The Impact Of Top Management's Overseas Background On Management Earnings Forecasts

As an increasing number of Chinese people going abroad to work and study,China has undergone a brain drain in the past few decades.In an effort to attract the talented and the highly-skilled to come back,Chinese central and provincial government has introduced a series of preferential policies,including household registration,financial subsidies and tax breaks.As a result,the country has seen an increase in the number of employees with foreign experiences,some of which even make their way to top management in listed companies.According to 'imprinting theory',these emigrants,during their time in foreign countries,are likely to develop characteristics that reflect prominent features of the environment and these characteristics continue to persist even if they return to China.These features may further influence management's decision-making process.Prior empirical studies shed some light on the impact of management's overseas background on firm performance,technological innovation and etc.,but evidence on the more extensive impact of the returnees on the capital market is insufficient.Management earnings forecast,as an important form of information disclosure of public companies,may exert far-reaching impact on investors,analysts and the capital market as a whole.The earnings forecast system of Chinese capital market involves both voluntary disclosure and compulsory disclosure,which allows management to have some discretion in deciding whether,when and how to disclose earnings forecasts.In other words,the probability,precision,timeliness and accuracy of earnings forecasts are largely influenced by firm's top management team.However,the influence of management's overseas background on management earnings forecasts in Chinese capital market has not yet been thoroughly investigated.This study investigates the impact of top management's overseas experience on earnings forecast with a sample of Chinese listed companies from 2013-2017 and reaches the following conclusions.First,this study shows that management with overseas experiences significantly improves the probability of disclosing earnings forecasts.In addition,the improvement is more significant if the CEO or the chairman of the board has overseas experiences and if the experiences are from countries or areas practicing common law rather than civil law.Moreover,management with overseas experiences is related to more precise and timelier earnings forecasts.Finally,this study finds that compared to overseas study experiences,overseas work experiences are more significantly correlated with higher probability,precison and timeliness of earnings forecast.This study adds to the literature on management overseas background as well as management earnings forecast.The conclusions may be of avail to policy makers and public companies in their effort to bring in more talents with overseas experiences.