Essays in Macroeconomics, Corporate Finance, and Social Learning

Download or read book Essays in Macroeconomics, Corporate Finance, and Social Learning written by Andrew C. P. Hertzberg and published by . This book was released on 2004 with total page 118 pages. Available in PDF, EPUB and Kindle. Book excerpt: (Cont.) the release of information until the long-term results of the firm are realized. In equilibrium, when the belief about the aggregate state is high, managers will be given short-term incentives, delaying the release of information. When the belief about the aggregate state is low, long-term incentives will be prevalent and information will be released without delay. This produces asymmetric learning dynamics for the economy, with gradual booms and rapid recessions. In a boom the belief about the aggregate state increases, information is pushed off into the future, and learning is slow. In a recession the belief is falling, triggering a switch to long-term incentives, that brings forward the release of information and accelerates learning. Chapter 2 presents a model of corporate misreporting in an environment where investors have heterogeneous beliefs and short sale constraints. The disagreement between investors provides a motive for agents who start a firm to limit the amount of information which it releases to the public so as to sponsor speculation over its value. This incentive to limit information is stronger when the heterogeneity of beliefs among investors is stronger. Investors also learn about a firm's expected profitability from the information released by other firms in the industry. I show that this creates a strategic complementarily in the precision of information released by each firm. This can give rise to multiple equilibria: one in which all firms release precise reports and one in which their reports are inaccurate ...