An entrepreneur who wants to divest his firm suffers a time-inconsistency problem: divesting a stake creates an incentive to divest further since he does not internalize the arising agency costs for the stake already sold. This paper shows that this leads to excessive divestment in equilibrium...

We present a model that links the opacity of an asset to its liquidity. We show that while low‐opacity assets are liquid, intermediate levels of opacity provide incentives for investors to acquire private information, causing adverse selection and illiquidity. High opacity, however, benefits...