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.
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Research Article|
June 13 2022
Top Management Team Functional Diversity and Management Forecast Accuracy
Shan Wang
Shan Wang
Loyola Marymount University
Assistant Professor
Accounting
1 LMU Drive, MS 8385
UNITED STATES
Los Angeles
CA
90045
(310)338-7660
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Received:
November 12 2021
Revision Received:
November 12 2021
Revision Received:
November 12 2021
Revision Received:
April 04 2022
Accepted:
June 08 2022
Online Issn: 1558-7975
Print Issn: 0888-7993
2022
Accounting Horizons (2022)
Citation
Shan Wang; Top Management Team Functional Diversity and Management Forecast Accuracy. Accounting Horizons 2022; https://doi.org/10.2308/HORIZONS-19-108
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