The analysis in this paper considers the effects of relaxing regulations that ensure that the proportions of ownership retained by entrepreneurs in new issues are observable to investors. Entrepreneurs, endowed with full ownership of their firms and private information concerning future prospects, seek to share risks with investors able to diversify those risks away. There is a trade‐off for entrepreneurs receiving good news between shedding risk and having their shares undervalued by uninformed investors. In equilibrium, an entrepreneur with good news either retains full ownership or sells a portion of his shares at the same price offered by an entrepreneur with bad news. The price in the latter case reflects rational expectations by investors as to the proportion of ownership retained by the entrepreneur conditional on his news. Only in certain cases are Pareto orderings possible across regimes in which ownership retention is either observable or unobservable. Implications for securities regulation are discussed. Résumé. Les auteurs s'intéressent dans leur analyse aux conséquences de l'assouplissement de la réglementation voulant que la proportion de titres retenue par les entrepreneurs dans les nouvelles émissions soit observable pour les investisseurs. Les entrepreneurs qui ont la propriété exclusive de leur entreprise et qui disposent d'une information privilégiée au sujet des ses perspectives d'avenir cherchent à partager leurs risques avec des investisseurs capables de diversifier ces risques de manière à les minimiser. Lorsque l'information est positive, l'entrepreneur fait face à un compromis entre le partage du risque et la sous‐évaluation de ses titres par les investisseurs non informés. En situation d'équilibre, l'entrepreneur qui détient une information positive conserve la totalité des titres ou en vend une fraction au prix qu'offrirait un entrepreneur détenant de l'information négative. Le prix, dans ce dernier cas, reflète les attentes rationnelles des investisseurs quant à la proportion des titres conservée par l'entrepreneur, en fonction de l'information dont il dispose. L'application des classements de Pareto n'est possible que dans certains cas seulement dans des situations où la proportion de titres conservée est soit observable soit non observable. Les auteurs traitent des conséquences des résultats de leurs recherches sur la réglementation relative aux valeurs mobilières.

ABSTRACT This article examines the role of measurement biases, due to order flow effects, in abnormal split ex‐day returns. We conjecture that postsplit orders consist of numerous small buyers and fewer larger sellers. This change in order flow causes closing prices to occur more frequently at the ask price, consistent with Maloney and Mulherin (1992) and Grinblatt and Keim (1991) . In addition, this change causes specialists' spreads to increase, perhaps to offset larger average inventories. We examine both NYSE and NASDAQ samples and find that order flow biases can explain approximately 80 percent (48 percent) of the NYSE (NASDAQ) ex‐day return.

This article examines the role of measurement biases, due to order flow effects, in abnormal split ex-day returns. The authors conjecture that postsplit orders consist of numerous small buyers and fewer larger sellers. This change in order flow causes closing prices to occur more frequently at the ask price, consistent with M. T. Maloney and J. H. Mulherin (1992) and M. Grinblatt and D. Keim (1991). In addition, this change causes specialists' spreads to increase, perhaps to offset larger average inventories. The authors examine both NYSE and NASDAQ samples and find that order flow biases can explain approximately 80 percent (48 percent) of the NYSE (NASDAQ) ex-day return.

ABSTRACT: A class of agency problems is analyzed in which a principal, responsible for production decisions, delegates responsibility for gathering information germane to such decisions to an agent. At issue is the value of sample outcomes and other signals in improving the efficiency of contracts offered by the principal in resolving the moral hazard that arises from the unobservability of the agent's effort. It is Shown that sample outcomes are useful in providing appropriate incentives, as well as in conditioning production decisions. Ex post observability of either the state of nature or the payoff from production is also shown to be valuable for incentive purposes in all but highly specialized and less interesting situations. Among the classes of agents to which these findings might apply are market researchers, political pollsters, census takers, geological surveyors, research scientists, quality inspectors, traffic monitors, talent scouts, and corporate auditors.

[A class of agency problems is analyzed in which a principal, responsible for production decisions, delegates responsibility for gathering information germane to such decisions to an agent. At issue is the value of sample outcomes and other signals in improving the efficiency of contracts offered by the principal in resolving the moral hazard that arises from the unobservability of the agent's effort. It is shown that sample outcomes are useful in providing appropriate incentives, as well as in conditioning production decisions. Ex post observability of either the state of nature or the payoff from production is also shown to be valuable for incentive purposes in all but highly specialized and less interesting situations. Among the classes of agents to which these findings might apply are market researchers, political pollsters, census takers, geological surveyors, research scientists, quality inspectors, traffic monitors, talent scouts, and corporate auditors.]

Robert M. Conroy, Robert L. Winkler, Informational Differences Between Limit and Market Orders for a Market Maker, The Journal of Financial and Quantitative Analysis, Vol. 16, No. 5 (Dec., 1981), pp. 703-724

We study the pricing effects of dividend and earnings announcements by taking advantage of the unique setting in Japan where managers simultaneously announce the current year's dividends and earnings as well as forecasts of next year's dividends and earnings. Defining surprises as deviations from analysts' forecasts, we find that share price reactions are significantly affected by earnings surprises, especially management forecasts of next year's earnings. The information content of dividends is marginal and is restricted to announcements of next year's dividends. Consistent with Modigliani and Miller's dividend irrelevance proposition, current dividend surprises have no material impact on stock prices in Japan.