Chief Information Officer Characteristics and Management Forecast Quality

I examine the association between Chief Information Officer (CIO) characteristics and the quality of management earnings forecasts. CIOs manage and utilize firms' IT resources to provide the internal informational outputs that managers rely on to create management forecasts (Li et al., 2007; Feng et al., 2009). After controlling for the firm-level IT capability using the InformationWeek 500 IT ranking list, I document that firms that hire a CIO are more likely to issue management forecasts than firms without a CIO and firms with a CIO issue more specific forecasts as opposed to a range. However, the quality of the issued forecasts at CIO firms is not significantly higher than those at non-CIO firms, which implies that merely hiring a CIO doesn't necessarily improve the management forecast quality. I next find that a CIO's structural power is positively associated with the management forecast quality, while a CIO's tenure, business education background, and personal awards are not significantly related to management forecast quality. Further, I find that that CIO structural power, business background, and personal awards are positively associated with the firm’s IT capability ranking. This study suggests ways to improve firms’ internal information environment quality by hiring CIOs with a business background and personal awards or empowering their CIOs in terms of structural power (i.e., additional job titles).

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