Do Well Managed Firms Make Better Forecasts?

42 Pages Posted: 27 Dec 2021 Last revised: 9 Nov 2022

See all articles by Nicholas Bloom

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Takafumi Kawakubo

Center for the Protection of Human Rights (CPHR) - LSE

Chunming Meng

National Institute of Economic and Social Research

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Rebecca Riley

King’s College London

Tatsuro Senga

Queen Mary University of London

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Date Written: December 2021

Abstract

We link a new UK management survey covering 8,000 firms to panel data on productivity in manufacturing and services. There is a large variation in management practices, which are highly correlated with productivity, profitability and size. Uniquely, the survey collects firms’ micro forecasts of their own sales and also macro forecasts of GDP. We find that better managed firms make more accurate micro and macro forecasts, even after controlling for their size, age, industry and many other factors. We also show better managed firms appear aware that their forecasts are more accurate, with lower subjective uncertainty around central values. These stylized facts suggest that one reason for the superior performance of better managed firms is that they knowingly make more accurate forecasts, enabling them to make superior operational and strategic choices.

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Suggested Citation

Bloom, Nicholas and Kawakubo, Takafumi and Meng, Chunming and Mizen, Paul and Riley, Rebecca and Senga, Tatsuro and Van Reenen, John Michael and Van Reenen, John Michael, Do Well Managed Firms Make Better Forecasts? (December 2021). NBER Working Paper No. w29591, Available at SSRN: https://ssrn.com/abstract=3994269

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

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Takafumi Kawakubo

Center for the Protection of Human Rights (CPHR) - LSE ( email )

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Chunming Meng

National Institute of Economic and Social Research ( email )

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Paul Mizen

University of Nottingham ( email )

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Bank of England

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Centre for Economic Policy Research (CEPR)

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Rebecca Riley

King’s College London ( email )

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Tatsuro Senga

Queen Mary University of London ( email )

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John Michael Van Reenen

Stanford Graduate School of Business ( email )

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