The Rise of the CFO - A Quantitative Study Investigating Investors' Reaction to the Evolution of the CFO Over Time

Abstract: The role of the CFO has evolved substantially over the years. From being a traditional financial and accounting overseer to compromise a wider set of responsibilities, including financial management and strategic decision-making. Despite this, little attention has been dedicated to investors' reaction to CFO turnovers and potential factors that influence those reactions, particularly in the UK where CFOs also appear to be essential for firm success. This thesis investigates investors' reaction to CFO turnovers over time and whether the reactions to CFO turnovers have increased proportionally more compared to those of CEOs turnovers announcements. Using a sample of 737 observations, an event study was conducted to analyse the cumulative abnormal returns at the event of succession announcements. Our findings reveal that the investors' reaction to CFO turnovers have increased over time, indicating that investors view CFOs as increasingly important for the success of the firm. Investors' reaction to CFO turnovers has not increased proportionally more compared to CEO turnover announcements. However, the study shed light on their interdependence and close links. Our primary contribution to empirical literature is the heightened stock market reaction to CFO turnovers which mirrors the evolution of the CFO's role. It also offers valuable insights to the strategic implications for the firm where CFO successions require careful monitoring.