Author : Pingyang Gao
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Book Synopsis Informational Feedback Effect, Adverse Selection, and the Optimal Disclosure Policy by : Pingyang Gao
Download or read book Informational Feedback Effect, Adverse Selection, and the Optimal Disclosure Policy written by Pingyang Gao and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Trading in a secondary stock market not only redistributes wealth among investors but also generates information that guides subsequent investment. We provide a positive theory of disclosure that reflects both functions of a secondary market. By making private information public, disclosure reduces private information acquisition and levels the playing field. However, a leveled playing field has two opposite effects on firm value. On one hand, it ameliorates adverse selection among investors and improves the liquidity of firm shares. On the other hand, it could also impede investment efficiency because less information is produced by the market and used by decision makers. This trade-off determines the optimal disclosure policy. Our theory generates new testable predictions and reconciles disclosure with other parts of securities regulation that encourage private information production.