The Wrong Kind of Transparency

51 Pages Posted: 16 Jul 2008

See all articles by Andrea Prat

Andrea Prat

Columbia University - Columbia Business School, Finance; Centre for Economic Policy Research (CEPR)

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Date Written: October 2002

Abstract

In a model of career concerns for experts, when is the principal hurt from observing more information about her agent? This paper introduces a distinction between information on the consequence of the agent's action and information directly on the agent's action. It is the latter kind that can hurt the principal by engendering conformism, which worsens both discipline and sorting. The paper identifies a necessary and sufficient condition on the agent signal structure under which transparency on action is detrimental to the principal. The paper also shows the existence of complementarities between transparency on action and transparency on consequence. The results are used to interpret existing disclosure policies in politics, corporate governance, and delegated portfolio management.

JEL Classification: D20, D80, H11, H70, L22, P11

Suggested Citation

Prat, Andrea, The Wrong Kind of Transparency (October 2002). LSE STICERD Research Paper No. TE439, Available at SSRN: https://ssrn.com/abstract=1160984

Andrea Prat (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom