I examine whether contracts that require customers to privately share with suppliers forecasts of their future demand for the supplier’s products (“demand forecast contracts,” or “DF contracts”) affect the supplier’s reliance on an alternative information source—stock prices—when making investment decisions. If suppliers find these forecasts a more direct signal of future demand than stock prices, they may reduce their reliance on stock prices to guide investments. Using hand-collected data, I find that suppliers’ investments become significantly less sensitive to stock prices after entering a DF contract for the first time. This effect is stronger when forecasts are more credible, demand more uncertain, and investments more irreversible. Supplier performance, measured by return on assets and cash flow from operations, improves post-DF. Overall, these findings suggest that when a relatively direct information source about future demand becomes available, managers reduce their reliance on stock prices in making real decisions. Data Availability: Data are available from public sources cited in the text.

We use the staggered adoption of the Universal Demand Laws (UD Laws) to examine the effect of an exogenous reduction in shareholders' ability to litigate on the extent of accounting conservatism. On average, we find an increase in reporting conservatism post-UD. The increased conservatism is concentrated in firms that contemplate equity issuance, with a high proportion of monitoring investors, and high corporate governance quality. In contrast, firms with specific short-term incentives for aggressive accounting—such as those narrowly beating benchmarks, those with abnormal insider trading, and those likely to violate debt covenants—weakly governed firms, and firms with high ex ante litigation risk decrease reporting conservatism after UD. Our results suggest that the relation between the litigation environment and reporting conservatism is complex and dependent on specific characteristics and unique circumstances of the firms.