Does the market value the accounting expertise of chief financial officers? Evidence from the market value of cash holdings

This study investigates whether and how equity investors value the accounting expertise of chief financial officers (CFOs) in managing cash assets. Using hand-collected CFO data of S&P 1500 firms from 1999 to 2015, we find that the stock market places a higher value on cash assets when firms replace a non-accountant CFO with an accountant CFO. Specifically, the market value of an additional dollar of cash increases by 92 cents following such CFO turnovers. Moreover, we find that the positive effect of CFOs’ accounting backgrounds on the market value of cash is particularly evident for firms in low growth industries and firms with weak corporate governance. Our evidence highlights efficient cash management as an important channel through which accountant CFOs contribute to firm value.