Use this URL to cite or link to this record in EThOS: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.800057
Title: Essays on information and incentives in financial markets
Author: Piccolo, Alessio
ISNI:       0000 0004 8507 290X
Awarding Body: University of Oxford
Current Institution: University of Oxford
Date of Award: 2020
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Abstract:
This thesis comprises three essays in financial economics. The common thread is the interaction between incentives and information in financial markets. Chapter 1 analyzes a model in which a credit rating agency's (CRA's) rating is followed by a market for credit risk that provides a public signal - the price. A more accurate rating decreases market informativeness, as it diminishes mispricing and, hence, incentives for investor information acquisition. On the other hand, more-informative trading increases CRA accuracy incentives by making rating inflation more transparent. We analyze implications for policy and the real economy. Chapter 2 develops a model of the interaction between executive compensation and stock market prices, and analyzes its implications for corporate short-termism. We show that inefficient short-termism can arise in equilibrium as a self-fulfilling prophecy, due to strategic complementarities between the firm's investment horizon and investors' decision to acquire information about short-term performance or long-term value. The model helps us assess evidence presented in the "myopia" debate and yields novel implications regarding ownership structure, executive compensation, and managerial horizon. Finally, Chapter 3 analyzes a model of competition between credit rating agencies (CRAs). In equilibrium, investors buy only assets that received high ratings from multiple CRAs. This has two contrasting effects on the quality of certification. On the one hand, the issuer needs to pass the screening of multiple CRAs; other things being equal, this improves certification. On the other hand, it has the perverse effect of incentivizing dishonest ratings, by introducing a team dimension that dilutes the CRAs' reputational concerns. When the perverse effect dominates, competition reduces the quality of certification. However, mandating disclosure of indicative ratings can restore the first-best outcome.
Supervisor: Meyer, Margaret ; Shapiro, Joel Sponsor: Economic and Social Research Council
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.800057  DOI: Not available
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