Study On The CFO Characteristics And Function Effect

In the information asymmetry and incomplete contract circumstances, the multiple principal-agent relationship makes CFOs play the key role in the corporate valuation management. CFOs are in an embarrassing dilemma that CFOs'capacity is incompetent, CFOs'power is insufficient and CFOs'incentive is inadequate. This phenomenon has influenced the function effect of CFOs in the financial supervision and strategic support. Based on the special institutional circumstances in China that the ownership is highly concentrated and the controlling shareholders'human characteristics are incomplete, this thesis studies the function effect of CFOs from CFOs'capacity characteristics, the power characteristics and the incentive characteristics, hoping that it will provide some evidences to improve the CFO system.According to the principal-agent theory, incomplete contract theory, asymmetric information theory, upper echelons theory, power theory and incentive theory, this thesis Firstly systematically refines the theory basis of CFOs capacity's influence to function effect, the theory basis of moderating effect of CFOs power characteristics and incentive characteristics to the relationship between CFOs ability characteristics and function effect, and proposes the logical framework of study on CFOs characteristics and corresponding function. It is found that, the size of CFOs capacity can be measured by CFOs background characteristics in some extent, CFOs capacity can influence the exertion effect of financial supervision and strategic support functions, CFOs power characteristics and incentive characteristics can bring moderating effect to the relationship between CFOs capacity characteristics and function effect.Taking advantage of methods of principal component analysis, multiple linear regression and moderating effect analysis, this paper construct the CFO capacity index from three dimensions of organization power, expert power and prestige power, which contain six variables of CFOs'gender, age, title, tenure, education and part-time job. We try to resolve the following issues:â‘ the impact of CFO capacity index on the function effect of financial supervision and strategic support;â‘¡the moderating impact of CFOs'power, including CFOs'rank and whether CFOs enter the board of directors, on the relationship of CFOs'capacity and functional effect;â‘¢the moderating impact of CFOs'incentives, including CFOs'compensation and whether CFOs hold the shares of the company, on the relationship between CFOs'capacity and functional effect. The results demonstrate that:Firstly, a stronger CFOs'capacity can lead to better functional effect of financial supervision, which therefore makes lower agent cost. In the non-state company sample, a stronger CFOs'capacity is benefit for the function effect of strategic support, which yields good performance. In the state company sample, however, CFOs with stronger capacity strategic always brings negative effects to their functions play of strategic support, resulting in poor performance of the company.Secondly, in the front median sample of CFOs'rank, the relationship between CFOs'capacity and agent cost is significantly negative, which is benefit for the functional effect of financial supervision, but this evidence is not found in the later median sample of CFOs'rank. Besides, CFOs enter the board of directors is harmful for the function effect of financial supervision. In the state companies sample, the front rank of CFOs and CFOs enter board of directors are benefit for the functional effect of strategic support and the performance will become better. In the non-state company sample, however, the CFOs'power characteristics play the negative role instead of positive role in the moderating effect. It can be seen that in state-owned enterprises, enhancing CFOs'power can moderate the impact of CFO capacity to its function play of strategic support, promoting the performance of the company, which explains the inverse relationship between CFOs'strong capacity and poor performance in state-owned company in conclusion one.Thirdly, higher compensation is useful for the function effect of financial supervision and strategic support, which in turn reduce the agency cost and improve the performance. However, CFOs hold shares is not significant with the function effect in the moderating effect and only plays the homogenous moderating effect between CFOs'capacity and the function effect of strategic support in the state company sample. In addition, CFOs holding share is not benefit for the function effect of financial supervision in both state and non-state company samples. It can be seen that in state-owned enterprises, reasonable incentive mechanism can moderate the impact of CFO capacity to its function play of strategic support, promoting the performance of the company, which also explains the inverse relationship between CFOs'strong capacity and poor performance in state-owned company in conclusion one.In the end, this thesis provides some policies from the above conclusions, including perfecting CFOs'qualified certificate system, improving CFOs'rank, being prudent to choose CFOs enter the board of directors and re-recognizing the system of CFOs'compensation and equity-incentives. In practice, we advance platform of the magic square of financial engineering to exert CFOs'function. Based on the special system in Chinese background, this thesis studies the law of CFO characteristics'effect to the function exertion of financial supervision and strategic support, which can enrich the upper echelons theory to a certain extent, and can also improve related CFOs systems, alleviate agency problems, reduce agency cost and provide a theory basis and empirical support to enhance performance of the company.