Open Access. Powered by Scholars. Published by Universities.®
Social and Behavioral Sciences Commons™
Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 5 of 5
Full-Text Articles in Social and Behavioral Sciences
Learning From Manipulable Signals, Mehmet Ekmekci, Leandrro Gorno, Lucas Maestri, Jian Sun, Dong Wei
Learning From Manipulable Signals, Mehmet Ekmekci, Leandrro Gorno, Lucas Maestri, Jian Sun, Dong Wei
Research Collection Lee Kong Chian School Of Business
We study a dynamic stopping game between a principal and an agent. The agent is privately informed about his type. The principal learns about the agent’s type from a noisy performance measure, which can be manipulated by the agent via a costly and hidden action. We fully characterize the unique Markov equilibrium of this game. We find that terminations/ market crashes are often preceded by a spike in (expected) performance. Our model also predicts that, due to endogenous signal manipulation, too much transparency can inhibit learning. As the players get arbitrarily patient, the principal elicits no useful information from the …
Political Connections, Informational Asymmetry, And The Efficient Resolution Of Financial Distress, Madhav S. Aney, Sanjay Banerji
Political Connections, Informational Asymmetry, And The Efficient Resolution Of Financial Distress, Madhav S. Aney, Sanjay Banerji
Research Collection School Of Economics
We show that securities issued by a distressed firm, often through exchange offers, providethe most efficient resolution of financial restructuring. Information asymmetry between thefirm-bank coalition and small bondholders gives rise to other forms of distress resolutionsuch as refinancing, public workout, and the inefficiency of liquidation. We find that politicallobbying by the firm-bank amplifies these inefficiencies and inhibits the development of privatemarket for distressed securities. Cross-country evidence is consistent with this and indicatesthat improved creditor rights, and information facilitating credit bureaus interact in reducingthe likelihood of inefficient distress resolution.
The Information In Asset Fire Sales, Sheng Huang, Matthew Ringgenberg, Zhe Zhang
The Information In Asset Fire Sales, Sheng Huang, Matthew Ringgenberg, Zhe Zhang
Research Collection Lee Kong Chian School Of Business
Asset prices remain depressed for several years following mutual fund fire sales. We show that this price pressure is partly due to asymmetric information which leads to an adverse selection problem for arbitrageurs. After a flow shock, fund managers do not scale down their portfolio, rather, they choose to sell a subset of low-quality stocks that subsequently underperform. In other words, fund managers have stock selling ability. Our findings suggest an explanation for the tendency of asset prices to remain depressed following fire sales: information asymmetries make it difficult for arbitrageurs to disentangle pure price pressure from negative information.
Foreign Direct Investment And Foreign Portfolio Investment Under Asymmetric Information, Ruanjai Suwantaradon
Foreign Direct Investment And Foreign Portfolio Investment Under Asymmetric Information, Ruanjai Suwantaradon
Research Collection School Of Economics
This paper develops a model of international capital flows when there is asymmetric information between foreign investors and domestic managers. Direct investors have a direct influence on the management, thus overcoming agency and information problems. This information advantage, however, comes at the cost of having to acquire management expertise. The tradeoff between management costs and the costs of asymmetric information consequently determines the level and composition of a country’s international capital flows. Analyzing how this tradeoff changes with economic conditions in a country, the model can qualitatively capture the experiences of many crisis countries during the 1990s. Specifically, the model …
Asymmetric Information And Conglomerate Discount: Evidence From Spinoffs, Charlie Charoenwong, Kuan Yong David Ding, Jing Pan
Asymmetric Information And Conglomerate Discount: Evidence From Spinoffs, Charlie Charoenwong, Kuan Yong David Ding, Jing Pan
Research Collection Lee Kong Chian School Of Business
The existing literature argues that diversified firms may be undervalued due to the information asymmetry between a firm's management and the market. Splitting the firm's divisions into multiple business components is thought to facilitate the market valuation of each component more accurately. We investigate the information hypothesis from corporate spinoffs from 1981 through 2004. We use the post-spinoff data to reconstruct the diversified firm, assess the improvement in value at the combined firm level, and relate the value improvement to the change in the level of information asymmetry. We find that, prior to the spinoff, the sample firms have significantly …