The effect of CFO's accounting firm experience on debt concentration

The appointment of former auditors as CFOs has become increasingly common, yet little is known about whether and how their prior accounting firm experience affects corporate debt concentration decisions. Using data on Chinese A-share listed firms from 2008 to 2020, we provide evidence that prior-auditor CFOs significantly reduce debt concentration. This effect is achieved through three channels: mitigating default risk, enhancing liquidation value, and improving accounting information quality, which collectively foster more diversified debt structures. The effect is stronger when CFOs possess senior accounting firm experience and in firms with severe financial constraints or high agency costs. We further find that prior-auditor CFOs lower the cost of debt, highlighting the economic consequence of their influence. By identifying accounting firm experience as a previously overlooked managerial attribute that shapes corporate debt structure decisions, our study contributes to the literature on debt structure determinants and extends research on how managerial career backgrounds affect debt decision-making.