The Generalized Informativeness Principle

20 Pages Posted: 8 Dec 2014 Last revised: 7 May 2021

See all articles by Pierre Chaigneau

Pierre Chaigneau

Queen's University

Alex Edmans

London Business School - Institute of Finance and Accounting; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Daniel Gottlieb

London School of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: December 2014

Abstract

This paper shows that the informativeness principle, as originally formulated by Holmstrom (1979), does not hold if the first-order approach is invalid. We introduce a "generalized informativeness principle" that takes into account non-local incentive constraints and holds generically, even without the first-order approach. Our result holds for both separable and non-separable utility functions.

Suggested Citation

Chaigneau, Pierre and Edmans, Alex and Gottlieb, Daniel, The Generalized Informativeness Principle (December 2014). NBER Working Paper No. w20729, Available at SSRN: https://ssrn.com/abstract=2535181

Pierre Chaigneau (Contact Author)

Queen's University ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Alex Edmans

London Business School - Institute of Finance and Accounting ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Daniel Gottlieb

London School of Economics ( email )

New Academic Building 5.30
Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://https://personal.lse.ac.uk/gottlied/

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