Incentives for Information Production in Markets where Prices Affect Real Investment

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  • 1 January 2008
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      • Published in RePEc
Abstract
We show that the amount of information in equilibrium increases in the expected profitability of the firm’s investments, and that this creates an amplification mechanism from changes in fundamentals to real value. Uncertainty about future performance has a non-trivial effect on information production. We show that information production on investment opportunities is less privately profitable than that on assets in place, and argue that some overinvestment increases firm value.
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