Esta tese se dedica a estudos na área de finanças. Os estudos se subdividem nas subáreas de microestrutura e apreçamento de ativos, mas há uma inserção do trabalho em finanças corporativas, uma vez que trato da governança corporativa das empresas. No primeiro capítulo estimo o coeficiente de assimetria de informação embutido no spread de compra e venda de ações brasileiras. Além disso, verifico se há padrões para esse coeficiente e para o próprio spread em relação ao tamanho da transação e à hora de negociação. No capítulo dois, eu investigo quais características ligadas às empresas têm relação com as variáveis estimadas no capítulo 1, o coeficiente de assimetria de informação embutido no spread de compra e venda de ações brasileiras e o próprio spread. A governança corporativa das empresas é uma das características examinadas. No terceiro capítulo, eu observo quais mecanismos de governança corporativa fazem com que haja uma relação antagônica entre os retornos das ações brasileiras e o índice de governança corporativa, conforme mostrado por Carvalhal e Nobili (2011). Nesta investigação, dou ênfase à concentração acionária das empresas brasileiras que, em comparação com países mais desenvolvidos...

Esta tese é composta de três artigos. No primeiro artigo, "Simple Contracts under Simultaneous Adverse Selection and Moral Hazard", é considerado um problema de principal-agente sob a presença simultânea dos problemas de risco moral e seleção adversa, em que a dimensão de seleção adversa se dá sobre as distribuições de probabilidade condicionais as ações do agente. No segundo artigo, "Public-Private Partnerships in the Presence of Adverse Selection" é analisada a otimalidade de parcerias público-privadas sob a presença de seleção adversa. No terceiro artigo, "Regulation Under Stock Market Information Disclosure", por sua vez, é considerado o problema da regulação de firmas de capital aberto, onde as firmas possuem incentivos para mandar sinais opostos para o regulador e o mercado.; This thesis is composed of three articles. The first article, "Simple Contracts under Simultaneous Adverse Selection and Moral Hazard", considers a principal-agent problem under the simultaneous presence of both moral hazard and adverse selection, where the adverse selection dimension is given over the outcome conditional probabilities given the agents actions. The second article, "Public-Private Partnerships in the Presence of Adverse Selection" analyses the optimality of private-public partnerships under the presence of adverse selection. The third article...

O setor de saúde suplementar brasileiro operou desde os anos de 1940 sem regulação. Em 1998, o governo estabeleceu a regulação deste setor. Na regulamentação das atividades foram estabelecidas a ilimitação do número de consultas médicas, proibição de seleção de risco, entre outras medidas. O objetivo deste trabalho é investigar se a regulação resultou em aumento do número de consultas médicas por parte dos subscritores de planos de saúde, ou seja se ocorreu aumento do risco moral ex-post. Além disto, analisar alterações nos determinantes da demanda por posse de plano de saúde antes e após a regulação visando encontrar indícios de seleção adversa. Para isto, foram utilizados quatro métodos econométricos: regressão de Poisson, regressão binomial negativa e regressão quantílica de dados de contagem e um modelo Probit. O estimador de diferenças-em-diferenças foi utilizado para estimar o impacto da regulação sobre o número de consultas médicas. O modelo de regressão Probit foi utilizado para analisar os determinantes da demanda por posse de plano de saúde. Os dados utilizados provêm da Pesquisa Nacional de Amostra de Domicílios de 1998 (antes da regulação) e 2003 (depois da regulamentação). Os dados foram divididos por sexo e também pelo perfil epidemiológico...

The dominant approach to studying the effects of IMF programs has emphasized moral hazard, but we find that adverse selection has more impressive effects. We propose a novel strategic selection model to study the growth effects of IMF programs, which allows for the possibility of adverse selection. We find that adverse selection occurs: the countries that are most interested in participating in IMF programs are the least likely to have favorable growth outcomes. Controlling for this selection effect, we find that countries benefit from IMF programs on average in terms of higher growth rates, but that some countries benefit from participation, while others are harmed. Moral hazard predicts that long-term users of Fund resources benefit least from participating in programs, while adverse selection predicts the opposite. Contrary to previous findings, we find that IMF programs have more successful growth performance among long-term users than among short-term users.; Government

Although Insurers Face Adverse Selection and Moral Hazard When They Set Insurance Contracts, These Two Types of Asymmetrical Information Have Been Given Separate Treatments Sofar in the Economic Literature. This Paper Is a First Attempt to Integrate Both Problems Into a Single Model. We Show How It Is Possible to Use Time in Order to Achieve a First-Best Allocation of Risks When Both Problems Are Present Simultaneously.

Some critics of privatization argue that poor labor force restructuring is a key concern and that governments should establish better retrenchment programs. Using new data from a sample of 400 companies in the world, Chong and López-de-Silanes test competing theories about the wisdom of retrenchment programs and their effect on prices paid by buyers, and rehiring policies by private owners after privatization. The results show that adverse selection plagues retrenchment programs carried out by governments before privatization. Controlling for endogeneity, several labor retrenchment policies yield a negative impact on net privatization prices. In confirmation of the adverse selection argument, various types of voluntary downsizing lead to a higher frequency of rehiring of the same workers by the new private owners. Compulsory skill-based programs are the only type of program that is marginally associated with higher prices and lower rehiring rates after privatization, but the political and economic costs of this policy may make it somewhat impractical. While a qualified non-intervention policy appears to be the safest bet in labor retrenchment before privatization...

Adverse selection can be defined as strategic behavior by the more informed partner in a contract against the interest of the less informed partner(s). In the health insurance field, this manifests itself through healthy people choosing managed care and less healthy people choosing more generous plans. Drawing on theoretical literature on the problem of adverse selection in the health insurance market, the author synthesizes concepts developed piecemeal over more than 20 years, using two examples and revisiting the classical contribution of Rothschild and Stiglitz. He highlights key insights, especially from the literature on "equilibrium refinements" and on the theory of "second best." The government can correct spontaneous market dynamics in the health insurance market by directly subsidizing insurance or through regulation; the two forms of intervention provide different results. Providing partial public insurance, even supplemented by the possibility of opting out, can lead to second-best equilibria. The same result holds as long as the government can subsidize contracts with higher-than-average premium-benefit ratios and can tax contracts with lower-than-average premium-benefit ratios. The author analyzes the following policy options relating to the public provision of insurance: a) Full public insurance. b) Partial public insurance with or without the possibility of acquiring supplementary insurance and with or without the possibility of opting out. In recent plans implemented in Germany and the Netherlands...

A plethora of recent literature on asset pricing provides plenty of empirical evidence on the importance of liquidity, governance and adverse selection of equity on pricing of assets together with more traditional factors such as market beta and the Fama-French factors. However, literature has usually stressed that these factors are priced individually. In this dissertation we argue that these factors may be related to each other, hence not only individual but also joint tests of their significance is called for. In the three related essays, we examine the liquidity premium in the context of the finer three-digit SIC industry classification, joint importance of liquidity and governance factors as well as governance and adverse selection. Recent studies by Core, Guay and Rusticus (2006) and Ben-Rephael, Kadan and Wohl (2010) find that governance and liquidity premiums are dwindling in the last few years. One reason could be that liquidity is very unevenly distributed across industries. This could affect the interpretation of prior liquidity studies. Thus, in the first chapter we analyze the relation of industry clustering and liquidity risk following a finer industry classification suggested by Johnson, Moorman and Sorescu (2009). In the second chapter...

Regulation FD, imposed by the Securities and Exchange Commission (SEC) in October 2000, was designed to create a level playing field by prohibiting selective disclosure of material private information to particular groups. Exactly what advantage these groups gain is unclear. If multiple insiders receive identical information, the information is immediately incorporated in price and the expected profit of each insider is zero. Regardless of the SEC’s motivation in imposing Regulation FD, empirical investigation has shown that it has had a chilling effect, with firms now disclosing less information. With less information flow, private information becomes more long-lived and valuable. With increased risk of providing immediacy to informed traders, market makers will demand increased compensation, widening the bid/ask spread. To test this proposition, we identify the cost components of the bid/ask spread for a sample of NASDAQ stocks in the period just before and just after the implementation of Regulation FD. The evidence indicates that Regulation FD has led to an increase in the expected cost of the adverse selection component of the spread.; no

The purpose of this study is to investigate the relation between investor protection, adverse selection, and the probability of informed trading. Previous research has established a direct relation between investor protection and firm liquidity, measured by bid-ask spreads and depths. In this study, we test the hypothesis that adverse selection is the mechanism through which poor investor protection leads to higher costs of liquidity. The Hong Kong equity market provides a unique opportunity to compare adverse selection differences across distinct investor protection environments, holding constant the trading platform and currency. Using various bid-ask spread decomposition models and probability of informed trading estimates, we confirm the hypothesized relation between investor protection quality and adverse selection costs. These findings contribute to the literature by establishing one of the links in the chain connecting investor protection to firm valuation.; Paul Brockman, Dennis Y. Chung

Default rates on instalment loans vary with type of the good purchased. Using an Italian dataset of instalment loans between 1995-1999, we first show that the variation persists even after controlling for contract and individual-specific characteristics, and for the potential selection bias due to credit rationing. We explore whether the residual variation in the default rates across the different types of goods is due to unobserved individual heterogeneity (selection effect) or due to the effect of the specific characteristics of the good (good effect). We claim that the two effects may be interpreted as adverse selection and moral hazard. We exploit the data on multiple contracts per individual to disentangle the two effects, and find that most of the variation is explained by the selection effect. Individuals who buy motorcycles on credit are more likely to default on any loan, while those buying kitchen appliances, furniture and computers are more likely to repay, compared to average. We conclude that there is asymmetric information in the consumer credit market, mostly in the form of adverse selection.

It has long been standard in agency theory to search for incentivecompatible mechanisms on the assumption that people care only about their own material wealth. However, this assumption is clearly refuted by numerous experiments, and we feel that it may be useful to consider nonpecuniary utility in mechanism design and contract theory. Accordingly, we devise an experiment to explore optimal contracts in an adverse-selection context. A principal proposes one of three contract menus, each of which offers a choice of two incentive-compatible contracts, to two agents whose types are unknown to the principal. The agents know the set of possible menus, and choose to either accept one of the two contracts offered in the proposed menu or to reject the menu altogether; a rejection by either agent leads to lower (and equal) reservation payoffs for all parties. While all three possible menus favor the principal, they do so to varying degrees. We observe numerous rejections of the more lopsided menus, and approach an equilibrium where one of the more equitable contract menus (which one depends on the reservation payoffs) is proposed and agents accept a contract, selecting actions according to their types. Behavior is largely consistent with all recent models of social preferences...

We propose a flexible framework for estimating and testing structural models with adverse selection. This framework uses semiparametric methods for estimating consistently structural parameters of interest and for assesssing the results by testing procedures. We consider a problem of environmental regulation where firms are regulated through contracts. We show how to check parametric assumptions for the abatement cost function and test for neglected adverse selection. We then apply a semiparametric procedure for estimating models with adverse selection, that does not require to specify the distribution of the private information and avoids costly numerical procedures. The proposed framework can prove useful in a wide variety of problems where adverse selection can be present.

This paper measures the adverse selection costs associated to a given trade by estimating its permanent impact on market quotes. This estimation depends on observable trade features and market conditions, and it is given by the impulse-response function of a generalization of the Hasbrouck's (1991a,b) VAR model. It is evidenced that microstructure structural models of quote formation may introduce a downward bias in the estimation of adverse selection costs by assuming that trades only have an immediate impact on prices. Moreover, it is observed that the market behavior, in terms of liquidity and activity, in the short-term period after a trade depends on the information-asymmetry risk associated to that trade.

The dissertation highlights different topics of equity trading in limit order books using the example of Deutsche Boerse's electronic trading system XETRA. The first introductory chapter is a straight forward discussion of the profitability of exchange trading for both the exchange operator and the liquidity suppliers. It applies Harris and Hasbrouck(1996) for the continuous trading and extends it to the auction phase. The second chapter analyzes the impact of adverse selection on liquidity provision. It relaxes the the assumptions of Sandas(2001) empirical implementation of the theoretical model outlined in Glosten(1994) in two dimensions. Replacing the marginal profit conditions with average ones improves the empirical performance, whereas the nonparametric specification of the market order size does not. A cross sectional analysis corroborates the finding that adverse selection costs are more severe for smaller capitalized stocks. Iceberg orders allow traders to submit hidden liquidity into the order book. The third chapter studies the interaction between hidden liquidity and overall liquidity provision. It provides evidence that iceberg orders can be detected using public information and that market participants follow state-dependent order submission strategies. At times of iceberg orders prevailing in the order book the marker order flow and price impact changes. After adjusting for those effects in the Glosten/Sandas framework the marginal compensation of liquidity provision changes. The fourth chapter changes the focus to the opening auction. It proposes an extension to Biais et al.(1999) to remove the market microstructure noise of the indicative price regression. The results show that the indicative price becomes informative about the true value at the very beginning of the call phase...

A plethora of recent literature on asset pricing provides plenty of empirical evidence on the importance of liquidity, governance and adverse selection of equity on pricing of assets together with more traditional factors such as market beta and the Fama-French factors. However, literature has usually stressed that these factors are priced individually. In this dissertation we argue that these factors may be related to each other, hence not only individual but also joint tests of their significance is called for. ^ In the three related essays, we examine the liquidity premium in the context of the finer three-digit SIC industry classification, joint importance of liquidity and governance factors as well as governance and adverse selection. Recent studies by Core, Guay and Rusticus (2006) and Ben-Rephael, Kadan and Wohl (2010) find that governance and liquidity premiums are dwindling in the last few years. One reason could be that liquidity is very unevenly distributed across industries. This could affect the interpretation of prior liquidity studies. Thus, in the first chapter we analyze the relation of industry clustering and liquidity risk following a finer industry classification suggested by Johnson, Moorman and Sorescu (2009). In the second chapter...

Managers know more about the performance of the organization than investors, which makes the disclosure of information a possible strategy for competitive differentiation, minimizing adverse selection. This paper's main goal is to analyze whether or not an entity's level of diclosure may affect the risk perception of individuals and the process of evaluating their shares. The survey was carried out in an experimental study with 456 subjects. In a stock market simulation, we investigated the pricing of the stocks of two companies with different levels of information disclosure at four separate stages. The results showed that, when other variables are constant, the level of disclosure of an entity can affect the expectations of individuals and the process of evaluating their shares. A higher level of disclosure by an entity affected the value of its share and the other company's.

OBJECTIVE: To investigate the effect of employer contribution policy and adverse selection on employees' health plan choices. STUDY DESIGN: Microsimulation methods to predict employees' choices between two health plan options and to track changes in those choices over time. The simulation predicts choice given premiums, healthcare spending by enrollees in each plan, and premiums for the next period. DATA SOURCES: The simulation model is based on behavioral relationships originally estimated from the RAND Health Insurance Experiment (HIE). The model has been updated and recalibrated. The data processed in the simulation are from the 1993 Current Population Employee Benefits Supplement sample. PRINCIPAL FINDINGS: A higher fraction of employees choose a high-cost, high-benefit plan if employers contribute a proportional share of the premium or adjust their contribution for risk selection than if employees pay the full cost difference out-of-pocket. When employees pay the full cost difference, the extent of adverse selection can be substantial, which leads to a collapse in the market for the high-cost plan. CONCLUSIONS: Adverse selection can undermine the managed competition strategy, indicating the importance of good risk adjusters. A fixed employer contribution policy can encourage selection of more efficient plans. Ironically...

Background Although most community-based health insurance (CBHI) schemes are voluntary, problem of adverse selection is hardly studied. Evidence on the impact of targeted subsidies on adverse selection is completely missing. This paper investigates adverse selection in a CBHI scheme in Burkina Faso. First, we studied the change in adverse selection over a period of 4 years. Second, we studied the effect of targeted subsidies on adverse selection. Methods The study area, covering 41 villages and 1 town, was divided into 33 clusters and CBHI was randomly offered to these clusters during 2004–06. In 2007, premium subsidies were offered to the poor households. The data was collected by a household panel survey 2004–2007 from randomly selected households in these 33 clusters (n = 6795). We applied fixed effect models. Results We found weak evidence of adverse selection before the implementation of subsidies. Adverse selection significantly increased the next year and targeted subsidies largely explained this increase. Conclusions Adverse selection is an important concern for any voluntary health insurance scheme. Targeted subsidies are often used as a tool to pursue the vision of universal coverage. At the same time targeted subsidies are also associated with increased adverse selection as found in this study. Therefore...

Health insurance arrangements developed in various social settings as a means of pooling health risks and health resources in order to protect members' income against unpredictable health costs but also in order to guarantee their access to health care. Problems of unregulated health insurance markets, like adverse selection and risk selection, are frequently discussed in academic and political circles in the context of either inefficiency or inequity. Though interest in regulation as a health sector reform instrument is growing, empirical studies of unregulated health insurance markets are still rare, particularly, in low and middle-income country settings. This thesis contributes to the body of research and literature that attempts to identify empirical evidence for adverse selection and risk selection. It aims to examine the following research question: Are unregulated health insurance markets characterised by adverse selection and/ or risk selection and do they thereby create inefficiency or inequity. The objective is to demonstrate empirically whether or not these markets experience selection processes. First, this thesis derives a group method for empirical investigations into adverse selection and risk selection from which testable hypotheses can be derived. Second...