| How insider directors affect board performance is at the center of the debate on corporate governance reform, especially in the post-SOX (Sarbanes-Oxley Act of 2002) period. A growing body of research supports the notion that inside directors can blunt the effectiveness of the board monitoring role and thus impair the firms' future performance. However, boards of directors are expected to perform both advising and monitoring functions. Accordingly, other literature argues and provides evidence that inside directors can promote both roles due to their informational advantages regarding firm activities.;The key role of the Chief Financial Officer (CFO) in firm operating performance has been increasingly emphasized over the past two decades. Many studies provide evidence of CFOs' considerable influence on corporate strategic choices and corporate governance. Therefore, I empirically investigate how the CFO board membership affects board advising and monitoring performance. The empirical findings are summarized as follows.;First, I find that CFO board membership is associated with improved board advising performance due to decreased corporate acquisition risk and increased corporate investment efficiency. Second, I find that CFO board membership is associated with improved board monitoring performance due to increased firm internal control quality and lower audit risk. Taken together, the results suggest that CFO board membership supports both board advising and monitoring performance. |
