Sunshine is known to positively impact physical and mental health.

But Dr. Jeffrey Pittman has discovered that sunshine may also influence earnings forecasts from corporate executives.

Dr. Pittman is an accounting professor and Chair in Corporate Governance and Transparency.

His co-authored paper, Managerial Mood and Earnings Forecast Bias: Evidence from Sunshine Exposure in The Accounting Review, examines whether corporate earnings forecasts are sensitive to sunshine levels around companies’ U.S. headquarters in the preceding two weeks.

The research team found that good mood, which they measure with recent sunshine exposure, upwardly biases forecast earnings.

After establishing that sunshine-induced optimism affects earnings forecasts, the researchers explored whether certain corporate governance structures constrain this bias.

They document that it’s less severe when companies are subject to more media or financial analyst coverage, and when executive compensation is tied to the accuracy of their forecasts.

They also report evidence that executives who let sunshine bias distort company disclosures pay a heavy price in the form of shorter tenure, lower compensation and fewer promotions.

The paper is co-authored with Dr. Chen Chen, Monash University, Australia; Dr. Yangyang Chen, City University of Hong Kong, China; Dr. Edward Podolski, Deakin University, Australia; and Dr. Madhu Veeraraghavan, T.A. Pai Management Institute, India.