. In the first variation, I focus on the implications of the CEO having power that enables the CEO to pressure the CFO to manipulate the performance metric. In the second variation, the CEO and CFO may collude, and the CFO contributes directly to output. Also, there is an exogenous-quality performance metric available. In the third variation, the CEO's power is unknown to the CFO and principal ex-ante, and a revelation mechanism is employed to examine expected utilities and the CEO's informational rents. In general, I find that: incentive compensation can be positively or negatively associated with the variance of the performance metric; CEO power over the CFO affects incentive strength and reporting quality and changes the way that reporting costs affect these; CFO production makes collusion between the CEO and CFO more valuable; collusion between the CEO and CFO might be value-enhancing or value-destroying; and either powerful or non-powerful CEOs can earn rents when their power is unknown during contracting.

Indexing (details)


Subject
Accounting;
Management;
Studies;
Chief executive officers;
Chief financial officers;
Performance evaluation;
Financial reporting;
Business metrics;
Quality
Classification
0272: Accounting
0454: Management
Identifier / keyword
Social sciences, CEO, CFO, Chief executive officer, Chief financial officer, Endogenous-quality reporting systems, Managerial power
Title
Endogenous-quality reporting systems and managerial power in a CEO-CFO setting
Author
Friedman, Henry L.
Number of pages
193
Publication year
2012
Degree date
2012
School code
0175
Source
DAI-A 73/09(E), Dissertation Abstracts International
Place of publication
Ann Arbor
Country of publication
United States
ISBN
9781267351258
Advisor
Lambert, Richard
Committee member
Fischer, Paul; Gonedes, Nicholas; Heinle, Mirko; Lambert, Richard
University/institution
University of Pennsylvania
Department
Accounting
University location
United States -- Pennsylvania
Degree
Ph.D.
Source type
Dissertations & Theses
Language
English
Document type
Dissertation/Thesis
Dissertation/thesis number
3509004
ProQuest document ID
1018701522
Copyright
Database copyright ProQuest LLC; ProQuest does not claim copyright in the individual underlying works.
Document URL
http://search.proquest.com/docview/1018701522
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