Career Experience and Executive Performance: Evidence from Former Equity Research Analysts
53 Pages Posted: 28 Jun 2019
Date Written: June 4, 2019
This study examines CEOs and CFOs who have prior work experience as equity research analysts. Consistent with backgrounds in forecasting and valuation, we find these executives provide earnings guidance that is more accurate than that of other executives, and their merger and acquisition (M&A) transactions generate significantly higher announcement returns. For available CEOs and CFOs, we examine their track records as research analysts with respect to forecasting accuracy and stock recommendation profitability. We find a positive association between a record of past forecasting accuracy and more accurate earnings guidance, as well as a positive association between past stock recommendation profitability and M&A announcement returns. Beyond these traits, we find these executives provide greater certainty in their answers to analysts during conference calls, especially when answering forward-looking questions. Finally, these executives’ firms exhibit superior accounting and stock return performance. Overall, our evidence suggests that early career skill sets can shape top executive performance outcomes.
Keywords: CEO/CFO, Career experience, Equity analyst, M&A, Earnings forecasts
JEL Classification: M41, G24, J24
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