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We propose a new theory of suboptimal risk-taking based on contractual externalities. We examine an industry with a continuum of firms. Each firm's manager exerts costly hidden effort The productivity of effort is subject to systematic shocks. Firms' stock prices reflect their performance...
Persistent link: https://www.econbiz.de/10011083766
We study ffort and risk-taking behaviour in an economy with a continuum of principal-agent pairs where each agent exerts costly hidden effort. When the industry productivity is uncertain, agents have motivations to match the industry average effort, which results in contractual externalities....
Persistent link: https://www.econbiz.de/10011084670
We study a model where a capital provider learns from the price of a firm’s security in deciding how much capital to provide for new investment. This feedback effect from the financial market to the investment decision gives rise to trading frenzies, where speculators all wish to trade like...
Persistent link: https://www.econbiz.de/10008530385
We study a model where the aggregate trading of currency speculators reveals new information to the central bank and affects its policy decision. We show that the learning process gives rise to coordination motives among speculators leading to large currency attacks and introducing...
Persistent link: https://www.econbiz.de/10009148354
We study a model in which a capital provider learns from the price of a firm's security in deciding how much capital to provide for new investment. This feedback effect from the financial market to the investment decision gives rise to trading frenzies, in which speculators all wish to trade...
Persistent link: https://www.econbiz.de/10010678706
We study a model where the aggregate trading of currency speculators reveals new information to the central bank and affects its policy decision. We show that the learning process gives rise to coordination motives among speculators leading to large currency attacks and introducing...
Persistent link: https://www.econbiz.de/10008468601
Persistent link: https://www.econbiz.de/10010395178
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