[This paper examines cross-sectional differences in the optimistic behavior of financial analysts. Specifically, we investigate whether the predictive accuracy of past information (e.g., time-series of earnings, past returns, etc.) is associated with the magnitude of the bias in analysts' earnings forecasts. We posit that there is higher demand for non-public information for firms whose earnings are difficult to accurately predict than for firms whose earnings can be accurately forecasted using public information. Assuming that optimism facilitates access to management's non-public information, we hypothesize that analysts will issue more optimistic forecasts for low predictability firms than for high predictability firms. Our results support this hypothesis.]

[The quality of capacity planning significantly affects firm profitability, particularly for firms in service industries. In practice, firms use product cost data to infer the expected cost of under- and over-stocking capacity and to determine installed capacity. Theory shows that this is not optimal practice. In light of the informational and computational complexities associated with the optimal theoretical formulation, the use of product cost may be justified as a heuristic. For a multi-product, multi-resource firm, we use simulations to investigate the efficiency of four cost-based decision rules in determining the expected cost of under- and over-stocking capacity. Results indicate surprisingly high performance levels, relative to a benchmark solution. The performance of the product-based planning rule deteriorates as products increasingly share capacity resources. The opposite is true for resource-focused rules. There appears to be significant value from identifying mechanisms to balance installed capacity across resources.]

[This paper studies information system design in a model of double moral hazard in which there is both a decision problem and a control problem. If either problem is considered in isolation, an information system that provides more public information is preferred. However, an information system that provides less public information can, in fact, be desirable because of an interaction between the two problems. The benefit of choosing an information system that provides less information is that it serves as a substitute for commitment for the principal. The cost is that neither the principal's decision (act) nor the agent's payments can be conditioned on the information. We provide sufficient conditions under which less information and more information are each optimal.]

The quality of capacity planning significantly affects firm profitability, particularly for firms in service industries. In practice, firms use product cost data to infer the expected cost of under- and over-stocking capacity and to determine installed capacity. Theory shows that this is not optimal practice. In light of the informational and computational complexities associated with the optimal theoretical formulation, the use of product cost may be justified as a heuristic. For a multi-product, multi-resource firm, we use simulations to investigate the efficiency of four cost-based decision rules in determining the expected cost of under- and over-stocking capacity. Results indicate surprisingly high performance levels, relative to a benchmark solution. The performance of the product-based planning rule deteriorates as products increasingly share capacity resources. The opposite is true for resource-focused rules. There appears to be significant value from identifying mechanisms to balance installed capacity across resources.

This paper examines cross-sectional differences in the optimistic behavior of financial analysts. Specifically, we investigate whether the predictive accuracy of past information (e.g., time-series of earnings, past returns, etc.) is associated with the magnitude of the bias in analysts' earnings fore- casts. We posit that there is higher demand for non-public information for firms whose earnings are difficult to accurately predict than for firms whose earnings can be accurately forecasted using public information. Assuming that optimism facilitates access to management's non-public information, we hypothesize that analysts will issue more optimistic forecasts for low predictability firms than for high predictability firms. Our results support this hypothesis.

This paper studies information system design in a model of double moral hazard in which there is both a decision problem and a control problem. If either problem is considered in isolation, an information system that provides more public information is preferred. However, an information system that provides less public information can, in fact, be desirable because of an interaction between the two problems. The benefit of choosing an information system that provides less information is that it serves as a substitute for commitment for the principal. The cost is that neither the principal's decision (act) nor the agent's payments can be conditioned on the information. We provide sufficient conditions under which less information and more information are each optimal.

We examine the impact of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, on the reporting behavior of commercial banks and the informativeness of their financial statements. We argue that, because mandatory recognition of hedge ineffectiveness under SFAS 133 reduced banks' ability to smooth income through derivatives, banks that are more affected by SFAS 133 rely more on loan loss provisions to smooth income. We find evidence consistent with this argument. We also find that the increased reliance on loan loss provisions for smoothing income has impaired the informativeness of loan loss provisions for future loan defaults and bank stock returns. Data Availability: The data are available from public sources.