This paper demonstrates the relevance of strategy constraints on market makers to the possibility of financial market breakdown when there is information asymmetry between market makers and investors; both the case of competitive market makers and the case of a monopolistic market marker are...

This paper models an economy in which managers, whose efforts affect firm performance, are able to make quot;insidequot; trades on claims whose value is also dependent on firm performance. Managers are able to trade only on quot;good news,quot; that is, on returns above market expectations....

In this paper we show, in an incomplete contracts framework which combines asymmetric information and moral hazard, that by permitting insiders to trade on personal account the equilibrium level of output can be increased and shareholder welfare can be improved. This result follows for two...

We develop an integrated model in which a risk neutral informed trader optimally chooses any combination of: a market buy, a market sell, a limit buy including the optimal limit buy price, and a limit sell including the optimal limit sell price. We allow orders to cross with one another without...

To reduce the cost of compliance, it is important that individuals seeking tax preparation assistance, as well as policymakers, be aware of any performance differences between preparers. In this paper the results of Money's tax test are employed to determine whether the accuracy and bias of...

We develop an integrated model in which a risk neutral informed trader optimally chooses any combination of: a market buy (MB), a market sell (MS), a limit but (LB) including the optimal limit buy price, and limit sell (LS) including the optimal limit sell price. With minimal distributional...

We develop a model of noisy rational expectations equilibrium in segmented markets. The noise emerges endogenously through intermarket effects rather than through exogenous supply noise from liquidity or naive trading as in standard noisy rational expectations equilibrium of the Hellwig type....

We study games in which the decision to exercise an option is a signal of private information to outsiders, whose beliefs affect the utility of the decision maker. Signaling incentives distort the timing of exercise, and the direction of distortion depends on whether the decision-maker's utility...

Motivated by recent FASB, IASB, and CFA Institute comments, we explore the predictive value of direct method cash flow disclosures. A primary stated purpose of the direct method is to better forecast future performance. To examine this purpose, we first document that direct method line items...

This paper provides a model of indirect lobbying where special interest groups try to influence policy outcomes by targeting voters. Specifically, competing lobbies engage in influence activities to affect the information that a (possibly biased) media outlet collects on the public value of...