ABSTRACT Corporate investment decisions require managers to forecast expected future cash flows from potential investments. Although these forecasts are a critical component of successful investing, they are not directly observable by external stakeholders. In this study, we investigate whether the quality of managers' externally reported earnings forecasts can be used to infer the quality of their corporate investment decisions. Relying on the intuition that managers draw on similar skills when generating external earnings forecasts and internal payoff forecasts for their investment decisions, we predict that managers with higher quality external earnings forecasts make better investment decisions. Consistent with our prediction, we find that forecasting quality is positively associated with the quality of both acquisition and capital expenditure decisions. Our evidence suggests that externally observed forecasting quality can be used to infer the quality of capital budgeting decisions within firms. JEL Classifications: D83, G31, M41 Data Availability: Data are available from public sources identified in the paper.

ABSTRACT Firm disclosures often reach only a portion of investors, which results in information asymmetry among investors and, therefore, lower market liquidity. This issue is particularly salient for firms that are not highly visible, as they tend not to receive broad news dissemination via traditional intermediaries, such as the press. This paper examines whether firms can reduce information asymmetry by more broadly disseminating their news. To isolate the impact of dissemination, we focus our analysis on firms' use of Twitter and exploit the 140-character message restriction. Specifically, using a sample of technology firms, we examine the impact of using Twitter to send market participants links to press releases that are provided via traditional disclosure methods. We find this additional dissemination of firm-initiated news via Twitter is associated with lower abnormal bid-ask spreads and greater abnormal depths, consistent with a reduction in information asymmetry. Moreover, this result holds mainly for firms that are not highly visible, consistent with them being in greater need of this additional dissemination channel. We also examine the impact of dissemination on a volume-based measure of liquidity, and find that dissemination is positively associated with liquidity. Data Availability: All data are publicly available from the sources indicated in the paper.