Do Well Managed Firms Make Better Forecasts? (ESCoE DP 2021-18)

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We link a new UK management survey covering 8,000 firms to panel data on productivity in
manufacturing and services. There is a large variation in management practices, which are
highly correlated with productivity, profitability and size. Uniquely, the survey collects firms’
micro forecasts of their own sales and also macro forecasts of GDP. We find that better
managed firms make more accurate micro and macro forecasts, even after controlling for
their size, age, industry and many other factors. We also show better managed firms appear
aware that their forecasts are more accurate, with lower subjective uncertainty around central
values. These stylized facts suggest that one reason for the superior performance of better
managed firms is that they knowingly make more accurate forecasts, enabling them to make
superior operational and strategic choices.