This paper analyzes the disclosure strategy of firms that face uncertainty regarding the investor's response to a voluntary disclosure of the firm's private information.This paper distinguishes itself from the existing disclosure literature in that firms do not use voluntary disclosures to...

We consider a principal-agent setting in which a manager’s compensation de- pends on a noisy performance signal, and the manager is granted the right to choose an (accounting) method to determine the value of the performance signal. We study the effect of the degree of such reporting...

We study financial contagion in an experimental market. There are two assets and an exogenous shock reduces the value of one of the two assets. Whether and how the other asset is affected depends on the correlation between the underlying values of the two assets. In some trials, the...

This paper shows how post earnings announcement drift may arise in a capital market with rational investors if the firm's earnings in consecutive periods are positively correlated and there is a fixed supply of the firm's shares.This result is driven by the fact that equilibrium share prices...

We study the optimal design of liability schemes (at the corporate or individual level) when the objective is to deter socially harmful corporate behavior without discouraging productivity enhancements. We assume that firms face agency problems between shareholders and managers (moral hazard)...

A large literature showed that small firms experience difficulties in accessing the credit market due to informational asymmetries; these may be mitigated by collateral or relationship lending, possibilities often precluded to small business. We investigate the effect on small business finance...

Collateral is one of the most important features of a debt contract. A substantial theoretical literature motivates the use of collateral as a means to alleviate ex-ante and ex-post information asymmetries between borrowers and lenders and the incidence of credit rationing. Through its seniority...

Networks can have an important effect on economic outcomes. Given the complexity of many of these networks, agents will generally not know their structure. We study the sensitivity of game-theoretic predictions to the specification of players’ (common) prior on the network in a setting where...