CFO Outside Directorships: What Happens to Financial Reporting Quality at the Home Firm?

Using financial statement misstatements and material weaknesses in internal control to proxy for financial reporting quality (FRQ), we examine whether CFO outside directorships affect FRQ at their home firms. Contrary to concerns about CFOs being distracted from their primary duties, our results suggest that CFO outside board service is not detrimental to FRQ at the home firm, even in situations where outside board service demands a substantial amount of board member attention. Instead, we find that CFO outside board service leads to higher home firm FRQ. In additional analyses, we find that this benefit is related to learning opportunities which occur when CFOs join the outside firm's audit committee, when CFOs lack accounting expertise, and when the quality of financial reporting at the outside firm is high. Our results should be of interest to regulators, investors, auditors, management, and board members considering the implications of CFO outside board service.