Research on the Relationship between CFO’s Status and Firm Over-Investment

This paper investigates the relationship between CFO’s status and firm over-investment from the unique perspective of CFO’s position in Top Management Team(TMT), considering traditional cultural background of China. This paper indicates that there is a positive relationship between the rank of CFO in the TMT and the status. The study finds that CFO’s status have negative impact on firm over-investment; and the negative impact only exist in non-state-owned firms. Additional tests show that the CFO’s high status strengthens the effectiveness of its compensation contract; and the restraining effect of CFO’s status on firm over-investment eventually will be reflected in the market, reducing its risk of stock market crashes.