논문검색
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[2011]
The Value of Private and Public Information in Firms : An Agency View
- 작성자
- Martin Dierker
내용
Both private and public information are valuable and affect the cost of capital (Easley and
O’Hara, 2004). We endogenize the production of these types of information within the firm. In
a simple agency problem in the presence of adverse selection, both private and public infor-
mation are valuable because they lead to more efficient contracting. We solve for the optimal
linear contract and obtain simple expressions of how the value of the firm depends on its
information environment. Assuming that the manager has access to technologies that produce
both public and private information, we solve for the equilibrium at the information acquisition
stage. Depending on the cost of information production, some firms will rely more on public
information, while others generate more private information.
We examine the desirability of stricter accounting standards such as the Sarbanes-Oxley
act and give predictions on which firms will be better off by delisting as a consequence.
Finally, we relate our results to executive compensation. We show how some firms will find it
optimal to rely heavily on their manager’s production of private information. The large rents
accruing to these managers in equilibrium are not due to their effort, but rather due to their
superior knowledge of the business and ability to generate information that improves the
efficiency of the firm.
Keywords：Private Information, Contracting, Accounting Standards
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