Do Higher Rankings Empower CFOs to Better Fulfill their Responsibilities? Empirical Evidence from China

In Chinese culture, the listing order (the ranking) of individuals reflects their social status and power accorded in an organization. Unlike other countries where corporate executive names are usually listed alphabetically in the annual reports, Chinese public companies' listing order of executive names follows this social norm. In this context, we examine whether and how CFOs' rankings in annual reports influence their managerial responsibilities fulfilled. We find that higher CFO rankings decrease the companies' overinvestment (Investment Function), cost stickiness (Cost Function), real earnings management (Information Function), and improve tax-avoidance ability (Tax Function). Our analysis also reveals that CFO-ranking effects on these outcomes vary by state ownership, corporate governance, and CFOs' personal backgrounds. Overall, our evidence suggests that higher rankings empower CFOs to better fulfill their responsibilities