What’s My Style? The Influence of Top Managers on Voluntary Corporate Financial Disclosure

58 Pages Posted: 8 Dec 2008 Last revised: 21 Oct 2010

See all articles by Linda Smith Bamber

Linda Smith Bamber

University of Georgia - J.M. Tull School of Accounting

John (Xuefeng) Jiang

Michigan State University - Department of Accounting & Information Systems

Isabel Yanyan Wang

Michigan State University

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2008

Abstract

Prior research in finance and accounting generally posits a limited role for idiosyncratic manager-specific attributes in explaining accounting and disclosure choices. In contrast, upper echelons theory, originating in the strategic management literature, suggests that differences among individuals can affect corporate outcomes. Extant research in voluntary disclosure follows the traditional financial economics perspective, yet even the most comprehensive empirical models leave most of the cross-sectional variation in disclosure unexplained. This prompts us to investigate whether these models are missing a major component: Do idiosyncratic differences among individual managers play a significant incremental role in voluntary corporate financial disclosure?

We build a data set that tracks managers over time, which allows us to isolate manager-specific fixed effects after controlling for firm effects. We find that top executives do exhibit unique individual-specific and economically significant disclosure styles. That is, our evidence suggests that individual managers significantly influence attributes of their firms' voluntary disclosures, even after controlling for techno-economic determinants of disclosure identified in prior research, and firm- and time-specific effects. The collective magnitude of these manager-specific fixed effects is large: Manager-specific effects explain roughly as much or more of the variation in disclosure as the known techno-economic determinants combined. We then investigate whether managers' unique fixed effects are associated with observable characteristics of their own personal backgrounds. We find that managers promoted from finance, accounting, and legal career tracks, managers born before World War II, and managers holding MBAs tend to exhibit more conservative disclosure styles. These associations between our estimates of managers' fixed effects and distinctive (permanent) characteristics of their own personal backgrounds provide evidence confirming that our estimated manager fixed effects capture systematic long-lived differences in managers' unique disclosure styles. Our results suggest that individual-specific effects play an important - yet heretofore largely unexplored - role in voluntary financial disclosure. Further investigation of the role unique individual characteristics play in explaining corporate financial reporting is potentially a fruitful direction for future research.

Keywords: Voluntary disclosure, management earnings forecasts, individual differences, upper echelons theory

JEL Classification: G30, M12, M41, M43, M45, M50

Suggested Citation

Bamber, Linda Smith and Jiang, John (Xuefeng) and Wang, Isabel, What’s My Style? The Influence of Top Managers on Voluntary Corporate Financial Disclosure (June 1, 2008). Accounting Review, Vol. 85, No. 4, pp. 1131-1162, July 2010. Available at SSRN: https://ssrn.com/abstract=1312904

Linda Smith Bamber

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706-542-3501 (Phone)
706-542-3630 (Fax)

John (Xuefeng) Jiang (Contact Author)

Michigan State University - Department of Accounting & Information Systems ( email )

252 North Business Complex
East Lansing, MI 48824-1034
United States
517-432-3031 (Phone)
517-432-1101 (Fax)

HOME PAGE: http://www.msu.edu/~jiangj/

Isabel Wang

Michigan State University ( email )

N233 Business Complex
Broad School of Business
East Lansing, MI 48824-1122
United States

HOME PAGE: http://www.msu.edu/~wangyany/

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