Are CEO experience and financial expertise associated with financial restatements?


This study examines whether and how Chief Executive Officer (CEO) experience and financial expertise affect financial restatements (FR) by investigating a sample of Iranian listed companies from 2008 to 2017. We define experienced CEOs as those who are hired from inside the firm and financial expert CEOs as those who hold an accounting qualification or have work experience as an auditor, chief financial officer (CFO), controller, and or other accounting-related positions. We find that FR is positively associated with insider CEOs (CEOs with more internal experience), and negatively associated with CEO financial expertise. Moreover, we find that CEO experience is negatively associated with FR when the CEO is a financial expert. This result highlights the importance of financial background for senior executives. Further, our results show that insider CEOs can improve the financial reporting quality through reducing FR when they have higher decision-making power. This study contributes to the literature on CEO characteristics and financial reporting. The results provide important implications for policymakers and the board of directors in emerging economies regarding the requirement to appoint top managers with financial expertise.

Publication Title

Revista de Contabilidad-Spanish Accounting Review