It is often noted that accounting information, while faithfully estimating current profitability, fails to reflect forward-looking information about new ventures. Stock prices, however, reflect the prevailing sentiment about both current and future activities. As a result, though accounting is...

When a firm's input supplier can acquire private information to gain an edge in negotiations, we show that the firm can blunt the supplier's informational advantage by permitting cost inefficiencies in internal production. Specifically, we establish that a modest increase in the cost of the...