Optimal Information Revelation by Informed Investors

Strausz, Roland (Januar 2005): Optimal Information Revelation by Informed Investors. SFB/TR 15 Discussion Paper No. 34

Abstract

This paper studies the structure of optimal finance contracts in an agency model of outside finance, when investors possess private information. We show that, depending on the intensity of the entrepreneur’s moral hazard problem, optimal contracts induce full, partial, or no revelation of the investor’s private information. A partial or nonrevelation of information is optimal, when it mitigates an undersupply of effort by the entrepreneur due to moral hazard.

• Dokumententyp: Paper
• Keywords: informed investors, optimal finance contracts, partial information revelation
• Fakultät: Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems ; Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A1 - Allokationsmechanismen in Organisationen und Märkten
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: G24, D82
• Sprache: Englisch