Inside and Outside Information

Inside and Outside Information

ABSTRACT We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speec...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:The Journal of finance (New York) 2024-08, Vol.79 (4), p.2667-2714
Hauptverfasser: QUIGLEY, DANIEL, WALTHER, ANSGAR
Format: Artikel
Sprache:eng
Schlagworte:
Banks
Bayesian analysis
Credit ratings
Financial systems
Speech
Tests
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
container_end_page 2714
container_issue 4
container_start_page 2667
container_title The Journal of finance (New York)
container_volume 79
creator QUIGLEY, DANIEL
WALTHER, ANSGAR
description ABSTRACT We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize optimal tests by developing tools for Bayesian persuasion with incentive constraints, and use these results to derive novel guidance for the design of bank stress tests, as well as benchmarks for socially optimal corporate credit ratings.
doi_str_mv 10.1111/jofi.13360
format Article
fullrecord <record><control><sourceid>proquest_cross</sourceid><recordid>TN_cdi_proquest_journals_3081437908</recordid><sourceformat>XML</sourceformat><sourcesystem>PC</sourcesystem><sourcerecordid>3081437908</sourcerecordid><originalsourceid>FETCH-LOGICAL-c3500-3d7b0e760646fe2c52969f6a7078932a33de0cd812c1bc418bedd6a1cca7da0b3</originalsourceid><addsrcrecordid>eNp9j0FLwzAYhoMoOKcXf4AMvAmd35e0SXqU4bQy6EXPIU1SyNiamXTI_r3dOvDme3m_w8P78RByjzDHIc_r0Po5MsbhgkywyCHjlOMlmQBQmiFIek1uUlrDMUUxIQ9Vl7x1M93ZWb3vT3fVtSFude9Dd0uuWr1J7u7cU_K1fP1cvGer-q1avKwywwqAjFnRgBMceM5bR01BS162XAsQsmRUM2YdGCuRGmxMjrJx1nKNxmhhNTRsSh7H3V0M33uXerUO-9gNLxUDiTkTJciBehopE0NK0bVqF_1Wx4NCUEd_dfRXJ_8Bno2wM6Hz6Q-VZcnEIE8HBEfkx2_c4Z8x9VEvq3H2F37rZYc</addsrcrecordid><sourcetype>Aggregation Database</sourcetype><iscdi>true</iscdi><recordtype>article</recordtype><pqid>3081437908</pqid></control><display><type>article</type><title>Inside and Outside Information</title><source>Wiley Online Library Journals Frontfile Complete</source><creator>QUIGLEY, DANIEL ; WALTHER, ANSGAR</creator><creatorcontrib>QUIGLEY, DANIEL ; WALTHER, ANSGAR</creatorcontrib><description>ABSTRACT We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize optimal tests by developing tools for Bayesian persuasion with incentive constraints, and use these results to derive novel guidance for the design of bank stress tests, as well as benchmarks for socially optimal corporate credit ratings.</description><identifier>ISSN: 0022-1082</identifier><identifier>EISSN: 1540-6261</identifier><identifier>DOI: 10.1111/jofi.13360</identifier><language>eng</language><publisher>Cambridge: Blackwell Publishers Inc</publisher><subject>Banks ; Bayesian analysis ; Credit ratings ; Financial systems ; Speech ; Tests</subject><ispartof>The Journal of finance (New York), 2024-08, Vol.79 (4), p.2667-2714</ispartof><rights>2024 the American Finance Association.</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><cites>FETCH-LOGICAL-c3500-3d7b0e760646fe2c52969f6a7078932a33de0cd812c1bc418bedd6a1cca7da0b3</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://onlinelibrary.wiley.com/doi/pdf/10.1111%2Fjofi.13360$$EPDF$$P50$$Gwiley$$H</linktopdf><linktohtml>$$Uhttps://onlinelibrary.wiley.com/doi/full/10.1111%2Fjofi.13360$$EHTML$$P50$$Gwiley$$H</linktohtml><link.rule.ids>314,776,780,1411,27901,27902,45550,45551</link.rule.ids></links><search><creatorcontrib>QUIGLEY, DANIEL</creatorcontrib><creatorcontrib>WALTHER, ANSGAR</creatorcontrib><title>Inside and Outside Information</title><title>The Journal of finance (New York)</title><description>ABSTRACT We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize optimal tests by developing tools for Bayesian persuasion with incentive constraints, and use these results to derive novel guidance for the design of bank stress tests, as well as benchmarks for socially optimal corporate credit ratings.</description><subject>Banks</subject><subject>Bayesian analysis</subject><subject>Credit ratings</subject><subject>Financial systems</subject><subject>Speech</subject><subject>Tests</subject><issn>0022-1082</issn><issn>1540-6261</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2024</creationdate><recordtype>article</recordtype><recordid>eNp9j0FLwzAYhoMoOKcXf4AMvAmd35e0SXqU4bQy6EXPIU1SyNiamXTI_r3dOvDme3m_w8P78RByjzDHIc_r0Po5MsbhgkywyCHjlOMlmQBQmiFIek1uUlrDMUUxIQ9Vl7x1M93ZWb3vT3fVtSFude9Dd0uuWr1J7u7cU_K1fP1cvGer-q1avKwywwqAjFnRgBMceM5bR01BS162XAsQsmRUM2YdGCuRGmxMjrJx1nKNxmhhNTRsSh7H3V0M33uXerUO-9gNLxUDiTkTJciBehopE0NK0bVqF_1Wx4NCUEd_dfRXJ_8Bno2wM6Hz6Q-VZcnEIE8HBEfkx2_c4Z8x9VEvq3H2F37rZYc</recordid><startdate>202408</startdate><enddate>202408</enddate><creator>QUIGLEY, DANIEL</creator><creator>WALTHER, ANSGAR</creator><general>Blackwell Publishers Inc</general><scope>OQ6</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>202408</creationdate><title>Inside and Outside Information</title><author>QUIGLEY, DANIEL ; WALTHER, ANSGAR</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c3500-3d7b0e760646fe2c52969f6a7078932a33de0cd812c1bc418bedd6a1cca7da0b3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2024</creationdate><topic>Banks</topic><topic>Bayesian analysis</topic><topic>Credit ratings</topic><topic>Financial systems</topic><topic>Speech</topic><topic>Tests</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>QUIGLEY, DANIEL</creatorcontrib><creatorcontrib>WALTHER, ANSGAR</creatorcontrib><collection>ECONIS</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>The Journal of finance (New York)</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>QUIGLEY, DANIEL</au><au>WALTHER, ANSGAR</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Inside and Outside Information</atitle><jtitle>The Journal of finance (New York)</jtitle><date>2024-08</date><risdate>2024</risdate><volume>79</volume><issue>4</issue><spage>2667</spage><epage>2714</epage><pages>2667-2714</pages><issn>0022-1082</issn><eissn>1540-6261</eissn><abstract>ABSTRACT We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize optimal tests by developing tools for Bayesian persuasion with incentive constraints, and use these results to derive novel guidance for the design of bank stress tests, as well as benchmarks for socially optimal corporate credit ratings.</abstract><cop>Cambridge</cop><pub>Blackwell Publishers Inc</pub><doi>10.1111/jofi.13360</doi><tpages>48</tpages></addata></record>
fulltext fulltext
identifier ISSN: 0022-1082
ispartof The Journal of finance (New York), 2024-08, Vol.79 (4), p.2667-2714
issn 0022-1082
1540-6261
language eng
recordid cdi_proquest_journals_3081437908
source Wiley Online Library Journals Frontfile Complete
subjects Banks
Bayesian analysis
Credit ratings
Financial systems
Speech
Tests
title Inside and Outside Information
url https://sfx.bib-bvb.de/sfx_tum?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2025-02-08T11%3A35%3A57IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primo3-Article-proquest_cross&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=Inside%20and%20Outside%20Information&rft.jtitle=The%20Journal%20of%20finance%20(New%20York)&rft.au=QUIGLEY,%20DANIEL&rft.date=2024-08&rft.volume=79&rft.issue=4&rft.spage=2667&rft.epage=2714&rft.pages=2667-2714&rft.issn=0022-1082&rft.eissn=1540-6261&rft_id=info:doi/10.1111/jofi.13360&rft_dat=%3Cproquest_cross%3E3081437908%3C/proquest_cross%3E%3Curl%3E%3C/url%3E&disable_directlink=true&sfx.directlink=off&sfx.report_link=0&rft_id=info:oai/&rft_pqid=3081437908&rft_id=info:pmid/&rfr_iscdi=true