Moral Hazard and Information Sharing: A Model of Financial Information Gathering Agencies

Marcia H. Millon and Anjan Thakor ()
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Marcia H. Millon: Boston College

Finance from University Library of Munich, Germany

Abstract: We propose a theory of information gathering agencies in a world of informational asymmetries and moral hazard. In a setting in which true firm values are certified by screening agents whose payoffs depend on noisy ex post monitors of information quality, the formation of information gathering agencies (groups of screening agents) is justified on two grounds. First, it enables screening agents to diversify their risky payoffs. Second, it allows information sharing. The first effect itself is insufficient despite the risk aversion of screening agents and the stochastic independence of the monitors used to compensate them.

JEL-codes: G (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004-11-10
New Economics Papers: this item is included in nep-cfn and nep-fin
Note: Type of Document - pdf; pages: 21
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https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0411/0411024.pdf (application/pdf)

Related works:
Journal Article: Moral Hazard and Information Sharing: A Model of Financial Information Gathering Agencies (1985)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0411024

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