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...

We develop a theoretical model where a redistribution of bank capital (e.g., due to reckless trading and/or faulty risk management) leads to a "freeze" of the interbank market. The fire-sale market plays a central role in spreading the crisis to the real economy. In crisis, credit rationing and...