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...

We report results from an experiment that evaluates the consequences of having a socially motivated monitor use the market price of a bank’s traded assets to decide whether or not to intervene in the bank’s operations. Consistent with predictions of a recent theoretical paper by Bond,...

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...