This study examines the relation between internal information asymmetry and subordinate managers' engagement in answering investor questions at interactive disclosure events. We measure internal information asymmetry as the difference between non-CEO managers' and the CEO's trading profits on their own company's stock. We find that subordinates' engagement in the Q&A sessions of disclosure events increases with internal information asymmetry. More importantly, our results show that, when internal information asymmetry is higher, subordinates' answers are more specific and forward-looking relative to, and more different from, the CEO's answers. Finally, we demonstrate that, when internal information asymmetry is higher, subordinates' tone is incrementally more useful in predicting future earnings and future earnings announcement returns. Collectively, our results suggest that CEOs decentralize disclosure when subordinate managers possess relatively more information and such decentralization facilitates the release of costly-to-transfer internal information to external investors.

ABSTRACT We explore whether managers’ strong desire for good performance distorts their expectations and, consequently, corporate investment efficiency. We find that managers overweight favorable information and underweight unfavorable information, resulting in optimistic earnings guidance. We construct an ex ante measure of optimism and show that greater optimism is associated with a lower inventory investment efficiency: Managers overinvest in inventory, resulting in lower inventory turnover and increased incidence and severity of inventory writedowns. We also find motivational optimism influences firms’ financial reporting and is associated with an increased incidence of financial misreporting. Our results are consistent with the psychology theory of motivated reasoning, which emphasizes the distortive effects of preferences on beliefs and judgments. JEL Classifications: M41; D91; G41; G31.

We use employee predictions of their companies' six-month business outlook from Glassdoor.com to assess the information content of employee social media disclosures. We find that average employee outlook is incrementally informative in predicting future operating performance. Its information content is greater when the disclosures are aggregated from a larger, more diverse, more knowledgeable employee base, consistent with the wisdom of crowds phenomenon. Average outlook predicts bad news events more strongly than good news events, suggesting that employee social media disclosures are relatively more important as a source of bad news. Consistent with the organizational theory, we find systematic differences in the quantity and nature of the information in employee disclosures when the disclosures are grouped based on employee attributes and job responsibilities. Finally, average outlook predicts future returns of firms that attract less attention by analysts and investors, suggesting that investors in these firms use outlook inefficiently.

Boards of directors play their role in corporate governance by advising and/or monitoring managers. In the corporate disclosure literature, prior research has documented directors’ monitoring role, yet empirical evidence on directors’ advising role is limited. Since the advising role often entails information transfer, we examine directors who concurrently serve as directors or executives in the firms’ related industries (DRIs) and hence possess valuable information about the firms’ external operating environment. We hypothesize and find that more DRIs on boards are associated with more accurate management forecasts. This association is stronger when firms face greater uncertainty, and holds in settings where DRIs are unlikely to monitor managers, suggesting a distinct advising role of DRIs. Our study highlights directors’ role as information suppliers and advisors who help shape corporate voluntary disclosure.

We examine the role of teamwork within the top executive teams in generating management forecasts. Using social connections within the executive team to capture the team’s interaction, cooperation, and teamwork, we find that social connections among team members are associated with higher management forecast accuracy, consistent with economic theories that information is dispersed within a firm and with sociology insights that social connections facilitate information sharing. Further analyses show that the association between social connections and forecast accuracy is stronger when the teams are just beginning to work together, when their firms face more uncertainty or adversity, and when the CEOs are less powerful. Our results hold for a subsample of executive teams that experience pseudo exogenous shocks to their social connectedness. Taken together, our results underscore the importance of teamwork among executives in the forecast generation process. This paper was accepted by Suraj Srinivasan, accounting.

ABSTRACT This paper studies, both theoretically and empirically, how subordinates to CEOs can discipline the CEOs' self-serving activities. I predict that because CEOs' self-serving activities hurt the subordinates through the subordinates' stakes in the firms, the subordinates who observe these activities will take actions that negatively affect the CEOs, and that in anticipation of such reactions by subordinates, the CEOs will limit their own misbehaviors. This disciplinary mechanism will become more effective when the CEOs' self-serving activities are more observable to subordinates. Further, the sensitivity of CEOs' self-serving activities to observability will increase (1) as the agency problem between CEOs and their subordinates intensifies, and (2) when external monitoring is less effective. The incentive pay for the subordinates will also decrease with the strength of external monitoring. Using a series of empirical tests, I find results that are largely consistent with my theoretical predictions. JEL Classifications: G34; M41. Data Availability: Data are available from the public sources cited in the text, except for Glassdoor data, which are obtained by the author under a confidentiality agreement with Glassdoor, Inc.

We investigate whether information possessed by rank-and-file employees is incorporated in top managers’ expectations and decisions. Using employees’ predictions of their company’s business outlook from Glassdoor.com to measure the employees’ information set, and using management earnings forecasts to measure management expectations, we show that management expectations incorporate employees’ information only partially. This intrafirm information asymmetry is lower when top managers are more experienced and internally engaged and when employees are more satisfied with senior management, firm culture, and their compensation; and higher in companies that are more decentralized, have internal control weakness, and poorly incentivize their employees. Further analyses suggest that our results are not driven by managers’ strategically choosing not to use employees’ information in their forecasts. Finally, we document that firms with large discrepancies between management forecasts and employee outlook have poorer future performance and a higher likelihood of CEO turnover.

Based on our primary research question of what the relationship between user experience (UX) and machine learning (ML) is, this literature review examines how UX and ML function independently and interact with each other. We review literature with regard to the development of UX and ML separately, as well as the combination of these two areas. Our ultimate findings focus on four dimensions: the relationship between UX and ML, the advantages of integrating UX and ML, the challenges of applying ML technology to UX design, as well as the future implications in using ML to enhance UX. Finally, we give our suggestions concerning the establishment of a better ecosystem between UX and ML.

I propose a novel measure of firms that hire in the same talent pool analyzing employees’ internet co-search patterns on two major online labor markets: Glassdoor and LinkedIn. I classify co-searched firms as labor market peer firms (LMPs). LMPs (1) overlap but differ from standard product-market-based industry groupings; (2) exhibit significant incremental power to explain stock return and earning comovements; (3) outperform standard industry groupings to explain return comovements when LMPs share more labor market skills. Firms that are central in the LMP network pay higher salaries. My results highlight the potential of using the wisdom of employees extracted from the internet to measure fundamental linkages that are difficult to identify by standard industry measures. JEL Codes: D83, G0, J01, M2

We investigate whether Japan’s much touted governance reforms improve its firms’ management of cash, economic performance, and valuation. Consistent with an improvement in governance since 2000, Japanese firms hold less cash and increase payouts to shareholders. Improvements in performance are associated with reductions in (excess) cash, reductions in the influence of the banks that traditionally sit at the center of horizontal keiretsu, and increases in the holdings of management and foreign investors. The market valuation of Japanese firms’ cash holdings was lower than for US firms during the 1990s but increases to levels closer to those of US firms in the 2000s. Collectively, the evidence suggests that performance improves in those Japanese companies that reform their governance practices. These findings have implications for other Asian economies, such as China, India, and Korea, where there are ongoing discussions of whether improved governance can increase firm performance and valuation.