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This paper highlights the importance of the Chief Financial Officer (CFO) as a strategic partner of the Chief Executive Officer (CEO). Using a sample of 119 firms with a longitudinal design, a strategic partnership between the CFO and the CEO is found to have a positive influence on the firm's financial performance. Moreover, a series of propositions about the impact of the relational demography between the CEO and CFO on the CFO's strategic partnership with the CEO are tested. The results show that similarities in the CEO and CFO's educational level and tenure in the firm have an indirect positive effect on the firm's financial performance through the CFO's strategic partnership with the CEO. The theory and results presented herein provide the impetus for research on the role of the CFO in strategic management.
A growing body of literature has highlighted the importance of the CFO position (e.g., Dalton, 1999; Favaro, 2001; Heidrick & Struggles, 1998; Skærbæk & Tryggestad, 2010; Tulimieri & Banai, 2010; Zoni & Merchant, 2007). Zorn (2004) examined the rise of the CFO position among American firms from 1963-2000. The analysis pointed out a fundamental redistribution of the managerial roles in firms as a strategic response to environmental changes, "with greater relevance of financial considerations built into the executive structure and decision-making process" (p. 347). Similarly, the global survey report, "A New Role for New Times," released by a CFO research service in collaboration with KPMG in Singapore (2011), indicated that finance functions are playing a bigger role in firms' strategic decision-making processes today compared to five years ago.
In general, this line of research has suggested that beyond their fiduciary roles (e.g., tax, auditing, financial reporting, internal control), CFOs should also have significant responsibilities in assisting CEOs with strategic management (e.g., Siegel & Sorensen, 1999; Skærbæk & Tryggestad, 2010; Zoni & Merchant, 2007). The furious competition and global economic turmoil in today's business environment require top executives to make decisions on a robust fact base that includes insights into the underlying economics of the business (Glaister & Hughes, 2008; Hrisak, 1996; Zorn, 2004). Some have suggested that CEOs outsource more of the strategic responsibility to CFOs who are in charge of the budget planning and controlling (Egon Zehnder International,...