Journal Article

Using Stock Price Information to Regulate Firms

Antoine Faure-Grimaud

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 69, issue 1, pages 169-190
Published in print January 2002 | ISSN: 0034-6527
Published online January 2002 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00202
Using Stock Price Information to Regulate Firms

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This paper examines the role of the information contained in stock prices in the regulation of privatized firms. Stock prices contain noisy but unbiased information about firm's future prospects that regulators can use to decide on some regulatory policies. The main argument developed is that the observation of stock price movements reduces the incentives of regulators to develop their own monitoring technologies and can allow them to commit to relatively lighthanded regulations. This protects firm's investments in cost reduction activities and can increase ex ante welfare.

Journal Article.  0 words. 

Subjects: Economics

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