Does CFO vertical duality affect financial outcomes? Evidence from the CFO acting as the head of accounting

Using a sample of Chinese firms from 2008 to 2016, this paper examines whether a firm's chief financial officer (CFO) simultaneously being the head of the accounting department (CFO vertical duality) influences financial outcomes, including financial reporting quality and financial management efficiency. We find that, on average, this vertical duality does not affect financial reporting quality. However, a negative effect on financial reporting quality emerges when the CFO encounters specific incentives or opportunities to misre-port. Moreover, CFO vertical duality distracts the CFOs, especially in complex firms, and adversely impacts the CFOs' broader role in financial management, such as cash manage-ment and corporate financing. Overall, our results highlight that the position arrangement in the financial system is an important but relatively neglected determinant of financial outcomes. & COPY; 2022 Elsevier Inc. All rights reserved.