The Effects of Internal Information Aggregation on U.S. Multinational Enterprises’ Voluntary Disclosure Quality

Posted: 25 Jul 2015 Last revised: 29 Dec 2017

See all articles by Augustine Duru

Augustine Duru

American University - Kogod School of Business

Yun Fan

University of Oklahoma - Steed School of Accounting

Mark (Shuai) Ma

University of Pittsburgh - Katz Graduate School of Business

Date Written: May 31, 2016

Abstract

Using a sample of U.S. multinational enterprises, we examine whether internal information aggregation affects the quality of voluntary disclosure to external users, proxied by management earnings forecasts accuracy. We find that management earnings forecasts are less accurate when the internal information reported to a firm’s general manager is more aggregated. In addition, we show that financial analysts’ reactions to management forecasts are weaker for firms with a higher level of internal information aggregation. We also document that firms with higher internal information aggregation are more likely to under-invest and experience slower sales growth. Overall, our study suggests that internal information aggregation plays an important role in shaping multinational enterprises’ external financial disclosure behavior.

Keywords: Internal reporting structure; Information aggregation; Management earnings forecast

Suggested Citation

Duru, Augustine and Fan, Yun and Ma, Mark (Shuai), The Effects of Internal Information Aggregation on U.S. Multinational Enterprises’ Voluntary Disclosure Quality (May 31, 2016). Available at SSRN: https://ssrn.com/abstract=2635563 or http://dx.doi.org/10.2139/ssrn.2635563

Augustine Duru (Contact Author)

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
202-885-1937 (Phone)
202-885-1992 (Fax)

Yun Fan

University of Oklahoma - Steed School of Accounting ( email )

307 W Brooks
Norman, OK 73019
United States

Mark (Shuai) Ma

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

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