| CFO(Chief Financial Officer) participates in management,and plays an active role in the implementation of corporate strategies and corporate governance. In the developed country, CFO has already developed from the traditional function to the enterprise strategic partnership. CFO has now been elevated to the same level of financial oversight responsibility as was formerly viewed as the responsibility of the CEO.Since the beginning of 21st century, a series of scandals about the financial fruad have been disclosed that relate to top managers in listed companies. CFOs and the role they play in creating and disseminating accurate or fraudulent financial information have recently attracted wide attention. There has been considerable research regarding the reason for CEO(Chief Executive Officer) turnover and relationship between the top managers turnover and operating performance, yet there has been very little investigation regarding the relationship between new CFOs and reported financial information. Thus, an examination of changes in discretionary accruals around the hiring of a new CFO lends empirical evidence to the ability of the individual CFOs to significantly effect their firms'reported financial statements.Firstly, this paper investigates the related literatures about top managers turnover at home and abroad, and carries out theoretical analysis based on the Principal-agent theory, contract theory and corporate governance mechanism. Then, we study the relationship between the CFO turnover and discretionary accruals with the expanded Johns model. We choose sixty-seven listed companies that changed CFO from 2003 to 2005 and sixty-seven listed companies as control samples. We draw some conclusions from the statistical tests and the regression analysis: Companies that appoint a new CFO report siginificant reductions in discretionary accruals compared to other non-hiring, and siginificantly increase discretionary accruals in the last year. |
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