Death is a law: Death of former colleagues and management forecasts

Abstract

We investigate how grief following the death of a CEO's former colleague affects management forecasts. Our results show that the death of a former colleague is associated with a transient, one-year increase in the pessimism of management forecasts. This effect is amplified when the CEO exhibits a greater resemblance or stronger attachment to the deceased. Further, we also find that the effect is less pronounced for CEOs who are more equipped to handle the negative emotions. Additional tests show that CEOs issue pessimistic management forecasts at a higher frequency and exhibit more pessimistic tones in speech during conference calls after the death event. Moreover, we find that CEOs make a s..