CEO-CFO Tenure Order and Financial Statement Comparability

This study examines the impact of relative power, defined by the tenure order of associated CEOs and CFOs, on financial statement comparability. The analysis utilizes data from all A-share Chinese listed companies in Shenzhen and Shanghai between 2011 and 2020. The results reveal that when a CEO's tenure precedes that of the CFO, the comparability of accounting information is significantly reduced. Cross-sectional analyses reveal that when a firm is less financially constrained, and the CEO lacks a financial background, the CEO is more likely to influence the CFO's financial reporting decisions through tenure order, thereby reducing the comparability of accounting information. Additionally, high audit quality and significant shareholding by independent directors can mitigate the CEO's influence on the CFO's financial decisions through tenure order. This study contributes to the literature on factors affecting the comparability of accounting information and on executive tenure. It provides practical recommendations for enhancing corporate governance, particularly in the areas of executive appointments and succession planning. It also provides valuable insights for external information users, emphasizing that they should consider CEO-CFO tenure dynamics as an indicator of financial reporting quality and reliability. This understanding can facilitate more informed decision-making.