Conservative Traits and Managerial Forecasting Style
Posted: 4 Dec 2018 Last revised: 6 Nov 2019
Date Written: October 8, 2019
We investigate whether conservatism as a personality trait, measured by managers’ signatures, influences managers’ forecasting style. Building on upper echelons theory and psychology literature, we predict that conservative personality traits such as the resistance to change and the ensuing cautiousness in updating beliefs influence managers’ forecasts. Our findings suggest that conservative CFOs more likely select earnings as compared to revenues as the main KPI of the forecast, keep the same KPI across years, and issue specific forecasts. Finally, we provide some evidence that conservative CFOs issue more accurate forecasts. Overall, our findings suggest that the CFO is primarily involved in planning and developing management forecasts.
Keywords: management forecasts, conservatism, upper echelons theory, managerial traits
JEL Classification: M41; M12
Suggested Citation: Suggested Citation