Markets have a remarkable capacity for producing efficient resource allocations when information about relative values is dispersed across economic agents. We explore the use of market mechanisms inside the firm to address a resource allocation problem, and compare the outcome with the first-...

Many argue that uncontested director elections are meaningless because director nominees are almost surely elected. We assess whether the outcomes of uncontested director elections still serve as an informative poll of investor perceptions regarding board performance. We find that higher (lower)...

We characterize the steady-state equilibrium in which informed traders who exhibit heuristic (i.e., representativeness, as opposed to Bayesian) and Bayesian behaviors achieve the same expected utility. Then, we show how the endogenous, steady-state proportion of heuristic traders is affected by...

We propose a measure of disagreement among investors (i.e., differences of opinion as opposed to information asymmetry) based on analyst earnings forecasts. Our measure relies on the notion that when analysts agree, the law of iterated expectations applies and a regression of an analyst's...

We develop a model to explain the value and consequences of investment screens, which are commonly employed by sophisticated investors. In the model, some stock-market investors are uncertain about the quality of private information before they acquire it and, in equilibrium, rationally use...

Using a sample of announcements drawn from the 1980s and early 1990s, we reassess the relation between earnings news and earnings announcement timing. Using analyst forecast errors to proxy for news, we find that early announcements are associated with good news relative to late announcements....

We consider a cheap talk setting with two senders and a continuum of receivers with heterogenous preferences. Receivers listen to just one sender, but can choose which sender to listen to. We determine that: (i) full communication is possible for a large set of sender preferences; (ii) both...

In addition to being a function of traditional fundamentals such as cash-flow persistence and the discount rate, the equilibrium association between a security price and a value-relevant statistic can simply be a function of what rational investors believe the association will be. We refer to...

We analyze the effect of external financing concerns on managers' financial reporting behavior prior to management buyouts (MBOs). Prior studies hypothesize that managers intending to undertake an MBO have an incentive to manage earnings downward to reduce the purchase price. We hypothesize that...

Research in sociology and ethics suggests that individuals adhere to social norms of behavior established by their peers. Within an agency framework, we model endogenous social norms by assuming each agent's cost of implementing an action depends on the social norm for that action, defined to be...