Workshop Series: Matthew Hayward
In this article we consider how behavioral decision theory informs organizational impression management by examining the use of earnings forecast precision as a tool to influence stakeholder perceptions and market-related outcomes. We situate our arguments within the context of the precision of firms' earnings guidance because this choice is discretionary, material and widespread. Absent impression management, we offer support for the perspective that firm leaders (CEOs and CFOs) provide earnings guidance which is congruent with investors' pre-existing expectations. Then we explore three distinct impression management mechanisms that could influence earnings guidance precision, specifically the motivation to convince investors that a) performance will improve; b) adverse prior outcomes will be corrected or reversed; and c) there are social comparison processes which justify the basis for earnings guidance precision. Results point to the conditions in which organizations and their leaders seek to be accurate and when they seek to be informative with their forecasts. Theory and evidence also highlight how, over time, greater earnings precision can be associated with earnings manipulation and organizational malfeasance.
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Authors: Mathew Hayward (UQ/University of Colorado, Markus Fitza (Bentley University) and Don Moore (UC Berkeley)
Mathew Hayward has his PHD in Strategy and Organizational Studies from Columbia University. His research centers on overconfidence and hubris in decision making and now corporate communications and investor relations. He has published in Administrative Science Quarterly, Academy of Management Review, Management Science, Strategic Management Journal and so forth. He won the Newman Prize for best dissertation at the Academy of Management and in 2011 is the co-winner of the Organization and Management Theory prize for the best paper at the Academy of Management
Markus Fitza was awarded his PhD in Strategy and Entrepreneurship from the University of Colorado in August 2010. In his research he focuses on strategy and corporate governance with a special interest in uncertain and dynamic environments. He has two published works in the Strategic Management Journal and one in the AoM Best Paper Proceedings. His dissertation is a finalist for the 2011 Academy of Management BPS Dissertation Award and he is the winner of the 2010 Best Paper Award at the Strategic Management Society Annual Meeting. He lives in Boston and teaches at Bentley University.