What’s My Style? The Influence of Top Managers on Voluntary Corporate Financial Disclosure
50 Pages Posted: 10 Nov 2009 Last revised: 20 Oct 2010
Date Written: September 1, 2009
Financial economics has traditionally posited a limited role for idiosyncratic noneconomic manager-specific influences, but the strategic management literature suggests such individual influences can affect corporate outcomes. We investigate whether individual managers play an economically significant role in voluntary corporate financial disclosure. Tracking managers across firms over time, we find top executives exert unique and economically significant influence (manager-specific fixed effects) on their firms’ voluntary disclosures, incremental to those of known economic determinants of disclosure, and firm- and time-specific effects. We further show that managers’ unique disclosure styles are associated with observable demographic characteristics of their personal backgrounds: Managers promoted from finance, accounting, and legal career tracks, managers born before World War II, and those with military experience develop disclosure styles with conservative characteristics, and managers from finance and accounting and those with military experience favor more precise disclosure styles. These plausible associations confirm that our estimated manager-specific fixed effects capture systematic long-lived differences in managers’ unique disclosure styles.
Keywords: Voluntary disclosure, management earnings forecasts, individual differences, upper echelons theory
JEL Classification: G30, M12, M41, M43, M45, M50
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