Professor Jesse Davis Associate Professor of Finance.
"Incentivizing Effort and Informing Investment: The Dual Role of Stock Prices"
Abstract: Stock prices re ect managerial performance and aggregate investor information
about investment opportunities. These dual roles are often in tension: when prices are
more informative about future opportunities, they may be less effective at incentivizing
managerial effort. This intuitive tradeoff has novel consequences. Higher transparency,
which leads to more efficient investment, can decrease firm value. The principal may
strictly prefer to delegate investment to a manager who has no informational advantage
and makes ex-post ineffcient choices. Investment in diversifying and (ex-ante) negative
NPV projects mitigate agency problems. Finally, standard empirical measures of price
efficiency provide an incomplete picture of firm value.
Bio: I joined the finance faculty at UNC-Chapel Hill in 2016.My principal research interest is the economic impact of learning, information acquisition, and belief formation. While my approach is primarily theoretical, it is usually driven by, and at times accompanied by, empirical observation and analysis. I am a member of the Finance Theory Group and the Macro Finance Society.
Details:
Type: In Person
Time: Wednesday, May.8,2024 from 1:00 to 2:30 PM
Location: Room 2115
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