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Event

Accounting Area Presents Ernst & Young Speaker Series: Vishal Baloria

Thursday, September 19, 2024 17:00to18:30
Bronfman Building Room 410, 1001 rue Sherbrooke Ouest, Montreal, QC, H3A 1G5, CA

Vishal Baloria

Associate Professor, Accounting
University of Connecticut

Are Two Chiefs Better Than One? Financial Executives and Layoffs

Date: Thursday, September 19, 2024
Time: 5:00 PM – 6:30 pm
Location: Bronfman building, Room 410


Abstract

We examine the real effects of firms delegating financial accounting duties to a Chief Accounting Officer (CAO), thereby allowing the Chief Financial Officer (CFO) to allocate attention to operational duties. We find CAO usage is associated with a significant reduction in the likelihood of a layoff. This negative association is stronger among firms reporting an accounting loss, which serves as a powerful trigger to divest employees, and firms with longer Chief Executive Officer (CEO) tenure, who develop prosocial preferences for employees over time. To address non-random usage of CAOs among firms, we exploit state-level adoption of CPA mobility provisions that increase the labor supply of CAOs and document lower layoffs after the passage of CPA mobility provisions in a firm's headquarter state. The collective evidence suggests that placing distance between CFOs and financial accounting, through use of a CAO, can discourage layoffs, in line with the hypothesis that managerial attention on financial accounting rules that treat employee costs as expenses and liabilities drive firm layoff decisions.

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