Optimal Reporting Systems With Investor Information Acquisition

This paper analyzes a manager's optimal ex-ante reporting system using a Bayesian persuasion approach (Kamenica and Gentzkow (2011)) in a setting where investors affect cash flows through their decision to finance the firm's investment opportunities, possibly assisted by the costly acquisition of additional information (inspection). I examine how the informativeness and the bias of the optimal system are determined by investors' inspection cost, the degree of incentive alignment between the manager and the investor, and the prior belief that the project is profitable. I find that a mis-aligned manager's system is informative

only when the market prior is pessimistic and is always positively biased; this bias decreases as investors' inspection cost decreases. In contrast, a well-aligned manager's system is fully revealing when investors' inspection cost is high, and is counter-cyclical to the market belief when the inspection cost is low: It is positively (negatively) biased when the market belief is pessimistic (optimistic). Furthermore, I explore the extent to which the results generalize to a case with managerial manipulation and discuss the implications for investment efficiency. Overall, the analysis describes the complex interactions among determinants of firm disclosures and governance, and offers explanations for the mixed empirical results in this area.

Efficient Prices at Any Cost: Does Algorithmic Trading Deter Information Acquisition?

I demonstrate a powerful tension between acquiring information and incorporating it into asset prices, the two core elements of price discovery. As a salient case, I focus on the transformative rise of algorithmic trading (AT) typically associated with improved price efficiency. Using a measure of the relative information content of prices and a comprehensive panel of 37,325 stock-quarters of SEC market data, I establish instead that algorithmic trading strongly decreases the net amount of information in prices. The increase in price distortions associated with the AT “information gap” is roughly $42.6 billion/year for U.S. common stocks around earnings announcement events alone. Information losses are concentrated among stocks with high shares of algorithmic liquidity takers relative to algorithmic liquidity makers, suggesting that aggressive AT powerfully deters fundamental information acquisition despite its importance for translating available information into prices.

The Life Cycle of Corporate Venture Capital

This paper establishes the life-cycle dynamics of Corporate Venture Capital (CVC) to explore the information acquisition role of CVC investment in the process of corporate innovation. I exploit an identification strategy that allows me to isolate exogenous shocks to a firm's ability to innovate. Using this strategy, I first find that the CVC life cycle typically begins following a period of deteriorated corporate innovation and increasingly valuable external information, lending support to the hypothesis that firms conduct CVC investment to acquire information and innovation knowledge from startups. Building on this analysis, I show that CVCs acquire information by investing in companies with similar technological focus but have a different knowledge base. Following CVC investment, parent firms internalize the newly acquired knowledge into internal R&D and external acquisition decisions. Human capital renewal, such as hiring inventors who can integrate new innovation knowledge, is integral in this step. The CVC life cycle lasts about four years, terminating as innovation in the parent firm rebounds. These findings shed new light on discussions about firm boundaries, managing innovation, and corporate information choices.

Spectrotemporal CT data acquisition and reconstruction at low dose.

PURPOSE: X-ray computed tomography (CT) is widely used, both clinically and preclinically, for fast, high-resolution anatomic imaging; however, compelling opportunities exist to expand its use in functional imaging applications. For instance, spectral information combined with nanoparticle contrast agents enables quantification of tissue perfusion levels, while temporal information details cardiac and respiratory dynamics. The authors propose and demonstrate a projection acquisition and reconstruction strategy for 5D CT (3D+dual energy+time) which recovers spectral and temporal information without substantially increasing radiation dose or sampling time relative to anatomic imaging protocols. METHODS: The authors approach the 5D reconstruction problem within the framework of low-rank and sparse matrix decomposition. Unlike previous work on rank-sparsity constrained CT reconstruction, the authors establish an explicit rank-sparse signal model to describe the spectral and temporal dimensions. The spectral dimension is represented as a well-sampled time and energy averaged image plus regularly undersampled principal components describing the spectral contrast. The temporal dimension is represented as the same time and energy averaged reconstruction plus contiguous, spatially sparse, and irregularly sampled temporal contrast images. Using a nonlinear, image domain filtration approach, the authors refer to as rank-sparse kernel regression, the authors transfer image structure from the well-sampled time and energy averaged reconstruction to the spectral and temporal contrast images. This regularization strategy strictly constrains the reconstruction problem while approximately separating the temporal and spectral dimensions. Separability results in a highly compressed representation for the 5D data in which projections are shared between the temporal and spectral reconstruction subproblems, enabling substantial undersampling. The authors solved the 5D reconstruction problem using the split Bregman method and GPU-based implementations of backprojection, reprojection, and kernel regression. Using a preclinical mouse model, the authors apply the proposed algorithm to study myocardial injury following radiation treatment of breast cancer. RESULTS: Quantitative 5D simulations are performed using the MOBY mouse phantom. Twenty data sets (ten cardiac phases, two energies) are reconstructed with 88 μm, isotropic voxels from 450 total projections acquired over a single 360° rotation. In vivo 5D myocardial injury data sets acquired in two mice injected with gold and iodine nanoparticles are also reconstructed with 20 data sets per mouse using the same acquisition parameters (dose: ∼60 mGy). For both the simulations and the in vivo data, the reconstruction quality is sufficient to perform material decomposition into gold and iodine maps to localize the extent of myocardial injury (gold accumulation) and to measure cardiac functional metrics (vascular iodine). Their 5D CT imaging protocol represents a 95% reduction in radiation dose per cardiac phase and energy and a 40-fold decrease in projection sampling time relative to their standard imaging protocol. CONCLUSIONS: Their 5D CT data acquisition and reconstruction protocol efficiently exploits the rank-sparse nature of spectral and temporal CT data to provide high-fidelity reconstruction results without increased radiation dose or sampling time.