Debt,equity, and information

Most firms issue financial assets such as debt or equity (e.g. bonds or stock) to outside investors. While these financial assets differ greatly in their characteristics, their diversity has received little attention in the literature. Filling this important gap in the literature, this paper views debt and equity as financial contracts, and asks why they are optimal instead of other financial contracts. By endogenizing the bankruptcy process, this paper shows how debt and equity arise as a consequence of an optimal allocation of cash-flow rights and monitoring rights, and how equity leads to dividend signaling.     

Material flow,material information,and the analytics of integrative enterprise information systems

Enterprise information systems (EIS) process highly abstracted information. They, nevertheless, are concerned with material systems. Information science has become increasingly analytic. This article draws attention back to the deeply embedded motive forces of ‘exchange’ and ‘money-information’ in the empiric systems that attend its analytics. The article further points to a danger that excessive abstraction can disconnect decision information from that in the processes of concern to EIS.     

Hierarchical reporting,aggregation, and information cascades

Aggregation is commonly associated with loss of information. In contrast, this paper shows that aggregation can actually enhance information down‐the‐road by deterring information cascades. In particular, when hierarchical tiers forward only aggregate recommendations rather than nitty‐gritty details, it increases the uncertainty faced by subsequent tiers. This makes individuals at higher levels more willing to rely on and convey their own views rather than simply rubber stamping suggestions from lower levels. Copyright © 2006 John Wiley & Sons, Ltd.     

Insider,outsider and information heterogeneity

In financial markets, although the insider has superior information relative to the outsider, the outsider may possess some information the insider can’t precisely observe. This work investigates the impacts of information heterogeneity between the insider and outsider based on Foster and Viswanathan (1994). It shows that the less the insider knows about the outsider, the more she commits to aggressive trading, enabling her to earn more at the cost of outsider’s losses. Meanwhile, information heterogeneity improves the liquidity and benefits noise traders.     

Fisher, Keynes, and the Corridor of Stability

A bstract .   This chapter draws on the debt-deflation process of Fisher (1933 ) as well as on Keynes (1936 , chapter 19) and Tobin (1975 , 1980 ) to explore the concept of a corridor of stability, where an economy will be self-adjusting only for demand shocks small enough to leave it within that corridor.     

经济增长、幸福感与社会稳定

本文使用中国综合社会调查（CGSS,2010）和各地级市统计公报的数据,通过考察经济增长和幸福感对人们参加群体性事件的影响探索其对社会稳定的影响。结果发现,在控制人口特征变量之后,人均GDP和经济增长率并不影响人们是否参加群体性事件;失业率对人们是否参加群体性事件具有显著影响,失业率越高,人们参加群体性事件的可能性越大;物价指数对人们是否参加群体性事件具有显著性影响,物价指数越高,人们参加群体性事件的可能性越大;幸福感对人们是否参加群体性事件具有显著性影响,人们幸福感越高,参加群体性事件的可能性越低。将样本按照收入划分为低收入样本和高收入样本,结果发现,失业率对低收入人群参加群体性事件的影响程度要低于对高收入人群的影响。物价指数对低收入人群参加群体性事件的影响程度要高于对高收入人群的影响。幸福感对对低收入人群参加群体性事件的影响程度要低于对高收入人群的影响。     

Insider trading,overconfidence, and private information flow

In this study, we investigate a dynamic model wherein an overconfident and a risk-neutral informed trader optimally exploit their long-lived private information regarding the value of an asset. We find that when the degree of overconfidence becomes larger, or the intensity of private information flow becomes larger relative to the initial private signal, the market becomes more stable. Additionally, we find that the greater the intensity of private information flow relative to the initial private signal, the more evident the patient transaction and the slower the information is incorporated in the price.     

CEO duality,information costs,and firm performance

This study investigates the effects of CEO duality on firm performance and the moderating effect of information costs on the relationship between CEO duality and firm performance in Taiwan. By analyzing listed companies during the period from 2000 to 2012, our empirical results show that a lack of evidence for the links between leadership style and firm performance; however, this relationship is associated with information costs estimated by analysts’ earnings forecasts. Specifically, we find that CEO duality has statistically significant negative impacts on firm performance when information costs are high. This result provides evidence for the coexistence of the agency hypothesis and stewardship hypothesis as determined by the extent of the information costs, and it tends to underscore the importance of corporate governance on the relationship between CEO duality and firm performance.     

Default estimation,correlated defaults,and expert information

Capital allocation decisions are made on the basis of an assessment of creditworthiness. Default is a rare event for most segments of a bank's portfolio and data information can be minimal. Inference about default rates is essential for efficient capital allocation, for risk management and for compliance with the requirements of the Basel II rules on capital standards for banks. Expert information is crucial in inference about defaults. A Bayesian approach is proposed and illustrated using prior distributions assessed from industry experts. A maximum entropy approach is used to represent expert information. The binomial model, most common in applications, is extended to allow correlated defaults yet remain consistent with Basel II. The application shows that probabilistic information can be elicited from experts and econometric methods can be useful even when data information is sparse. Copyright © 2009 John Wiley & Sons, Ltd.     

News sentiment,credit spreads,and information asymmetry

This paper examines how the sentiment of firm-specific news affects CDS spreads conditional on the degree of information asymmetry. Using a large set of news releases, we document a strong negative relationship between the sentiment of firm-specific news and CDS spreads. More importantly, consistent with the role of public news in reducing information asymmetry, we find evidence that the relation between news sentiment and CDS spreads is stronger for firms with higher information asymmetry. Furthermore, the relation is stronger for news with negative sentiment and during the 2008 financial crisis. Our results are robust to alternative sentiment measures.     

Diversification discount,information rents,and internal capital markets

While many existing studies report that corporate diversification destroys shareholder value, several recent studies challenge these findings. Schoar [Schoar, A. (2002). Effects of corporate diversification on productivity. The Journal of Finance, 57, 2379?2403] finds that plants in conglomerates are more productive than those in comparable single-segment firms, although conglomerates are traded at discounts. Villalonga [Villalonga, B. (2004a). Diversification discount or premium? New evidence from the business information tracking services. The Journal of Finance, 59, 479–506; Villalonga, B. (2004b). Does diversification cause the “diversification discount”. Financial Management, 33, 5?27] employs a more comprehensive database and statistical techniques than those used in the prior studies, and shows that there is a diversification premium, rather than discount. This paper develops a model that highlights the costs and benefits of corporate diversification. The diversified firm trades off the benefits of more efficient resource allocation through its internal capital market against the costs of information rents to division managers, which are necessary for effective workings of the internal capital market. We provide an argument supporting Schoar's findings, and identify conditions under which there can be a diversification discount or a premium.     

Bringing archaeology into the information age: entropy,noise, channel capacity,and information potential in archaeological significance assessments

Quality & Quantity - Most archaeology today is conducted by private cultural resources management (CRM) firms in compliance with preservation legislation. Industry archaeologists make decisions...     

经理人过度自信、不对称信息与企业投资决策

通过构造二阶段投资模型,本文探讨信息不对称情况下经理人过度自信对企业投资决策的影响.研究结果表明:对于真实融资约束企业和伪融资约束企业,经理人过度自信心理偏误可能引发投资过度或投资不足;过度自信程度时企业投资-现金流敏感度有正向影响;对于过度自信程度轻微的劣质企业,投资对现金流不敏感,经理人心理偏误仅在举债筹资时可能引发过度投资.     

Resource balance, limited information and public policy

The U.S. Federal Government through its expenditure programs is having a major impact on all forms of pollution abatement. Total expenditures on Federal environmental programs amounted to $3.3 billion in 1972. A program of this magnitude can easily lead to waste and expenditures on conflicting goals unless carefully managed.

In a recent article in the Am. Econ. Rev. William Baumol examined the theoretical justification for and attacks on the Pigouvian tax and subsidy approach to controlling externalities. He concluded that while it is theoretically possible to control externalities through Pigou's procedure, the existence of multiple equilibrium and information requirements make it impractical. He proposes an alternate approach which changes the policy goal from maximization of social welfare to generation of acceptable levels of externalities. His goals differ drastically from those of the resource balance model presented by Kneese, Ayres and D'Arge of maximization of social welfare. This paper will combine the concept of resource balance with the goal of obtaining acceptable level of externalities at minimum cost in the presentation of a theoretical model that can be operationalized.

This paper proposes a general equilibrium method, utilizing the decomposition principle of linear programming, that will permit expenditures and regulations only on non-conflicting goals and includes a feedback mechanism for determining if a program is wasteful in relation to other programs. The model has five advantages over earlier proposals: (1) it is a general equilibrium rather than partial equilibrium model; (2) it is dynamic rather than static; (3) limited information rather than complete information is required for its implementation; (4) the model is heuristic rather than optimizing in the sense that policy decisions always increase the efficiency of pollution control, but because of the existence of uncertainty, they cannot be interpreted as maximizing social welfare; (5) the model incorporates multiple rather than a single policy tool.     

Auditor changes,information quality and bankruptcy prediction

In periods of financial distress management may attempt to suppress unfavorable information from creditors and investors through the use of undisclosed changes in accounting methods, estimates and procedures, thus reducing the quality of the information contained in the firm's financial statements. The auditor's role in this context is to ensure that such compromise does not take place. If the auditor does not permit such accounting treatments, the company may choose to switch to another auditor who will. Empirical evidence relating auditor-change behavior to the quality of comparative bankruptcy prediction models provides support for the notion that auditor changes before bankruptcy may be at least partially due to lack of success at suppressing unfavorable information with the current auditor. Conversely, non-auditor switching companies appear to enjoy greater success at suppressing negative income and leverage information.     

Write-down bonds,credit risk and imperfect information

A structural model of pricing Write-Down (hereafter WD) bonds under imperfect information has been developed to investigate the effect of WD bonds issuance on credit risk. Information is not only delayed but also asymmetrically distributed between managers and outside investors. We derive analytical solutions for corporate securities prices and find the issuance of WD bonds could significantly improve firm value via reducing bankruptcy cost. Our numerical results further demonstrate that the WD bonds issuance increases corporate risk tolerance and reduces the risk of bankruptcy and credit spreads under imperfect information.     

Convergence of information,random variables and noise

Random variables such as state-dependent prices often convey information while entering directly into a decision environment. To understand the convergence properties of behavior based on such random variables, the function mapping any random variable to the information it generates is examined. With respect to convergence in probability of random variables, the information map is continuous with respect to pointwise convergence of information only at completely revealing random variables. Continuity holds when the information map is restricted to any subset of random variables to which the same smooth independent term has been added. Relationships between convergence in distribution of perturbed random variables and convergence in distribution of conditional expectations are also studied.