Optimal Information Revelation by Informed Investors

Arbeitspapier

This paper studies the structure of optimal finance contracts in an agency model of outside finance, when investors possess private information. We show that, depending on the intensity of the entrepreneur's moral hazard problem, optimal contracts induce full, partial, or no revelation of the investor's private information. A partial or nonrevelation of information is optimal, when it mitigates an undersupply of effort by the entrepreneur due to moral hazard.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB/TR 15 Discussion Paper ; No. 34

Classification and Topics

• Classification: Wirtschaft ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Asymmetric and Private Information; Mechanism Design
• Subject: informed investors ; optimal finance contracts ; partial information revelation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Strausz, Roland
• Event: Veröffentlichung
• (who): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (where): München
• (when): 2005

Further information

• DOI: doi:10.5282/ubm/epub.13514
• Handle: http://hdl.handle.net/10419/94006
• URN: urn:nbn:de:bvb:19-epub-13514-4
• Last update: 10.03.2025, 11:42 AM CET