The Effect of Geographic Diversity on Managerial Earnings Forecasts

European Accounting Review, forthcoming

82 Pages Posted: 15 Aug 2012 Last revised: 20 Oct 2022

See all articles by Bright Gershion Godigbe

Bright Gershion Godigbe

Washington University in St. Louis - John M. Olin Business School

Jared N. Jennings

Washington University in St. Louis

Hojun Seo

Purdue University

Lloyd Tanlu

Washington and Lee University; Northeastern University

Date Written: May 31, 2014

Abstract

We examine whether geographic diversity – a salient characteristic of the firm’s organizational structure – affects the timing and quality of voluntary disclosure. We find that firms with higher geographic diversity issue earnings forecasts that are more pessimistic, less precise, and less accurate. We also find that firms with higher geographic diversity are more likely to bundle managerial earnings forecasts with the prior quarter’s earnings announcement and less likely to issue forecasts during the quarter. These results are consistent with geographic diversity increasing information acquisition costs associated with providing managerial earnings forecasts. Consistent with these findings, we provide evidence consistent with managers substituting managerial earnings forecasts with firm-initiated non-earnings press releases, which require less information acquisition, and that managerial earnings forecasts are less useful to analysts and investors when geographic diversity is higher. Overall, our findings suggest that a firm’s organizational complexity is a factor that shapes the information environment of the firm.

Keywords: Organizational Complexity; Geographic Diversity; Management Earnings Forecasts; Press Releases; Information Acquisition Costs

JEL Classification: M40, M41

Suggested Citation

Gershion Godigbe, Bright and Jennings, Jared N. and Seo, Hojun and Tanlu, Lloyd D., The Effect of Geographic Diversity on Managerial Earnings Forecasts (May 31, 2014). European Accounting Review, forthcoming, Available at SSRN: https://ssrn.com/abstract=2130119 or http://dx.doi.org/10.2139/ssrn.2130119

Bright Gershion Godigbe

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Jared N. Jennings

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Hojun Seo

Purdue University ( email )

403 W State St
West Lafayette, IN 47907
United States

Lloyd D. Tanlu (Contact Author)

Washington and Lee University ( email )

Lexington, VA 24450
United States

Northeastern University ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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