Relative Influence of the Managerial Power Dimension of Corporate Governance on Analysts’ Earnings Forecast Accuracy in Large and Small Firms

This study examines the influence of managerial power on analysts' earnings forecast accuracy. CEO/Chairperson duality and voting power of management on the board are used as proxies for managerial power. After controlling for key variables that have been shown to affect analysts' forecast accuracy in prior literature, this study indicates that managerial power is positively associated with analysts' earnings forecast errors for large firms, but not for small firms. The non-significant association between managerial power and forecast accuracy for small firms suggests that managerial power presents relatively less agency problems for small firms, while the inverse relationship between managerial power and forecast accuracy for large firms indicates that the managerial power dimension of corporate governance is a potential source of significant agency problems for large firms