This paper tries to explain why the issuers of an asset would restrict what information is available about their asset. In a world where knowledge is valued, market forces should induce disclosure, but we often see markets (such as the market for mortgage-backed securities) where assets' issuers refuse to release valuable information. We present a model of market liquidity and find that market liquidity can both rise and fall with the quantity of released information. More information may increase asymmetries of information and “lemons” style breakdowns. We find that asset bundling is more advantageous when private information is more accurate, which may be the case in the mortgage-backed securities market.Journal of Economic LiteratureClassification Numbers: G14, G32.

Violations of the absolute priority rule (APR) are commonplace in private workouts, formal business reorganizations, and personal bankruptcies. While some theorists suggest they may arise endogenously, they are clearly magnified by the institutional structure of the bankruptcy code. This paper shows that APR violations exacerbate credit rationing problems by reducing the payment lenders receive in default states. Furthermore, APR violations make default more likely to occur, thereby making debt financing more costly. Together, these results support the view that APR violations create an impediment to efficient financial contracting.Journal of Economic LiteratureClassification Numbers: G33, G38, K20.

We present an information-based explanation for spinoffs. When the various divisions of a firm are spun off into several firms that have separate stock market listings, the number of traded securities increases. This makes the price system more informative. It improves the quality of the investment decisions made by managers and reduces uninformed investors' uncertainty about the value of the divisions. Both effects serve to increase the sum total of the market values of the spun-off divisions above the market value of the original firm.Journal of Economic LiteratureClassification Numbers: G14, G34.