Thursday 6 April 2023 – 1:15pm-2:15pm

Enhancement in Firms’ Information Environment via Options Trading and the Efficiency of Corporate Investment

Prof. Andrianos Tsekrekos, Athens University of Economics & Business

Abstract:

We examine the association between enhancement in firms’ information environment via options trading and firms’ investment efficiency. Investment inefficiency is partly driven by information asymmetries between firm managers and capital providers, aggravating moral hazard concerns. We test whether enhancement in firms’ information environment through higher volumes of options trading (including a natural experiment involving exogenous shocks via the Penny Pilot Program) is positively related to more efficient firm investment decisions. Our results confirm that enhanced informational efficiency via higher volumes of options trading is positively related to improvements in firm-level investment efficiency. Our findings are in line with the enhancement in the information environment stemming from options trading reducing agency and moral hazard concerns (an agency channel) and are not driven by alternative explanations such as managerial learning from informed traders or lower cost of capital. Overall, our findings suggest that enhanced information environment via more options trading benefits firms’ investment decisions.

Registration, please contact robin@em-lyon.com

📍 The seminar will take place at emlyon business School (Ecully campus) – Room Learning Lab – building B, 1st floor.

Prof. Andrianos TSEKREKOS

Athens University of Economics & Business