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Diversity on management and supervisory board and accuracy of management earnings forecasts in IPO prospectuses

Author

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  • Tomasz Sosnowski

    (University of Lodz)

  • Anna Wawryszuk-Misztal

    (Maria Curie-Sklodowska University in Lublin)

Abstract

Motivation: Although the issue of accuracy and bias of earnings forecasts revealed in the IPO prospectuses has attracted attention of many researchers, the literature on the relationship between board characteristics and the quality of such financial projections is still very limited, especially for a two-tier board structure consisting of the management and the supervisory board. The policy of diversity on the boardroom is promoted in many countries and composition of the management and supervisory boards is expected to be comprehensive and diverse, among others, in terms of gender, education, age and professional experience of the members. Aim: The main objective of this study is to analyse the relationship between the accuracy of the earnings forecast disclosed in the IPO prospectus and the diversity of company’s corporate governance institutions. More specifically, we ask a question whether the extent of diversity in the board system features may have an impact on the accuracy of such forward-looking financial information. Results: Using a sample of 104 IPOs from the Warsaw Stock Exchange, we find that certain characteristics of the management and supervisory board enhance the usefulness of forward-looking financial information from a IPO prospectus, as some of boards characteristics are important for the evaluation of the earnings forecasts credibility at the time of IPO. For example, in accordance with our expectations, the age diversity results in more accurate forecasts. This evidence may be seen as an argument for diversity policy among board members.

Suggested Citation

  • Tomasz Sosnowski & Anna Wawryszuk-Misztal, 2019. "Diversity on management and supervisory board and accuracy of management earnings forecasts in IPO prospectuses," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 18(3), pages 347-363, September.
    • Handle: RePEc:cpn:umkeip:v:18:y:2019:i:3:p:347-363
    DOI: 10.12775/EiP.2019.024
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    References listed on IDEAS

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    2. Radosław Pastusiak & Jakub Keller & Michał Radke, 2020. "Marketability Discount in Various Economic Environments. Comparison of Developed and Emerging Markets on the Example of the USA and Poland," JRFM, MDPI, vol. 13(6), pages 1-15, June.

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    More about this item

    Keywords

    corporate governance; IPO forecast accuracy; management and supervisory board diversity; forecast error;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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