Insider or Outsider CEO: Choosing Wisely in Different Circumstances

Ahamed, Naseem; Tripathi, Nitya Nand

doi:10.1108/s0196-382120170000034006

Cited by 1 publication

(1 citation statement)

References 13 publications

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“…Moreover, CEOs who spent more time in the firm before being appointed as a CEO develop a better relationship with subordinate main managers, and, thus, can receive more honest feedback when they are faced with internal problems . Moreover, from the perspective of the stewardship theory, executives hired from within consider themselves as a component of the firm and tend to fulfill the responsibilities that are attributed to them by corporate owners (Ahamed & Tripathi, 2018). Furthermore, the previous experience of managers can reflect their psychological tendency and abilities, such as values, recognitions, skills, and knowledge (Hambrick & Mason, 1984).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Are CEO experience and financial expertise associated with financial restatements?

2021

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Este estudio examina si la experiencia del director general (CEO) y los conocimientos financieros afectan a las reformulaciones financieras (FR), y cómo lo hacen, investigando una muestra de empresas iraníes que cotizan en bolsa entre 2008 y 2017. Definimos a los consejeros delegados con experiencia como aquellos que son contratados desde dentro de la empresa y a los consejeros delegados expertos en finanzas como aquellos que poseen una cualificación contable o tienen experiencia laboral como auditor, director financiero (CFO), controlador u otros puestos relacionados con la contabilidad. Encontramos que FR está positivamente asociado a los CEOs con información privilegiada (CEOs con más experiencia interna), y negativamente asociado a la experiencia financiera del CEO. Además, encontramos que la experiencia del CEO se asocia negativamente con FR cuando el CEO es un experto financiero. Este resultado pone de manifiesto la importancia de la experiencia financiera de los altos ejecutivos. Además, nuestros resultados muestran que los directores generales con información privilegiada pueden mejorar la calidad de la información financiera reduciendo FR cuando tienen mayor poder de decisión. Este estudio contribuye a la literatura sobre las características de los directores generales y la información financiera. Los resultados ofrecen importantes implicaciones para los responsables políticos y los consejos de administración de las economías emergentes en lo que respecta a la exigencia de nombrar a altos directivos con conocimientos financieros. This study examines whether and how Chief Executive Officer (CEO) experience and financial expertise affect financial restatements (FR) by investigating a sample of Iranian listed companies from 2008 to 2017. We define experienced CEOs as those who are hired from inside the firm and financial expert CEOs as those who hold an accounting qualification or have work experience as an auditor, chief financial officer (CFO), controller, and or other accounting-related positions. We find that FR is positively associated with insider CEOs (CEOs with more internal experience), and negatively associated with CEO financial expertise. Moreover, we find that CEO experience is negatively associated with FR when the CEO is a financial expert. This result highlights the importance of financial background for senior executives. Further, our results show that insider CEOs can improve the financial reporting quality through reducing FR when they have higher decision-making power. This study contributes to the literature on CEO characteristics and financial reporting. The results provide important implications for policymakers and the board of directors in emerging economies regarding the requirement to appoint top managers with financial expertise.

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Section: Hypothesis Developmentmentioning

confidence: 99%