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.

ABSTRACT This paper examines the effects of stock splits on bid‐ask spreads for NYSE‐listed companies. Percentage spreads increase after splits, representing a liquidity cost to investors. These spread increases are directly related to decreases in share prices following splits and can explain part, but not all, of the observed increase in return variability after splits. The evidence thus suggests a liquidity cost of stock splits that must be weighed against any other perceived benefits of splits. Such a liquidity cost may validate that stock splits are a signal of favorable information about the firm.

This paper examines the effects of stock splits on bid-ask spreads for NYSE-listed companies. Percentage spreads increase after splits, representing a liquidity cost to investors. These spread increases are directly related to decreases in share prices following splits and can explain part, but not all, of the observed increase in return variability after splits. The evidence, thus, suggests a liquidity cost of stock splits that must be weighed against any other perceived benefits of splits. Such a liquidity cost may validate that stock splits are a signal of favorable information about the firm.