Imperfect Financial Markets and Investment Inefficiencies

Résumé

We analyze the consequences of noisy information aggregation for investment. Market imperfections create endogenous rents that cause overinvestment in up-side risks and underinvestment in downside risks. In partial equilibrium, these inefficiencies are particularly severe if upside risks are coupled with easy scalabil-ity of investment. In general equilibrium, the shareholders’ collective attempts to boost value of individual firms leads to a novel externality operating through price that amplifies investment distortions with downside risks but offsets dis-tortions with upside risks.

Remplacé par

Elias Albagli, Christian Hellwig et Aleh Tsyvinski, « Imperfect Financial Markets and Investment Inefficiencies », American Economic Review, vol. 113, n° 9, septembre 2023, p. 2323–2354.

Référence

Elias Albagli, Christian Hellwig et Aleh Tsyvinski, « Imperfect Financial Markets and Investment Inefficiencies », TSE Working Paper, n° 18-891, février 2018, révision février 2023.