The Impact of the CFO-CEO Power Gap on the Information: Disclosure Quality in China

Abstract

The power allocation of members in top management team is of great importance in corporate governance mechanism. Few studies, however, have been devoted to power allocation between chief financial officers (CFO) and chief executive officers (CEO) or its impact on the quality of information disclosure. This study describes the power allocation between CFOs and CEOs from four aspects, and then investigates the impact of the CFO-CEO power gap on information disclosure quality. This study selected Chinese A-share listed firms in Shenzhen Stock Exchange between 2016 and 2020 as the research samples, and the final samples contained 7,120 firm-year observations. The processing and testing of the relevant data in this research were conducted via Excel 2020 Stata 15.0 statistical software. We constructed the ordered logistic regression model to empirically examine the impact of CFO-CEO power gap on information disclosure quality. The empirical results indicate that the CFO-CEO power gap can improve the quality of information disclosure. When the power gap is larger, the quality of information disclosure is higher. In addition, the CFO-CEO power gap has a more profound impact on the quality of information disclosure in firms whose CFOs serve as the board secretary concurrently or have a financial background. These findings continue to hold when tested with a battery of robustness checks. Hence, the CFO-CEO power gap has an impact on information disclosure quality, which is of theoretical significance for the study of extending the influencing factors of information disclosure quality and enriching the economic consequences of the CFO-CEO power gap. From the perspective of the practical sense, the research conclusions will provide some useful references for the power allocation of top management teams and the selection of senior managers.