CEO Political Ideology and Management Earnings Forecast

Abstract

Republican CEOs are more likely to issue earnings forecasts and to issue forecasts that are more accurate and timely. Republican CEOs favor range and less optimistic forecasts, convey more negative news, and have more positive earnings surprises. We address endogeneity using propensity score matching and difference-in-difference estimates. Our results are robust to controlling for CEO characteristics, incentives, overconfidence, and managerial ability, and are stronger for firms with a high level of institutional ownership and litigation risk. The preference for threat and ambiguity avoidance of conservative CEOs seem to outweigh the tendency to seize on information associated with their authoritarian personalities.