Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

CFO and finance function: what matters in value creation

CFO and finance function: what matters in value creation PurposeAccording to the chief financial officer (CFO) of IBM Global Survey (2010), only few integrated finance organizations (IFOs) and only some CFOs’ role (Value Integrators) allow companies to generate value so as to outperform their peers. The purpose of this study is to gather additional insights on how the CFOs and finance organizations effectively promote value creation in for-profit organizations.Design/methodology/approachThe authors’ study has been developed through the methodology of case studies. The method, despite its intrinsic limitations, offers a much deeper understanding of the organizational context within which value creation takes place. The authors’ analysis is based on nine selected case studies of Italian industrial companies, selected to assure comparability with the IBM sample. All companies outperform their peers.FindingsThe authors observed that not only IFOs and value integrator CFOs support the value generation process. The authors’ sample suggests a variety of other relevant and likely alternatives for value creation deriving from both finance functions (FFs) and the roles of CFOs. Their findings indicate that FFs adopt three distinct patterns to add value for the shareholders. The first option involves the FF taking the lead in setting a common language across functions, management processes, management and stakeholders. The second value creation pattern is when the FF establishes a strong and relevant support to business. The third option implies that the FF acts as an advisor assuring independent compliance. The authors also concluded that regardless of the CFO’s roles, influential CFOs are older, with a deep functional company and industry experience. They also observe that some of this influence derives from “proximity” to shareholders, as all the more influential CFOs sit on the Board, enjoying a closer relationship with the shareholders.Research limitations/implicationsThis study was based on clinical cases, the findings can be generalized reliably only for the population studied here. More research is needed for further tests and explorations of these findings, especially in the area of CFO incentives and governance mechanisms.Practical implicationsThis study supports modern advice given to organizations in terms of the array of available alternatives to promote value creation with patterns and processes within the domain of the finance organization and CFO’s personal characteristics.Social implicationsThe paper contributes to untangle some gender issues, as the authors found that more influential CFOs are male. The authors have also contributed to explain some dynamics of the “labor” market development for finance professionals: the authors observed that the promotion for most influential CFOs comes through the ranks of a specific company, and this questions if a market really exits for such professionals in Italy, and more generally in Europe.Originality/valueThese results provide some useful support of prior findings and some modifications and extensions that further the authors’ understanding in this area of importance both to researchers and practitioners. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting & Organizational Change Emerald Publishing

CFO and finance function: what matters in value creation

Loading next page...
 
/lp/emerald-publishing/cfo-and-finance-function-what-matters-in-value-creation-Dl9e1F6VW0

References (47)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1832-5912
DOI
10.1108/JAOC-12-2014-0059
Publisher site
See Article on Publisher Site

Abstract

PurposeAccording to the chief financial officer (CFO) of IBM Global Survey (2010), only few integrated finance organizations (IFOs) and only some CFOs’ role (Value Integrators) allow companies to generate value so as to outperform their peers. The purpose of this study is to gather additional insights on how the CFOs and finance organizations effectively promote value creation in for-profit organizations.Design/methodology/approachThe authors’ study has been developed through the methodology of case studies. The method, despite its intrinsic limitations, offers a much deeper understanding of the organizational context within which value creation takes place. The authors’ analysis is based on nine selected case studies of Italian industrial companies, selected to assure comparability with the IBM sample. All companies outperform their peers.FindingsThe authors observed that not only IFOs and value integrator CFOs support the value generation process. The authors’ sample suggests a variety of other relevant and likely alternatives for value creation deriving from both finance functions (FFs) and the roles of CFOs. Their findings indicate that FFs adopt three distinct patterns to add value for the shareholders. The first option involves the FF taking the lead in setting a common language across functions, management processes, management and stakeholders. The second value creation pattern is when the FF establishes a strong and relevant support to business. The third option implies that the FF acts as an advisor assuring independent compliance. The authors also concluded that regardless of the CFO’s roles, influential CFOs are older, with a deep functional company and industry experience. They also observe that some of this influence derives from “proximity” to shareholders, as all the more influential CFOs sit on the Board, enjoying a closer relationship with the shareholders.Research limitations/implicationsThis study was based on clinical cases, the findings can be generalized reliably only for the population studied here. More research is needed for further tests and explorations of these findings, especially in the area of CFO incentives and governance mechanisms.Practical implicationsThis study supports modern advice given to organizations in terms of the array of available alternatives to promote value creation with patterns and processes within the domain of the finance organization and CFO’s personal characteristics.Social implicationsThe paper contributes to untangle some gender issues, as the authors found that more influential CFOs are male. The authors have also contributed to explain some dynamics of the “labor” market development for finance professionals: the authors observed that the promotion for most influential CFOs comes through the ranks of a specific company, and this questions if a market really exits for such professionals in Italy, and more generally in Europe.Originality/valueThese results provide some useful support of prior findings and some modifications and extensions that further the authors’ understanding in this area of importance both to researchers and practitioners.

Journal

Journal of Accounting & Organizational ChangeEmerald Publishing

Published: Jun 5, 2017

There are no references for this article.