Emotions and Managerial Judgment: Evidence from Sunshine

• 成果类型: Article
• 署名作者: Chen, Chen; Chen, Yangyang; Pittman, Jeffrey A.; Podolski, Edward J.; Veeraraghavan, Madhu
• 署名单位: Monash University; City University of Hong Kong; Memorial University Newfoundland; Virginia Polytechnic Institute & State University; Deakin University; Manipal Academy of Higher Education (MAHE)
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2020-0215
• 发表日期: 2022
• 页码: 179-203
• 关键词: institutional investors; voluntary disclosure; EARNINGS FORECASTS; ceo age; analyst superiority; positive affect; mood; weather; BEHAVIOR; cost

摘要

We examine the role and economic consequences of emotions in shaping the judgment of corporate executives. Analyzing a large sample of U.S. public firms, we find that sunshine-induced good mood leads managers to make upwardly biased earnings forecasts. Importantly, our evidence implies that managers become less susceptible to the sunshine priming effect in unambiguous settings, when their forecasts are subject to stricter external monitoring, and when they have stronger incentives to issue accurate forecasts. Additional tests show that equity market participants discern less informative signals from forecasts influenced by sunshine and that managers prone to the sunshine priming effect impose costs on their firms in the form of higher information risk and equity financing costs. Reflecting that labor markets also play a disciplinary role, we find that mood-prone managers suffer adverse career outcomes. We provide the first large-scale analysis on the nuanced ways in which emotions affect top executives. JEL Classifications: G02; G30; M40; M41.