06 Nov 2025
Recently, a paper entitled “Divisional Managers and Corporate Disclosure Quality”, co-authored by Dr Zhaoran Gong from the International Business School Suzhou (IBSS) at Xi’an Jiaotong-Liverpool University (XJTLU) along with his collaborators, has been accepted and published in the Journal of Business Finance & Accounting, a journal ranked ABDC A*. Focusing on internal management mechanisms in large enterprises, the study offers a fresh perspective on understanding how divisional managers influence corporate transparency.?
In large enterprises across various industries—whether they are multi-segment technology giants, geographically dispersed retail companies, or manufacturers with complex business structures—divisional managers consistently play a pivotal role as the information bridge between frontline operations and senior management. They oversee the day-to-day operations of the enterprise, deeply engaging in areas ranging from product R&D and iteration in technology firms to dynamic inventory management in retail. Crucially, they hold firm-specific insights that senior leaders cannot easily access. Such information, both concrete and unqiue to the firm, underpins senior management’s precise decision-making. To examine how divisional managers affect corporate transparency, the research team used a sample of multiple U.S. enterprises, focusing on analysing the past co-working experience between divisional managers and senior executives and its impact on the quality of corporate information disclosure.?
The findings indicate that if a divisional manager has previously worked with a Chief Executive Officer (CEO) or Chief Financial Officer (CFO) at another enterprise, their current firm shows three clear improvements: a notable increase in the accuracy of management earnings forecasts, an effective reduction in the risk of future stock price crashes, and a lower level of accrual-based earnings management practices. The underlying driver is the trust and efficient internal communication built through prior co-working. Such relationships encourage divisional managers to proactively share key information—including negative information—helping senior executives integrate higher-quality information and strengthening external disclosure.?
Further tests reveal that these firms restate their accounts less often and invest more efficiently. ?Particularly in M&A activities, they also curb over-investment. The study further clarifies that divisional managers are by no means merely operational administrators; they are central to corporate transparency. For corporate practice, this research outcome holds significant guiding value: suggesting that management appointment decisions should take account of prior co-working between senior executives and divisional managers, to strengthen internal communication and bolster investor trust.
Zhaoran (Jason) Gong ?is an Assistant Professor at the Department of Finance, IBSS, XJTLU. He obtained his PhD from The Hong Kong Polytechnic University. His research interests include mergers and acquisitions, board of directors, corporate governance, corporate disclosure, and the international market. His research has been presented at major international conferences including the European Finance Association and the American Finance Association annual meetings, and published in leading accounting and finance journals including the Journal of Financial and Quantitative Analysis, the Journal of Corporate Finance and the Journal of Business Finance & Accounting. He served ad hoc reviewer for several academic journals including Contemporary Accounting Research, Journal of Corporate Finance and Journals of Business Ethics, and is on the Editorial Board of Corporate Governance: An International Review (ABDC A and ABS 3).
The Journal of Business Finance & Accounting is a corporate finance journal publishing research papers in accounting, corporate finance, corporate governance, and their interfaces. The journal focuses on informational problems that are pervasive in financial markets and business organisations, and the role accounting plays in resolving these problems.
06 Nov 2025