Abstract
Abstract We study the relationship between financial decision making and top management team (TMT) composition using a sample of firms that choose the early adoption of the income decreasing accounting standard, SFAS No. 106. If early adoption addresses political costs or signals future performance improvement, then the decision is one that demands a high level of accounting and finance sophistication. We observe that the TMT composition of early adopters is consistent with this expectation. Relative to a control group, TMTs of early-adopting firms are nearly twice as likely to have dominant functional backgrounds in accounting and finance. Early adopters' TMTs also tend to have newer members, suggesting a bias for action.
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