Information design and capital formation

dc.contributor.affiliationFGV
dc.contributor.authorEscobar, Andrés
dc.contributor.authorRostek, Marzena
dc.contributor.authorSublet, Guillaume
dc.contributor.unidadefgvEscolas::EPGEpor
dc.date.accessioned2018-10-25T18:24:17Z
dc.date.available2018-10-25T18:24:17Z
dc.date.issued2018
dc.description.abstractCould a firm benefit from not disclosing all of its private information before its stock is traded in public financial markets? So long as the investors' marginal utility function is convex and the investors differ only in their risk-sharing needs, three substantive results hold: (1) a full disclosure policy minimizes the value of the firm; (2) lifting a mandate of full disclosure does not imply that firms will necessarily choose to withhold information maximally; and (3) with many firms that strategically choose disclosure policies, all Nash equilibria display only partial disclosure. Our insight is based on the role that the firm's equity can play as a risk-sharing device: if the firm chooses to keep some information private, its stock can be used by investors to hedge against risk. The problem that we study is of theoretical interest, but it is also topical: the Jumpstart Our Business Startups (JOBS) Act, which was signed into law in April 2012, substantially eases securities regulations for small companies going public. The declared intent of this change in regulation was to promote capital formation in new and small companies. Our results indicate that the provisions of this new legislation are in line with its intentions. Less stringent requirements on information disclosure for smaller firms may also benefit investors. © 2018 Elsevier Inc.eng
dc.identifierhttps://www.scopus.com/inward/record.uri?eid=2-s2.0-85045055574&doi=10.1016%2fj.jet.2018.03.004&partnerID=40&md5=7d44a0dab8baceab3a59b584e1b49d0f
dc.identifier.doi10.1016/j.jet.2018.03.004
dc.identifier.issn0022-0531
dc.identifier.scopus2-s2.0-85045055574
dc.identifier.urihttps://hdl.handle.net/10438/25548
dc.language.isoeng
dc.publisherAcademic Press Inc.
dc.relation.ispartofseriesJournal of Economic Theory
dc.rights.accessRightsrestrictedAccesseng
dc.sourceScopus
dc.subjectCrowdfundingeng
dc.subjectFinancial regulationeng
dc.subjectInformation designeng
dc.subjectInformation disclosureeng
dc.subjectInitial public offeringseng
dc.subjectValue of informationeng
dc.subject.bibliodataPoupança e investimentopor
dc.titleInformation design and capital formationeng
dc.typeArticle (Journal/Review)eng
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