Corporate teamwork culture and management earnings forecast quality

• Published date: 01 October 2023
• Author: Wenye Tang,Chunhao Xu,Lili Gai
• Date: 01 October 2023
• DOI: http://doi.org/10.1002/jcaf.22646

Received:  April   Accepted:  June 

DOI: ./jcaf.

RESEARCH ARTICLE

Corporate teamwork culture and management earnings

forecast quality

Wenye Ta ng 1Chunhao Xu2Lili Gai2

WalkerCollege of Business, Appalachian

State University, Boone, North Carolina,

USA

College of Business, The University of

TexasPermian Basin, Odessa, Texas, USA

Correspondence

Chunhao Xu, College of Business, The

University of Texasof the Permian Basin,

 E. University Odessa, TX -,

USA.

Email: xu_c@utpb.edu

Abstract

We examine the relationship between corporate teamwork culture and firms’

voluntary disclosure, specifically management earnings forecast quality. A new

measure of corporate teamwork culture is used, which was calculated using a

machine learning approach to analyze earnings call transcripts through a novel

word embedding model. We find that firms with stronger corporate teamwork

culture are more likely to issue earnings forecasts and file -K forms. Further

analysis reveals that the corporate teamwork culture score is positively associ-

ated with the quality of management earnings forecast. It implies that firms with

a stronger teamwork culture issue more accurate earnings forecasts as human

harmony cooperation and strong employee responsibility help reduce errors

in earnings forecasts. Our new empirical results contribute to the voluntary

disclosure and corporate culture literature.

KEYWORDS

Corporate Culture, Earnings Forecast, VoluntaryDisclosure

JEL CLASSIFICATION

G, G, M, M

1 INTRODUCTION

This study investigates the relationship between corporate

teamwork culture and firms’ voluntary disclosure. Specif-

ically, we focus on the frequency and accuracyof manage -

ment earnings forecast (MEF) to examine whether firms

with stronger teamwork cultures have better disclosure

quality.

O’Reilly and Chatman (,Page)definecorporate

culture as “a set of norms and values that arewidely shared

and strongly held throughout the organization”. In a sur-

vey conducted by Graham et al. (), senior executives

consider corporate culture as a top-three driver of firm

value. Mounting evidence suggests that different dimen-

sions of corporate culture are correlated with various

aspects of firms’ operations and business outcomes. Guiso

et al. () find that corporate culture is positively associ-

ated with firm performance when employees trust the top

management team. Furthermore, Li et al. () document

strong positive correlations between corporatecultural val-

ues and business operations such as operational efficiency,

earnings quality,CEO wealth-performance sensitivity, and

firm value. More studies document other positive effects

of corporate culture on business outcomes such as greater

synergies in mergers and acquisitions and lower audit fees

(Bena & Li, ; Chen et al., ;Edmans,).

However, there is scant research on the relationship

between corporate culture and voluntary disclosure. In

this paper, we address this issue by investigating whether

and how management earnings forecast (MEF) is affected

by corporate teamwork culture. Managers issue earnings

forecasts based on firms’ current and previous financial

J Corp Account Finance. ;:–. ©  Wiley PeriodicalsLLC. 237wileyonlinelibrary.com/journal/jcaf