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 analyze information production incentives for traders in financial markets, when firms condition investment decisions on information revealed through stock prices. We show that traders' private value of information about a firm's investment project increases with the ex ante likelihood the...