Does Past Co-Working Experience between CEOs and Divisional Managers Matter for Corporate Disclosure Quality?

43 Pages Posted: 6 Sep 2023

See all articles by Zhaoran Gong

Zhaoran Gong

Xi'an Jiaotong-Liverpool University (XJTLU) - International Business School Suzhou

Lixin (Nancy) Su

The Hong Kong Polytechnic University - School of Accounting and Finance

Fujing Xue

Sun Yat-sen University (SYSU) - School of Business

Cheng (Colin) Zeng

Hong Kong Polytechnic University

Date Written: August 21, 2023

Abstract

This study investigates the impact of prior co-working experience between a company’s CEO and its divisional managers on the disclosure quality of the firm. Using a large sample of U.S. firms, we find that such experience leads to more accurate management earnings forecasts and lower future stock price crash risks, consistent with the notion that co-working experience facilitates internal communication, which in turn improves external disclosure quality. Moreover, the information-enhancing role of the co-working experience is more pronounced for firms with greater organizational complexity, more opaque internal information environments, and for CEOs who are relatively new to the position and exhibit lower levels of overconfidence. Overall, our findings provide insight into the significance of co-working experience, which is an important yet understudied aspect of social capital, in shaping corporate disclosure and transparency.

Keywords: Co-working experience; Divisional managers; Communication; Disclosure quality

Suggested Citation

Gong, Zhaoran and Su, Lixin (Nancy) and Xue, Fujing and Zeng, Cheng, Does Past Co-Working Experience between CEOs and Divisional Managers Matter for Corporate Disclosure Quality? (August 21, 2023). Available at SSRN: https://ssrn.com/abstract=4546418 or http://dx.doi.org/10.2139/ssrn.4546418

Zhaoran Gong

Xi'an Jiaotong-Liverpool University (XJTLU) - International Business School Suzhou ( email )

111 Ren'ai Road
Suzhou Industrial Park
Suzhou, Jiangsu 215123
China

Lixin (Nancy) Su

The Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M730, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong
852-2766-7772 (Phone)
852-2330-9845 (Fax)

Fujing Xue

Sun Yat-sen University (SYSU) - School of Business

Cheng Zeng (Contact Author)

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

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