Optimal Collateralized Contracts

2020 ◽  
Vol 12 (4) ◽  
pp. 45-74
Author(s):  
Dan Cao ◽  
Roger Lagunoff
Keyword(s):  
Private Information ◽  
Optimal Contract ◽  
Optimal Contracts ◽  
Net Worth ◽  
Future Earnings ◽  
Endogenous Default ◽  
Initial Wealth ◽  
Credit Contracts ◽  
Collateralized Contracts

We examine the role of collateral in a dynamic model of optimal credit contracts in which a borrower values both housing and nonhousing consumption. The borrower’s private information about his income is the only friction. An optimal contract is collateralized when in some state, some portion of the borrower’s net worth is forfeited to the lender. We show that optimal contracts are always collateralized. The total value of forfeited assets is decreasing in income, highlighting the role of collateral as a deterrent to manipulation. Some assets—those that generate consumable services—will necessarily be collateralized, while others may not be. Endogenous default arises when the borrower’s initial wealth is low, as with subprime borrowers, and/or his future earnings are highly variable. (JEL D82, D86, G21, G51)

scholarly journals Earnings Smoothing as Information Signaling or Garbling: A Review of Literature

2018 ◽  
Vol 10 (1) ◽  
pp. 131
Author(s):  
Nor Afifah Shabani ◽  
Saudah Sofian
Keyword(s):  
Private Information ◽  
Firm Value ◽  
Future Research ◽  
Journal Articles ◽  
Actual Performance ◽  
Future Earnings ◽  
Information Signaling ◽  
Earnings Smoothing ◽  
Reported Earnings

Earnings smoothing, which refers to the action of managers managing earnings to reduce fluctuations of reported earnings, is a special type of earnings management because while earnings smoothing may be used to distort shareholders and creditors’ view of corporate actual performance, it may also serve as a tool to communicate corporate private information of future earnings to the aforementioned stakeholders. Hence, it comes to no surprise when prior literatures reveal that the studies on the role of earnings smoothing are divided into two streams: as information signaling and information garbling. This paper aims to review prior literatures, specifically on the role of earnings smoothing either as information signaling or garbling based on four themes: firm value, financing need, compensation contract and outsiders’ intervention. This paper reviews journal articles gathered from Web of Science database. Based on the shortcomings of prior literatures, this paper highlights avenue for future research.

Do Targets Benefit From Auctions? The Role of Private Information

2012 ◽  
Author(s):  
Carol Anilowski Cain ◽  
Antonio J. Macias ◽  
Juan Manuel Sanchez
Keyword(s):  
Private Information

scholarly journals Honest Equilibria in Reputation Games: The Role of Time Preferences

2018 ◽  
Vol 10 (1) ◽  
pp. 278-314 ◽  
Author(s):  
Melis Kartal
Keyword(s):  
Private Information ◽  
Repeated Games ◽  
Broad Class ◽  
Time Preferences ◽  
Reputation Games

New relationships are often plagued with uncertainty because one of the players has some private information about her “type.” The reputation literature has shown that equilibria that reveal this private information typically involve breach of trust and conflict. But are these inevitable for equilibrium learning? I analyze self-enforcing relationships where one party is privately informed about her time preferences. I show that there always exist honest reputation equilibria, which fully reveal information and support cooperation without breach or conflict. I compare these to dishonest reputation equilibria from several perspectives. My results are applicable to a broad class of repeated games. (JEL C73, D82, D83, D86, Z13)

Your network is your net worth: political ties and innovation performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Farrukh ◽  
Ali Raza ◽  
Abdul Waheed
Keyword(s):  
Partial Least Square ◽  
Innovation Performance ◽  
Least Square ◽  
Equation Modeling ◽  
Unique Contribution ◽  
Content Type ◽  
Net Worth ◽  
Political Ties ◽  
The Impact

PurposeBased on the social network theory, this study investigates the impact of political ties on innovation performance. Besides, this study also tests a mediation role of absorptive capacity (AC) and a moderation role of technology turbulence.Design/methodology/approachA hypothetico-deductive approach is adopted to test the hypotheses. Data were collected from the small and medium enterprises (SMEs) managers/owners through a structured questionnaire.FindingsPartial least square structural equation modeling technique is used to analyze the hypothesized relationships; the findings showed that political ties significantly impact the innovation performance, and this relationship is mediated by AC. Moreover, technological turbulence moderated the relationship between political ties and innovation performance.Originality/valueDespite the increasing attention to the role of networking in improving innovation, there is a scarcity of studies on the role of political ties, AC and technology turbulence in fostering organizational innovation; thus, this study is a unique contribution to literature.

scholarly journals Children and Online Privacy Protection: Empowerment from Cognitive Defense Strategies

2019 ◽  
Vol 39 (2) ◽  
pp. 205-219 ◽  
Author(s):  
J. Craig Andrews ◽  
Kristen L. Walker ◽  
Jeremy Kees
Keyword(s):  
Private Information ◽  
Parental Influence ◽  
Online Privacy ◽  
State Agencies ◽  
Educational Video ◽  
Defense Strategies ◽  
Education Campaigns ◽  
Defense Research ◽  
Limit Access

At present, very little is known about what might encourage children and teens to limit access to their private information online and to restrict what they share on social media and video sites. Federal and state agencies face challenges encouraging companies to help children, teens, and parents protect their information online. The authors extend previous cognitive defense research by examining (1) effects beyond advertising as applied to information privacy online; (2) not only children’s/teens’ beliefs and knowledge, but also their online privacy decisions; (3) multiple age categories; (4) multiple cognitive defense strategies (educational video, quiz with feedback, or absence of a strategy); and (5) children’s/teens’ motivation to restrict what they share online. Key results indicate significant effects of the quiz and educational video over the absence of a strategy in enhancing favorable online safety beliefs and in restricting online sharing. Findings also demonstrate the role of perceived parental influence and for agencies to offer privacy education campaigns to help empower children to protect their privacy. Implications for policy and privacy research are discussed.

scholarly journals Learning from prices: information aggregation and accumulation in an asset market

2020 ◽  
Author(s):  
Michele Berardi
Keyword(s):  
Private Information ◽  
Dynamic Properties ◽  
Public Information ◽  
Information Aggregation ◽  
Time Varying ◽  
Private Signals ◽  
Private And Public ◽  
Fundamental Value ◽  
Over Time

Abstract Can prices convey information about the fundamental value of an asset? This paper considers this problem in relation to the dynamic properties of the fundamental (whether it is constant or time-varying) and the structure of information available to agents. Risk-averse traders receive two potential signals each period: one exogenous and private and the other, prices, endogenous and public. Prices aggregate private information but include aggregate noise. Information can accumulate over time both through endogenous and exogenous signals. With a constant fundamental, the precision of both private and public cumulative information increases over time but agents put progressively more weight on the endogenous signals, asymptotically disregarding private ones. If the fundamental is time-varying, the use of past private signals complicates the role of prices as a source of information, since it introduces endogenous serial correlation in the price signal and cross-correlation between it and innovations in the fundamental. A modified version of the Kalman filter can still be used to extract information from prices and results show that the precision of the endogenous signals converges to a constant, with both private and public information used at all times.

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