Evidence from hedging practices suggests that firms will only hedge if they expect unfavorable events to arise. Stulz (1990) argues that selective hedging will only enhance value when the firm has an information advantage over the market, which enables the firm to foresee price movements. In...

Using a stylized construct where analysts wish to minimize their forecasting error, we model forecasted earnings when firm characteristics and prior forecasts are public information but analysts can gain private information by appeasing management via deviating from the consensus. Combining...