Management Accounting Section Midyear Meeting

Contemptuous CEOs and Management Forecasts

• In Event: CEO Behavior

Abstract

This study examines how a CEO's contemptuous personality relates to the issuance and the properties of management forecasts. We apply a machine-learning approach to analyze CEOs' facial expressions during their interviews at CNBC. By aggregating the contempt expression, we construct a measure of the CEO's contemptuous personality. Conceptually, contemptuous personality manifests as "social distancing and avoidance" and "perfectionism." We hypothesize and find that contemptuous CEOs are less likely to issue management forecasts. We further hypothesize and find that when contemptuous CEOs issue earnings guidance, their forecasts (MFs) are more optimistically biased and less accurate. In addition, we find that contemptuous CEOs walk down their forecasts to avoid missing their forecasted earnings benchmark. Further analyses suggest that financial analysts recognize CEOs' contemptuous personalities; their forecast revisions to the MF issuances are less sensitive to MFs issued by contemptuous CEOs. Our study provides novel evidence that contemptuous personality as a relevant CEO individual characteristic in the management forecasting context.

Authors

• Ru Tina Gao, University of Queensland

• Jeong-Bon Kim, City University of Hong Kong

• Xiaotao Kelvin Liu, Northeastern University

• Ray Wang, Hong Kong Baptist University