Unobservable costly effort in security design
将不可观测的成本努力引入安全设计的经典信号模型，发现企业流动性偏好越高，最优努力和利润越低，对称信息下努力更高，为实证结果提供理论解释。
I introduce unobservable costly effort into the canonical signalling model of security design. The choice of effort determines the quality of the security and creates an additional optimisation problem the firm must solve. My main result is that both optimal effort and optimal profits are decreasing in the firm’s preference for liquidity. I also show that optimal effort is greater under symmetric information. My approach provides a theoretical explanation for empirical results that cannot be obtained within the standard signalling framework. In addition, I extend existing methods to solve signalling models with endogenous private information. • Costly effort is introduced into the seminal model of security design. • Optimal effort and profits are decreasing in the firm’s preference for liquidity. • Optimal effort is therefore greater under symmetric information. • The analysis provides a theoretical explanation for empirical results.