Three essays in economics and finance

Sogo, Takeharu

Permalink

https://hdl.handle.net/2142/89001 Copy

Description

Title

Three essays in economics and finance

Author(s)

Sogo, Takeharu

Issue Date

2015-11-23

Director of Research (if dissertation) or Advisor (if thesis)

Bernhardt, Dan M

Doctoral Committee Chair(s)

Bernhardt, Dan M

Committee Member(s)

• Perry, Martin K
• Williams, Steven R
• Deltas, George

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Auctions with participation costs
• Security-bid auctions
• Entry
• Information disclosure
• Equity auctions
• Post-auction investment decisions
• Endogenous quality choice
• Securitization
• Structured finance products
• Moral hazard
• Adverse selection

Abstract

"This dissertation consists of three essays. The first essay is joint work with Dan Bernhardt. We endogenize entry to a security-bid auction, where participation is costly, and bidders must decide given their private valuations whether to participate. We first suppose that the minimum reserve security-bid yields the seller an expected revenue equal to the asset's stand-alone value to the seller. Demarzo et al. (2005) establish that with a fixed number of bidders, auctions with steeper securities yield the seller more revenues. Counterintuitively, we find that auctions with steeper securities also attract more entry, further enhancing the revenues from such auctions. We then establish that with optimal reserve securities, auctions with steeper securities always yield higher expected revenues. In the second essay, I consider a situation in which a winning bidder of an equity auction has an investment opportunity after the auction and the seller has private information about the return of the post-auction investment. I show that in such a situation, in contrast to the seminal ""linkage principle"" by Milgrom and Weber (1982), the seller's expected revenue may be higher when not disclosing her private information at all than when committing to publicly announce her private information regardless of whether it is positive or negative. The third essay is joint work with Keiichi Kawai. The securitization of structured finance products entails three types of inefficiency: the issuer's moral hazard when screening underlying assets (ex-ante inefficiency), the issuer's incentive to repackage underlying assets into separate securities even when doing so is socially inefficient (interim inefficiency), and adverse selection in the market (ex-post inefficiency). To analyze the interplay of these inefficiencies and their welfare implications, we consider a situation wherein buying medium-value assets and issuing medium-value securities are first-best. However, we show that the issuer not only buys low-value underlying assets but also repackages underlying assets to issue two types of securities of different values despite paying a socially wasteful cost."

Graduation Semester

2015-12

Type of Resource

text

Permalink

http://hdl.handle.net/2142/89001

Copyright and License Information

Copyright 2015 Takeharu Sogo

Owning Collections