Although federal judges are the ultimate arbiters of insider trading enforcement, the role of their political ideology in insider trading is unclear. Using the partisanship of judges’ nominating presidents to measure judge ideology, we first document that liberal judges are associated with heavier penalties in insider trading lawsuits than conservative judges. Next, we find that firms located in circuits with more liberal judges have fewer opportunistic insider sales. Cross-sectional analyses show that this deterrent effect is stronger when managers face a higher risk of insider trading lawsuits. Finally, we find that the Securities and Exchange Commission considers judges’ ideology when selecting litigation forums.

We examine whether the information conveyed in a relatively new analyst research output—capital expenditure (capex) forecasts—affects corporate investment efficiency. We find that firms with analyst capex forecasts exhibit higher investment efficiency. This effect is stronger when the forecasts are issued by analysts with higher ability or greater industry knowledge. Moreover, the effect of capex forecasts on investment efficiency varies with the signals they convey about future growth opportunities—positive‐growth signals are more effective in reducing underinvestment, while negative‐growth signals are more effective in reducing overinvestment. Cross‐sectional tests suggest that these effects operate at least in part through both a financing channel and a monitoring channel. Taken together, our results suggest that analysts' capex forecasts convey useful information about firms' growth opportunities to managers and investors, which can facilitate efficient investment.

We examine whether management forecast errors (MFEs), which are traditionally interpreted as backward-looking indicators of how well forecasts preempted earnings announcements, also operate as forward-looking measures that aid with predicting future earnings. This possibility arises if an MFE represents unrealized revenues or expenses a manager originally anticipated to occur in the forecast period but that ultimately occur in subsequent periods. Consistent with this possibility, we document that optimistic MFEs contain incremental information over current earnings for predicting future earnings realizations. This finding does not extend to pessimistic MFEs, consistent with such errors reflecting expectations management. The predictive information in optimistic MFEs is negatively related to managers' incentives to intentionally bias the forecast and is positively related to managerial ability. Analysts' post-earnings announcement forecasts for the subsequent period overestimate the future realization of MFEs, but such overestimation is less severe when managers issue timely post-earnings announcement forecast revisions for subsequent periods. Data Availability: Data used in this study are publicly available from sources identified in the text.

Prior research documents large, persistent productivity dispersion even within narrowly defined industries, suggesting the presence of frictions that impede the efficient allocation of resources. In this paper, we consider the role of information frictions. We posit that high-quality financial reporting with respect to firm productivity can mitigate information frictions and hence facilitate the efficient allocation of resources across firms. Using a large sample of firms in the manufacturing sector, we find evidence consistent with our prediction—industries with higher productivity informativeness tend to have smaller within-industry productivity dispersion. We further find that this relation is stronger in industries with greater dependence on external financing, suggesting that reporting quality affects allocation efficiency, at least in part, through the capital market channel. These findings suggest that the extent to which financial reporting is informative about productivity can affect resource allocation efficiency and hence have real effects at the macro level.