Many policy proposals call for government intervention to be based on the information in market prices of firm securities. Most of these proposals ignore the fact that market prices are endogenous to government intervention. In particular, when the government takes a corrective action based on...

We investigate the consequences of allowing for repeated capital market transactions in a model with asymmetric information between a firm and its investors. All firms in the model possess a profitable project that they need to raise cash to undertake. However, equilibria exist in which firms...

Many economic agents take corrective actions based on information inferred from market prices of firms' securities. Examples include directors and activists intervening in the management of firms and bank supervisors taking actions to improve the health of financial institutions. We provide an...