Does Past Co-Working Experience between CEOs and Divisional Managers Matter for Corporate Disclosure Quality?
43 Pages Posted: 6 Sep 2023
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
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