Information Acquisition Activities Research Articles

Information Acquisition During a Dutch Auction

In this paper we consider equilibrium behavior in a Dutch (descending price) auction where the bidders are uninformed of their valuations with probability 1-q and can acquire information about their valuation at a positive cost during the auction. We assume that the information acquisition activity is covert. We characterize the equilibrium behavior in a setting where bidders are ex ante symmetric and have independent private values. We show that, if the number of bidders is large, the Dutch auction produces more revenue than would a first price auction.

Reporting Frequency, Information Precision and Private Information Acquisition

Abstract: This study examines whether the choice between quarterly and semiannual reporting affects the precision of investors' information and their private information acquisition activities. In the first part of this study, we show that a firm's reporting frequency has no effect on the average precision of investors' information. However, our analysis of announcement‐period price variance and share turnover shows that an increase in reporting frequency does make interim and annual financial reports a more important component of investors' information set, relative to other sources of information. In particular, the results of this analysis suggest that investors of semiannual reporters hold more precise pre‐announcement information than investors of quarterly reporters. In the second part of our study, we test one explanation for this finding. We argue that an increase in a firm's reporting frequency reduces investors' incentives to acquire private information between consecutive announcement dates and, consequently, should reduce information asymmetry among investors, increase share liquidity, and stimulate trading. Consistent with this reasoning, we find that quarterly reporters have lower average bid‐ask spreads and higher abnormal share turnover than semiannual reporters.

Does Monitoring Effect Explain the Relation between Analyst Following and Firm Value?

Researchers argue that analysts’ information acquisition activities increase firm value through reducing agency costs, i.e., the monitoring effect (Jensen and Meckling 1976; Healy and Palepu 2001). However, the existing empirical evidence on analyst monitoring effect is limited and inconclusive. This paper extends the literature by examining 1) whether analyst following is related to higher firm value; and 2) if the relation is positive, whether the positive relation reflects analyst monitoring effect. We document a positive relation between analyst following and asset value and the positive relation is consistent with analyst monitoring effect as reflected in two aspects. First, the positive effect is significant for cash and much weaker for other assets. This is consistent with a stronger monitoring effect for assets that are subject to higher agency costs or information asymmetry. Second, consistent with analyst following constraining asset mismanagement or motivating more efficient asset use, analyst following is related to higher subsequent operating performance and total payout of cash.

Overconfidence and Market Efficiency with Heterogeneous Agents

We study financial markets in which both rational and overconfident agents coexist and make endogenous information acquisition decisions. We demonstrate the following irrelevance result when a positive fraction of rational agents (endogenously) decides to become informed in equilibrium, prices are set as if all investors were rational, and as a consequence the overconfidence bias does not affect informational efficiency, price volatility, rational traders’ expected profits or their welfare. Intuitively, as overconfidence goes up, so does price informativeness, which makes rational agents cut their information acquisition activities, effectively undoing the standard effect of more aggressive trading by the overconfident. The main intuition of the paper, if not the irrelevance result, is shown to be robust to different model specifications.

Investment Implications of Information Acquisition and Leakage

This paper studies when a firm will acquire additional information about a potential new project by consulting outsiders, when doing so runs the risk of reducing the value of implementing the project as a consequence of information leakage. The analysis evaluates the firm's information acquisition activities in both the presence and absence of moral hazard in project production.

Information Acquisition Activities: A Study of Global Start-Up Exporting Companies

In this study, the author investigates the antecedents of information search effort and information source use and the implications of firms’ information acquisition activities on export performance. The author examines four major sets of variables to understand their impact on firms’ information search effort and the use of personal, quasi-government, and documented sources. These variables are information source characteristics, firm strategic orientation, environmental characteristics, and organizational characteristics. Empirical results based on a survey of U.S. exporting firms provide mixed support for these factors in predicting firms’ information search effort and information source use. Findings on firm performance support the notion that firms that engage in greater information search and those that rely on personal and quasi-government information sources tend to have higher performance levels.

International market information infusion: Data acquisition behaviour in Norwegian exporters

The ‘process’ internationalisation model provides the conceptual framework for a study of overseas market information acquisition in 32 Norwegian exporters. The research results do not support some important elements of the ‘process’ model. Particular areas where empirical support was not apparent relate to the evolutionary thrust of the 'process' model and the 'psychic' distance construct. Information acquisition activity in the survey firms is much more heavily influenced by the relative importance of exporting and management's export commitment than temporal factors or the scale of overseas business. Experiential knowledge was also valued less highly than expected. The results confirm the importance of personal contacts as information sources and indicate a high propensity to access sources which are readily available and inexpensive.

Institutional Ownership and the Liquidity of Common Stock Offerings

AbstractThis paper investigates the extent to which institutional ownership of equity affects the market's response to announcements of new issues of common stock. We find that the absolute magnitude of the share price reaction is negatively related to the level of institutional ownership in the announcing firm. These results are consistent with the argument that the information acquisition activities of institutional investors reduce preannouncement information asymmetries between managers and the capital market.

Information Acquisition as Business Strategy

Information acquisition activities, such as accounting disclosure, financial analysis, and marketing research, are major concerns in moder business administration. Business enterprises often invest enormous amounts of time and money in obtaining information for the various tasks of decision making. A growing literature is devoted to addressing the role of information in the production decision and the market structure. However, little effort has been devoted to understanding information acquisition as an essential part of business strategy.' The purpose of this paper is to analyze information gathering as a competition strategy of manufacturing firms and to examine its implications for the welfare of society. Li, McKelvey, and Page [13] and Vives [20] use a two-stage game model to study the information acquisition of oligopolistic firms. However, these authors ignore the strategic aspect of information acquisition. In both [13] and [20], firms are symmetric and produce a homogenous good. Therefore, the equilibrium is also symmetric: all firms gather the same amount of industrywide information. We generalize [13] in several ways. We allow firms to produce differentiated products, and to use the information they acquire to contest the product market. Moreover, the information in our model can be partly firm-specific and partly industry-wide. We adopt a convex information cost function more general than that of [13]. Therefore, [13] can be interpreted as a special case of the model presented here. Novshek and Sonnenschein [14], Gal-Or [6], Vives [19], and Li [12] study the possibility of trading or sharing the exogenous industry-wide information about demand. Okada [15], Fried [4], Li [12], Shapiro [18], and Seidmann [17] examine the incentive for disclosing exogenous firm-specific information about costs in an oligopoly.2 We extend the analysis in this literature

A Test of Services Marketing Theory: Consumer Information Acquisition Activities

The author explores the information needs of service consumers. In the purchase decision process, search behavior is motivated in part by perceived risk and the consumer's ability to acquire relevant information with which purchase uncertainty can be addressed. Marketing theory suggests that consumers use information sources in a distinctive way to reduce the uncertainty associated with services. Hence, six hypotheses are developed to test the information acquisition of service buyers. An experimental approach is employed to compare, in a prepurchase context, the information sources used by consumers of services and those used by consumers of goods. The resulting data support the predictions offered and extend marketing theory.

A Test of Services Marketing Theory: Consumer Information Acquisition Activities

The author explores the information needs of service consumers. In the purchase decision process, search behavior is motivated in part by perceived risk and the consumer's ability to acquire relevant information with which purchase uncertainty can be addressed. Marketing theory suggests that consumers use information sources in a distinctive way to reduce the uncertainty associated with services. Hence, six hypotheses are developed to test the information acquisition of service buyers. An experimental approach is employed to compare, in a prepurchase context, the information sources used by consumers of services and those used by consumers of goods. The resulting data support the predictions offered and extend marketing theory.

Introducing successful new industrial products

Product developers continue to be plagued by the high incidence of new product failure. This monograph presents the results of a two‐phase empirical study designed to shed some light on approaches which might improve the process.Phase I focuses on a large sample of such failures and reveals that industrial product firms suffer from an inward orientation. The main reasons for failure were found to be a lack of understanding of customers, competition and the market environment. A review of the many activities involved on the new product process showed that market oriented activities consistently fared the worst when compared to technical, production and financial evaluation. Finally, a lack of marketing research personnel and skills was thought to have contributed more to industrial product failure than any other resource deficiency.Phase II of the research presents three case histories of exceptionally successful and well‐executed industrial new product ventures. They reveal that the development of new products is a sequential and goal‐oriented process, each stage involving information acquisition activity followed by evaluation and decision. Incremental commitment is identified as an effective route to risk reduction. The case histories demonstrate that market orientation in industrial product development is not only feasible but highly desirable.