We study the role of executive functional background in explaining management discretion in financial reporting. Taking goodwill impairment as our reporting setting, we focus on top executives (CEOs and CFOs) whose employment history includes experience in investment banking, private equity, venture capital or management consulting, as we expect these executives to have unique human capital and reputation concerns with respect to acquisitions and valuation modeling related to fair-value reporting. On average, we document that CFOs with prior transaction experience impair goodwill more frequently and in smaller amounts than other executives. Further investigation suggests that CFOs with prior transaction experience report goodwill that is more value relevant. This is consistent with CFO valuation expertise helping impair goodwill in a more informative manner. In contrast, CEOs with prior transaction experience appear to be subject to agency conflicts that affect their propensity to impair goodwill. Overall, our results not only suggest that executive functional background is a significant explanatory factor of financial reporting discretion, but also that a better understanding of its effect relies upon analyses of specific settings and predictions grounded in upper echelons theory and agency theory.

The case describes the challenges that Ultimate Fighting Championship faced as a result of regulatory opposition and loss of the license to operate. The genesis of the business idea, the subsequent growth, and the fall of the UFC are described. The case concludes with Lorenzo Fertitta deciding whether to invest in the company.

We study the M&A activity of firms with top executives whose employment history includes experience in a Wall Street firm, especially those with investment banking background ("IB executives"). In terms of strategy, controlling for firm-level effects, we document that firms with IB executives (and directors) engage in more divestitures. We also find that the presence of an IB CFO—but not CEO—is associated with more acquisitions. Next, in terms of accounting choice, we find that IB executives are more likely to impair goodwill only when their reputation concerns are likely to be low. Finally, in terms of performance, we find that market reactions to transaction announcements vary with the presence of a former Wall Street executive primarily when (s)he is an alumnus of one of the advisors on the deal. Overall, our results suggest that the influence of Wall Street executives on their firm's M&A stems not only from their functional background but also from their reputation concerns and social networks.