Conservative Traits and Managerial Forecasting Style

Posted: 4 Dec 2018 Last revised: 6 Nov 2019

See all articles by Sara Bormann

Sara Bormann

Washington University in St. Louis - John M. Olin Business School

Debbie Claassen

Ludwig-Maximilians-Universität München

Christian Hofmann

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

Nina Schwaiger

LMU Munich

Date Written: October 8, 2019

Abstract

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

Bormann, Sara and Claassen, Debbie and Hofmann, Christian and Schwaiger, Nina, Conservative Traits and Managerial Forecasting Style (October 8, 2019). Available at SSRN: https://ssrn.com/abstract=3281621 or http://dx.doi.org/10.2139/ssrn.3281621

Sara Bormann

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Debbie Claassen

Ludwig-Maximilians-Universität München ( email )

Christian Hofmann

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Nina Schwaiger (Contact Author)

LMU Munich ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

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