Abstract
We analyze the incentives for information disclosure in financial markets. We show that borrowers may have incentives to voluntarily withhold information and that doing so is most attractive for claims that are inherently hard to value, such as portfolios of subprime mortgages. Interestingly, opacity may be optimal even though it increases informational asymmetries between contracting parties. Finally, in our setting a government can intervene in ways that ensure the liquidity of financial markets and that resemble the initial plans for TARP. Even if such interventions are ex-post optimal, they affect incentives for information disclosure and have ambiguous ex-ante effects.
Item Type: | Paper |
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Keywords: | Information Acquisition, Adverse Selection, Allocative Efficiency, Opacity |
Faculties: | Economics Economics > Munich Discussion Papers in Economics |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | D82, G21, G32 |
URN: | urn:nbn:de:bvb:19-epub-20937-9 |
Language: | English |
Item ID: | 20937 |
Date Deposited: | 04. Jun 2014, 10:34 |
Last Modified: | 06. Nov 2020, 15:26 |
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