Forecast Error in Housing Corporations: Analyzing the Impact of Organizational and CFO Characteristics on Budget Predictions

Abstract

This thesis examines impact of the accuracy of real estate forecasts within Dutch housing corporations. It focusses on the role of Chief Financial Officer (CFO) characteristics and organizational characteristics in explaining budget deviations. The central research question is: To what extent do organizational and CFO characteristics impact the forecast error in housing corporations in the Netherlands? To answer this question, a quantitative regression analysis was used, based on financial and CFO data from 180 housing corporations. This included both personal characteristics of finance executives (such as background and experience) and organizational characteristics (such as size and region). The results show that the scale of an organization has a significant influence on the accuracy of real estate budgets. In addition, the tenure of the CFO is also significantly related to forecast error. This suggests that larger corporations with more capacity budget more realistically, and that longer tenure contributes to better understanding of internal processes. For policymakers and administrators, these findings stress the importance of organizational capacity as well as stability in financial management to increase the reliability of multi-year budgets.