18 septembre 2012, 11h00–12h30
Toulouse
Salle MF 323
Economic Theory Seminar
Résumé
We consider a competitive financial market in which companies engage in strategic financial reporting knowing that investors only pay attention to finitely many aspects of firms' reports and extrapolate from their sample. We investigate the extent to which stock prices differ from the fundamental values, assuming that companies must report all their activities but are otherwise free to disaggregate their reports as they wish. We show that no matter how many aspects investors are able to consider, a monopolist can induce a price of its stock bounded away from the fundamental. Besides, competition between companies may exacerbate stock mispricing.
Mots-clés
Extrapolation; efficient market hypothesis; competition; sophistication; financial reporting;
Codes JEL
- C72: Noncooperative Games
- G14: Information and Market Efficiency • Event Studies • Insider Trading