|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
Is a Restatement a CFO’s Kiss of Death?, Study by U. of Alabama professors finds a far higher turnover rate among restating finance chiefs than among those who don’t restate. But how much higher?
Roy Harris
cfo.com. November 19, 2007
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EXCERPT: Companies that restate earnings change CFOs much more frequently than non-restating companies do, according to a study by two University of Alabama professors. But exactly how much more frequently turns out to be a matter of some confusion. The report, titled "Corporate Governance Consequences of Accounting Scandals: Evidence from Top Management, CFO, and Auditor Turnover," found that nearly a 10 percentage point gap exists between the adjusted turnover rate for finance chiefs at companies reporting lower earnings in a restatement (50.4 percent), compared to CFOs at non-restating companies (40.46 percent). Among CEOs, the difference using the same "regression model" was 14 percent (46.17 percent versus 31.73 percent). Perhaps more surprising is the calculation that audit firms are no more likely to be replaced by a company that restates than by a non-restating company, according to the report, which was drafted in March and last revised this month by professors Anup Agrawal and Tommy Cooper, of the university’s Culverhouse College of Business. Some readers of the report, however, have paid more attention to the raw statistics, before the adjustment, showing that 65 percent of finance chiefs depart companies after restatements, and that 53 percent of CEOs depart under the same circumstances. "If you are a manager, chief financial officer or auditor working for a company that comes out with a restatement, start looking for another job. That’s the only conclusion you can draw" from the new study, observed Leon Gettler, a business journalist for Australia’s The Age newspaper, writing for the www.soxfirst.com corporate-finance Website. |
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