Information aggregation to form earnings expectations: Evidence from CEO networks and management forecast accuracy
Sam (Sunghan) Lee, Steven R. Matsunaga, Peter (Seung Hwan) Oh, Hyun A. Hong
Contemporary Accounting Research · 2024 · Volume 41 · Issue 2
Abstract
We investigate whether a larger CEO employment network provides access to information that improves firms' earnings forecasts and find a significantly positive relation between CEO employment network size and management earnings forecast accuracy. Our results suggest that firms use information obtained from CEO contacts to increase the accuracy of their earnings forecasts. Our conclusion is further supported by evidence of positive associations between CEO employment network size and the likelihood, frequency, and precision of management earnings forecasts. We also find that CEO employment network size is positively related to analysts' reactions to the forecast news and the accuracy of management earnings forecasts relative to analyst forecasts. Overall, our results are consistent with a larger CEO employment network generating external information that increases the accuracy of firms' earnings forecasts.
Keywords
analyst forecasts, CEO network, external information, information transfer, management earnings forecasts, informations externes, prévisions de résultats de la direction, prévisions des analystes, réseau de PDG, transfert d’informations
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