The Effects of Internal Information Aggregation on U.S. Multinational Enterprises’ Voluntary Disclosure Quality
Posted: 25 Jul 2015 Last revised: 29 Dec 2017
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
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