Top Management Team Functional Diversity and Management Forecast Accuracy

Accounting Horizons 2022; doi: https://doi.org/10.2308/HORIZONS-19-108

65 Pages Posted: 23 Jun 2022

See all articles by Shan Wang

Shan Wang

Loyola Marymount University

Date Written: 3 28, 2022

Abstract

I examine whether TMT between-member and within-member functional diversity affect management earnings forecast accuracy. Between-member functional diversity refers to the heterogeneity of functional experts on a TMT and within-member functional diversity refers to the aggregate functional breadth of TMT members. I find that both types of functional diversity are positively associated with management forecast accuracy. Further cross-sectional analyses show that these positive associations are significant only when firms face greater information uncertainty, when TMTs are more decentralized, and when TMT members have longer joint team tenure. These findings are consistent with the information-processing perspective that TMT functional diversity can facilitate information processing and sharing and thus improve management forecast accuracy. This study contributes to the literature by shedding light on how TMT members with various functional backgrounds work together in shaping financial disclosure quality.

Keywords: top management team (TMT), functional diversity, management forecast accuracy

Suggested Citation

Wang, Shan, Top Management Team Functional Diversity and Management Forecast Accuracy (3 28, 2022). Accounting Horizons 2022; doi: https://doi.org/10.2308/HORIZONS-19-108, Available at SSRN: https://ssrn.com/abstract=4136732

Shan Wang (Contact Author)

Loyola Marymount University ( email )

1 LMU Drive
Los Angeles, CA 90054
United States
3103387660 (Phone)
90045-2678 (Fax)

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