Beatrice Michaeli, "Divide and Inform: Rationing Information to Facilitate Persuasion"
Michaeli develops a Bayesian persuasion model examining a manager's incentives to gather information when the manager can disseminate this information selectively to interested parties ("users") and when the objectives of the manager and the users are not perfectly aligned. The model predicts that if the manager can choose the subset of users to receive the information, then the manager may gather more precise information. The article identifies conditions under which a regime that allows managers to grant access to information selectively maximizes aggregate information. Strikingly, this happens when the objectives of managers and users are sufficiently misaligned. This finding is robust to variations of the model such as information acquisition cost, unobservable precision, sequential noisy actions taken by the users and delayed choice of the subset of users "in the know." These results call into doubt the common belief that forcing managers to provide unrestricted access to information to all potential users is always beneficial.
Henry Friedman and Mirko Heinle, "Lobbying and Uniform Disclosure Regulation"
Friedman and co-author Mirko Heinle use a model to explore the benefits and costs of regulatory uniformity, which manifests as one-size-fits-all rules in capital market settings. They show that uniform regulatory standards force self-interested insiders to free-ride on each other's socially harmful lobbying activities, providing a previously unidentified benefit to society of regulatory uniformity. They also derive the optimal degree of uniformity that a system designer (e.g., the legislature) would impose, and show that agency problems that facilitate managerial lobbying make one-size-fits-all regulation more desirable.
Judson Caskey, "Earnings Expectations and Employee Safety"
Caskey and co-author N. Bugra Ozel examine the relation between workplace safety and pressure on managers to meet earnings expectations. Using establishment-level data on workplace injuries from Occupational Safety and Health Administration, they document significantly higher injury/illness rates in firms that meet or just beat analyst forecasts compared to firms that miss or comfortably beat analyst forecasts. They provide evidence that the relation between benchmark-beating behavior and workplace safety stems from both increases in employee workloads and cuts to safety expenditures. They also provide evidence that the relation between benchmark-beating behavior and workplace safety is stronger when there is less union presence, when the effect of injury claims on workers' compensation premiums are smaller, and among firms that do not conduct business with government. Their findings highlight a specific consequence of managing real activities in order to meet earnings benchmarks.
Daniel Saavedra, "Why Don't Firms Claim Their Tax Refunds?"
A puzzle in the literature is why a large fraction of firms eligible for income tax refunds not file claims for such refunds on a timely basis. I hypothesize that firms with private information about higher future profitability and seeking debt financing forgo immediate use of provisions that allow the carryback of net operating losses as signaling device to separate from firms with lower future profitability that are otherwise similar. Firms expecting lower profitability are deterred from mimicking because carrying net operating losses forward is less valuable to them. Consistent with this hypothesis, firms that do not file claims for refunds on a timely basis display higher future profitability and receive lower debt financing costs than firms that file when they first become eligible. These results are stronger when the level of information asymmetry about the borrower's type is greater. This study is the first to use a signaling story to explain the low take-up rate of tax refunds. As a result, it informs academics and fiscal policy makers who seek to understand how tax policies affect real decisions.
