Ignorance Is Bliss: The Screening Effect of (Noisy) Information

• 成果类型: Article
• 署名作者: Feng, Felix Zhiyu; Wang, Wenyu; Wu, Yufeng; Zhang, Gaoqing
• 署名单位: University of Washington; University of Washington Seattle; Indiana University System; IU Kelley School of Business; Indiana University Bloomington; University System of Ohio; Ohio State University; University of Minnesota System; University of Minnesota Twin Cities; Carnegie Mellon University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826; 1558-7967
• DOI: 10.2308/TAR-2023-0112
• 发表日期: 2025-01
• 页码: 201-230
• 关键词: internal information; screening; corporate governance; accounting noise; EFFICIENCY; OWNERSHIP; CONTRACTS; credit; MODEL

摘要

This paper studies the value of a firm's internal information when the firm faces an adverse selection problem arising from unobservable managerial abilities. Although more precise information allows the firm to make ex post more efficient investment decisions, noisier information has an ex ante screening effect that allows the firm to attract on-average better managers. The tradeoff between more effective screening of managers and more informed investment implies a nonmonotonic relationship between firm value and information quality. A marginal improvement in information quality does not necessarily lead to an overall improvement in firm value.