Influential Chief Marketing Officers and Management Revenue Forecasts

Abstract

We examine the role of the chief marketing officer (CMO) in corporate voluntary disclosure of future revenues. Using a sample of S&P 1500 firms for the period from 2003 to 2011, we find that the presence of an influential CMO in top management is positively associated with the likelihood of a firm issuing a management revenue forecast. We also find that firms with an influential CMO provide more accurate revenue forecasts than other firms. These findings extend to long-window change analyses and are robust to the use of a propensity score matched-pair approach. Overall, the results are consistent with the notion that CMO influence in top management appears to play an important role in voluntary revenue disclosures. JEL Classifications: M12; M31; M41. Data Availability: All data are publicly available from sources identified in the paper.

Asymmetric Inventory Management and the Direction of Sales Changes*

“…We focus on management guidance of annual sales for year t + 1. The unit of analysis for this test is at the individual guidance level, following Koo and Lee (2018).…”

“…For tests on whether managers and analysts incorporate asymmetric inventory investment in their forecasts of future sales, we follow Koo and Lee (2018) and estimate the following OLS model relating management sales guidance and analyst sales forecasts to the inventory signal conditional on the direction of sales changes: where FORECAST denotes management's and analysts' sales forecast attributes which we measure by the following seven variables. The variable MFHIGHER ( AFHIGHER ) is management sales guidance (analyst consensus sales forecast) for the year t + 1 minus sales in year t , scaled by the market value of equity at the beginning of the fiscal year 9 .…”

“…The variable AFDISPERSION is the standard deviation of individual analyst sales forecasts for year t + 1 scaled by the consensus sales forecast. Following Koo and Lee (2018), control variables in this model include the standard deviation of quarterly sales ( STDREV it ), the standard deviation of monthly stock returns during the fiscal year ( STDRET it ), market value of equity ( SIZE it ), return on assets ( ROA it ), abnormal stock returns ( BHAR it ), Tobin's Q ( Q it ), research and development intensity ( RDINT it ), advertising expense intensity ( ADINT it ), the correlation between quarterly stock returns and seasonal sales changes ( RRCORR it ), a loss indicator for the following year ( LOSS it +1 ), analyst following ( ANALYSTS it ), and forecast horizon from the date of forecasts to the date of fiscal year‐end ( MFHORIZON it +1 for management sales guidance and AFHORIZON it +1 for analyst forecasts). For tests using analyst forecasts as the dependent variable, we also control for the presence of management guidance ( GUIDANCE it ), lagged forecast dispersion ( AFDISPERSION it ), and lagged values of each dependent variable.…”

Customer Satisfaction and Implied Cost of Equity: Moderating Effects of Product Market Conditions and Chief Marketing Officer

“…Along with other executives, CMOs contribute to their firm's strategic planning through market research and making future revenue projections (You et al, 2020) because they are mainly responsible for the development and promotion of brands and products (Bernhard & Olderog, 2014). Particularly, CMOs with greater knowledge and expertise in sales revenues and earnings can play a key role as "information" channels (Koo & Lee, 2018). CMOs also have economic incentives to align the market's expectations with their own information on future revenue estimates (You et al, 2020).…”

Can CFOs Resist Undue Pressure from CEOs toManage Earnings?

“…Our first set of variables is intended to capture a CFO's formal position relative to the CEO. Specifically, we use CFO Inside Director, a dummy variable that identifies whether the CFO is an inside director or not, as in Bedard et al (2014); CFO/CEO Compensation, defined as the ratio of the CFO's total compensation, excluding equity-based compensation, 15 to the CEO's total compensation, as in ; and CFO Salary Rank, a dummy variable that identifies whether the CFO is one of the three most highly compensated executives at the firm (based on cash compensation in the form of salary and bonus), as in , Hopkins et al (2015) and Koo and Lee (2018).…”