ABSTRACT We investigate the dynamics of internal forecasting in multi‐location firms and the relations between forecast characteristics and investment. Using U.S. Census microdata on plant‐level growth expectations, we find that plants within multi‐location firms make forecasts that are both more certain and less accurate than those of standalone plants. We provide evidence suggesting that headquarters infers uncertainty from inter‐plant forecast disagreement, and that headquarters is able to facilitate the use of relevant information held by one plant but applicable to another. Differences between peer and focal plants' forecasts predict forecast errors and relate to investment decisions at the focal plant, suggesting that information from multiple sources is integrated into capital allocation decisions. Headquarters' heavier use of peer plant forecast information when focal plants are more uncertain likely weakens focal plant managers' incentives to consider extreme scenarios when forecasting.

ABSTRACT Formal theory and empirical research are complementary in building and advancing the body of knowledge in accounting in order to understand real‐world phenomena. We offer thoughts on opportunities for empiricists and theorists to collaborate, build on each other's work, and iterate over models and data to make progress. For empiricists, we see room for more descriptive work, more experimental work on testing formal theories, and more work on quantifying theoretical parameters. For theorists, we see room for theories explicitly tied to descriptive evidence, new theories on individuals' decision making in a data‐rich world, theories focused on accounting institutions and measurement issues, and richer theories for guiding empirical work and providing practical insights. We also encourage explicitly combining formal theory and empirical models by having both in one paper and by structural estimation.