Entering text into the input field will update the search result below

What To Expect When Your CFO Leaves You

Feb. 02, 2019 10:30 AM ETAAPL, AMZN, C, D, F, META, JD, MSFT, NRCG, PCG, PSQ2 Comments


  • Tesla's CFO has retired. Investors tend to view that type of turnover as a red flag, so I looked for evidence as to why that might be the case.
  • The Fed is turning dovish, while the market seems to have taken Friday's jobs report in stride. I'm learning some lessons about market timing.
  • Our editors had a lot of strong recommendations, ranging from a niche piece on some misunderstood warrants to an exploration of what bond market bears have gotten wrong.

Happy Trails To Tesla CFO Deepak Ahuja

It's common for bears and short-sellers to point to a CFO departure as a strong negative for a company and its stock.

A similar reaction emerged after Tesla's earnings call Wednesday when Elon Musk announced the departure of CFO Deepak Ahuja. It's Ahuja's second retirement from the company, and by all appearances they expect this one to stick. Ahuja's internal replacement, Zachary Kirkhorn, has been at Tesla almost a decade and is in his mid-30s.

Commentators on Twitter are making a big deal out of this. Intuitively, it makes sense: A departure by your head accountant is probably disruptive and it's hard to imagine that it's ever a good thing. In the worst case situation, the CFO might be leaving due to major problems in a company's reporting. But those are just gut-feelings on my part. To find out what types of trends are associated with CFO departures, I looked at some abstracts from the academic literature. At a glance, the findings don't look good.

Here's the abstract for Shehzad Mian's "On The Choice And Replacement Of Chief Financial Officers," published in April 2001 and cited 96 times:

Key findings reported in the paper are: (A) external CFO succession rate is markedly higher than the external CEO succession rate, (B) the incidence of retirement is less common for serving CFOs as compared to the top executive, (C) CFO turnover is preceded by negative excess returns, (D) CFO turnover is preceded by a decline in operating return on assets in the pre-period, (E) announcements of CFO turnover are associated with a significant negative stock price reaction when old CFO quits and firm replaces with an internal appointment, and (F) CFO turnover is preceded by abnormally high CEO turnover.

Tesla shareholders might be concerned about

This article was written by

Co-host of Behind The Idea podcast. As Managing Editor - Contributor Content, I lead the Seeking Alpha team dedicated to curation of crowdsourced investment research and commentary. I am a CFA charterholder and member of the CFA Society Washington, DC.

Analyst’s Disclosure: I am/we are long PSQ.

I am long ERUS, EWZ, JNK, PSQ, and TUR.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.