To delegate or not to delegate? On the quality of voluntary corporate financial disclosure

This study investigates the impact of delegation structure of the top management team upon the corporate voluntary disclosure on financial outcomes. The paper develops two competing hypotheses pertaining to the relationship between the degree of delegation and the quality of management earnings forecasts (MFs), the most influential type of voluntary financial disclosure. In support of the literature on strategic information transmission, the empirical findings demonstrate a U-shaped relationship between the degree of delegation and the quality of MFs, suggesting that an internal optimality of responsibility sharing between the CEO and her immediate subordinates does not exist for internal information production and dissemination. Specifically, the paper analyzes four aspects of MFs, and the documented curvilinear forms are generally persistent across the multiple quality metrics. Consistent with the literature on aging executives, the curvilinear relation is more significant when the top management team is led by an older CEO. The paper utilizes a system of structural equations to ameliorate estimation biases and the results are robust to a battery of robustness checks.