Real Investment Decisions Under Information Constraints
AbstractWe investigate investment behavior when there is asymmetry of information between owners (the principal) and managers (the agent). The model accepts the standard cost-of-adjustment model as a particular case and is directly compared with it. For all types, information asymmetry distorts the relationship between investment and the cost of capital, and the relationship between investment and the shadow value of capital. In particular, a regime of inaction appears over a certain cost range, in an observationnally different way than when fixed adjustment costs, or irreversibilities, cause a similar phenomenon. Uncertainty, in the form of an increase in the spread of agents' types, tends to reduce investment despite symmetric adjustment cost and perfect competition. The model clarifies the interpretation of Tobin's q under asymmetric information and explains some results of the mergers and acquisition literature. En prÃ©sence d'asymÃ©trie d'information entre propriÃ©taires (le principal) et administrateurs (l'agent), la relation investissement coÃ»t du capital et la relation investissement valeur implicite du capital subissent une distorsion pour tous les types. Dans un modÃ¨le avec coÃ»t d'ajustement par ailleurs standard, il apparaÃ®t notamment un rÃ©gime d'inaction pour une certaine gamme de coÃ»ts. Ce phÃ©nomÃ¨ne se prÃ©sente sous une forme diffÃ©rente de ce qu'implique la prÃ©sence de coÃ»ts fixes ou d'irrÃ©versibilitÃ©s,0501s ressemble Ã ce qui survient lorsque le coÃ»t du capital est diffÃ©rent pour une hausse que pour une baisse du stock. L'incertitude, qui prend la forme d'un Ã©largissement de la distribution des types, tend cependant Ã rÃ©duire l'investissement. Le modÃ¨le clarifie l'interprÃ©tation du q de Tobin sous asymÃ©trie d'information et explique certains rÃ©sultats de la littÃ©rature sur les fusions et acquisitions.
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Bibliographic InfoPaper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number 9515.
Date of creation: 1995
Date of revision:
Other versions of this item:
- Gaudet, G. & Lasserre, P. & Long, N.V., 1995. "Real Investment Decisions Under Information Constraints," Papers 9515, Laval - Recherche en Politique Economique.
- Gérard Gaudet & Pierre Lasserre & Ngo Van Long, 1995. "Real Investment Decisions Under Information Constraints," CIRANO Working Papers 95s-33, CIRANO.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-05-25 (All new papers)
- NEP-FMK-1998-05-28 (Financial Markets)
- NEP-MIC-1998-05-25 (Microeconomics)
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