We examine whether earnings news triggers significant information transfers between firms linked by managerial talent. We find that the stock prices of a firm are positively associated with the news in the management forecasts issued by another firm that hires its CEO as an outside independent director (i.e., the advisee). Consistent with a market learning process, we find that the strength of information transfers is a function of the perceived influence of the CEO as an outside director as well as the uncertainty about CEO ability. Analyses on pseudo firms rule out any potential industry linkages as an alternative explanation. Supplemental evidence of reverse information transfers further confirms the learning effects.

Session 5.5: Management Forecasts