Financial Fallout: What Happens When a CFO Suddenly Dies?

An often overlooked but critical factor in a company’s financial stability is the Chief Financial Officer (CFO) role. While CEOs are typically the face of an organization, CFOs operate behind the scenes, managing the company’s financial actions and reporting those results to shareholders through financial reporting and disclosure. But how important is the CFO?

New research by Foster School of Business Professor of Accounting Sarah McVay, conducted with MaryJane Rabier, sheds light on this question. Examining when a CFO suddenly dies offers a rare glimpse into how CFOs impact publicly traded companies. Unlike planned departures, a CFO’s unexpected death leaves no time for transition.

Through examining firms that experienced the sudden death of a CFO, McVay and her co-author were able to measure the immediate impact of an unexpected leadership loss. They found that companies experience a decline in both the accuracy and timeliness of their financial reports and some evidence of declines in operational performance. In other words, CFOs play an integral role in the organization. The research underscores a key takeaway for business leaders: succession planning isn’t just a best practice; it’s a necessity. 

By building strong internal controls, establishing a succession plan and chain of command, training key personnel, and preparing contingency plans, firms can better navigate unexpected leadership disruptions and protect their financial integrity. McVay’s study highlights the often overlooked yet critical role of CFOs and provides valuable insights into how companies can safeguard their financial operations.

We caught up with McVay, who teaches topics related to financial accounting in the Foster School of Business, to learn more about her study, its valuable insights, and why business leaders should take note.

Why study the impact of sudden CFO deaths?

Sarah McVay: It’s typically quite difficult to quantify how much any individual matters to an organization. CFO turnovers often occur during unusual times where a lot of other changes were also made, such as during a reorg following extremely poor performance, which makes isolating the effect of the CFO difficult. If a CFO retires, there’s typically very little impact on a firm’s financial integrity because their notice gives the company time to make a succession plan. That doesn’t mean they weren’t important, but instead that we were not able to isolate their impact on the firm. That’s why it was important to look specifically at sudden deaths to measure the immediate impact on a firm. 

(Note: The study specifically examines the impact of sudden CFO deaths. Prolonged illnesses weren’t included, as they often allow time for transition planning. The goal was to measure the impact of an unplanned, immediate loss).

What specific financial reporting issues did you examine?

Sarah McVay: We looked at the timeliness and accuracy of financial reports using two measures: late and incorrect filings of a firm’s quarterly reports with the Securities and Exchange Commission (SEC). We analyzed the SEC filings before and after the sudden death of a CFO and found that a company is less likely to file its quarterly report on time and more likely to make mistakes when it does file. 

The loss of financial integrity also impacts internal decision-making. If managers are relying on incomplete or erroneous numbers to make decisions, then they will likely make the wrong decisions. If the numbers are messed up internally, it will manifest in poor decision-making. 

Financial reporting isn’t just a formality; it directly impacts how businesses operate. 

What insights can firms or business leaders gain from your research?

Sarah McVay: Every firm needs a succession plan! If there is a sudden CFO death but the firm has a plan with an appointed accountant who can take over the role, it mitigates many of the issues we see with late and incorrect filings. Another accountant who is fully aware of the firm’s financial standing must be part of the contingency plan. 

We also found that stronger internal controls over financial reporting, along with qualified subordinates to step in to fill the hole left by the CFO, reduce these issues. Organizations with stronger internal infrastructure and highly skilled employees are better prepared for the sudden loss of a CFO. 

What was a surprising research finding?

Sarah McVay: I was surprised that there was no effect on financial reporting timeliness or accuracy after a CEO’s sudden death. They don’t seem to be a fundamental part of the financial reporting process; we see no positive or negative impact. Financial reporting appears to distinctly be a CFO responsibility. However, if either a CEO or CFO suddenly dies, the company is more likely to have a decline in earnings the following year. Both CEOs and CFOs matter for company performance.

Why is this research significant?

Sarah McVay: First, this research shows that the CFO matters; this is clear from the direct impact their sudden passing has on financial reporting quality. Accounting and the importance of financial reporting don’t always get the attention they deserve, especially within startups and from non-financial executives. This research gives CFOs and their teams more credit for the work they do in maintaining a company’s financial stability. 

Second, it emphasizes the importance of strategic, long-term planning. CFOs often hold a lot of institutional knowledge, especially in smaller companies. The loss of this institutional knowledge makes the sudden loss of a CFO even more catastrophic. If a firm has effective internal controls, such as highly detailed processes and procedures for someone else to follow, qualified personnel, and a succession and contingency plan, the replacement can come in and do the work more easily. 

Ultimately, this study illustrates the value of a succession and contingency plan, and highlights just how essential CFOs are to not only the financial reporting process but also firm performance.

Read the research paper here: “How Resilient are Firms’ Financial Reporting Processes to the Sudden Loss of a CFO? Evidence from Sudden Deaths” – Sarah McVay, MaryJane Rabier. Published in The Accounting Review (2025). 

Learn more about the Master of Science in Professional Accounting program here.