Executive Extraversion and Voluntary Disclosure: Evidence from Management Earnings Forecasts

Abstract

This study examines whether and how the extraversion of a firm’s key executives influences its provision and the properties of management earnings forecasts. We provide evidence that firms with extraverted chief financial officers (CFOs) are more likely to have a greater level of voluntary disclosure. Specifically, we find that firms with extraverted CFOs tend to issue more earnings forecasts, forecasts with greater level of disaggregation, and forecasts accompanied by an internal attribution. However, we also find that the earnings forecasts issued by extraverted CFOs tend to be less timely and exhibit larger forecast errors. In contrast, we find no evidence that the extraversion of chief executive officers (CEOs) plays a significant role in either the provision or the properties of earnings forecasts. Further analysis suggests that after controlling for earnings forecast surprises, investors tend to react more strongly to earnings forecasts issued by extraverted CFOs. Collectively, our results suggest that the higher level of earnings forecasts associated with CFO extraversion is likely to result from the personality of the CFOs.

Keywords: big five; earnings forecast; extraversion; personality; voluntary disclosure

JEL Classification: M41