Massimo Scotti - Academia.edu (original) (raw)
Papers by Massimo Scotti
European Economic Review, 2021
We develop a model to analyze the impact of conicts of interest on the incentives of experts to ... more We develop a model to analyze the impact of conicts of interest on the incentives of experts to reveal their information to receivers. We show that reputational concerns lead experts to adopt conservative behaviour by conforming to public information and disregarding their own. In particular, initial reputation has a non monotonic e¤ect on the degree of information revelation, with truthful revelation being more likely to occur when there is more uncertainty on expert ability. Our results shed light on the relationship between institutional features of the reporting environment and informational e¢ ciency, suggesting a set of empirical implications relative to sell-side nancial analysts. The framework developed applies to issues of information transmission that involve conicting short term and long term objectives.
International Journal of Economic Theory, 2014
We analyze a model of cheap talk in which an expert that faces a con ‡ict of interest with a deci... more We analyze a model of cheap talk in which an expert that faces a con ‡ict of interest with a decision maker is concerned about establishing a reputation for having accurate information. In this environment, the incentive of the expert to establish a reputation for competence has a non-monotonic e¤ect on the degree of information revelation. An increase in reputation above a certain threshold always makes truthful revelation more di¢ cult to achieve. This is driven by the fact that experts with greater reputation for We would like to thank
This paper studies the impact of reputation on the reporting strategy of experts that face con ‡i... more This paper studies the impact of reputation on the reporting strategy of experts that face con ‡icts of interest. The framework we propose applies to di¤erent settings involving decision makers that rely on experts for making informed decisions, such as …nancial analysts and goverment agencies. We show that reputation has a non-monotonic e¤ect on the degree of information revelation. In general, truthful revelation is more likely to occur when there is more uncertainty on an expert's ability. Furthermore, above a certain threshold, an increase in reputation always makes truthful revelation more di¢ cult to achieve. Our results shed light on the relationship between the institutional features of the reporting environment and informational e¢ ciency.
SSRN Electronic Journal, 2011
This paper studies the impact of collective reputation on the reporting strategy of experts that ... more This paper studies the impact of collective reputation on the reporting strategy of experts that face con ‡icts of interest. The framework we propose applies to di¤erent settings involving decision makers that rely on experts for making informed decisions, in particular we consider sell-side …nancial analysts. We …nd that collective reputation has a non-monotonic e¤ect on the degree of information revelation. In general, truthful revelation is more likely to occur when there is more uncertainty on the average ability of analysts as a group. In particular, above a certain threshold, an increase in collective reputation always makes truthful revelation more di¢ cult to achieve. We test this theory by creating an index on the market's perception of the general reliability of analysts'recommendations. The empirical analysis provides evidence that collective reputation plays a role in determining the behaviour of analysts independently of their individual reputation.
Financial intermediaries are known to have access to privileged in- formation on …rm value, poten... more Financial intermediaries are known to have access to privileged in- formation on …rm value, potentially providing important services by revealing it to uninformed investors. An important issue that arises is whether Investment Banks have an incentive to distort prices by com- municating biased information on the …rms they are underwriting in IPOs. Reputation acquisition may mitigate this problem as interme- diaries may lose credibility by incorrectly forecasting the pro…tability of …rms. We argue that the introduction of reputation may not su¢ ce to eliminate all scope for misreporting, allowing less talented interme- diaries to pro…t from not revealing their private information to the market.
SSRN Electronic Journal, 2017
Decision makers often face uncertainty about the ability and the integrity of their advisors. If ... more Decision makers often face uncertainty about the ability and the integrity of their advisors. If an expert is sufficiently concerned about establishing a reputation for being skilled and unbiased, she may truthfully report her private information about the decision-relevant state. However, while in a truthtelling equilibrium the decision maker learns only about the ability of the expert, in an equilibrium with some misreporting she also learns about the expert's bias. Although truthtelling allows for better current decisions, it may lead to worse sorting outcomes. Therefore, if a decision maker is sufficiently concerned about future choices, lying may be welfare improving.
European Economic Review, 2021
We develop a model to analyze the impact of conicts of interest on the incentives of experts to ... more We develop a model to analyze the impact of conicts of interest on the incentives of experts to reveal their information to receivers. We show that reputational concerns lead experts to adopt conservative behaviour by conforming to public information and disregarding their own. In particular, initial reputation has a non monotonic e¤ect on the degree of information revelation, with truthful revelation being more likely to occur when there is more uncertainty on expert ability. Our results shed light on the relationship between institutional features of the reporting environment and informational e¢ ciency, suggesting a set of empirical implications relative to sell-side nancial analysts. The framework developed applies to issues of information transmission that involve conicting short term and long term objectives.
International Journal of Economic Theory, 2014
We analyze a model of cheap talk in which an expert that faces a con ‡ict of interest with a deci... more We analyze a model of cheap talk in which an expert that faces a con ‡ict of interest with a decision maker is concerned about establishing a reputation for having accurate information. In this environment, the incentive of the expert to establish a reputation for competence has a non-monotonic e¤ect on the degree of information revelation. An increase in reputation above a certain threshold always makes truthful revelation more di¢ cult to achieve. This is driven by the fact that experts with greater reputation for We would like to thank
This paper studies the impact of reputation on the reporting strategy of experts that face con ‡i... more This paper studies the impact of reputation on the reporting strategy of experts that face con ‡icts of interest. The framework we propose applies to di¤erent settings involving decision makers that rely on experts for making informed decisions, such as …nancial analysts and goverment agencies. We show that reputation has a non-monotonic e¤ect on the degree of information revelation. In general, truthful revelation is more likely to occur when there is more uncertainty on an expert's ability. Furthermore, above a certain threshold, an increase in reputation always makes truthful revelation more di¢ cult to achieve. Our results shed light on the relationship between the institutional features of the reporting environment and informational e¢ ciency.
SSRN Electronic Journal, 2011
This paper studies the impact of collective reputation on the reporting strategy of experts that ... more This paper studies the impact of collective reputation on the reporting strategy of experts that face con ‡icts of interest. The framework we propose applies to di¤erent settings involving decision makers that rely on experts for making informed decisions, in particular we consider sell-side …nancial analysts. We …nd that collective reputation has a non-monotonic e¤ect on the degree of information revelation. In general, truthful revelation is more likely to occur when there is more uncertainty on the average ability of analysts as a group. In particular, above a certain threshold, an increase in collective reputation always makes truthful revelation more di¢ cult to achieve. We test this theory by creating an index on the market's perception of the general reliability of analysts'recommendations. The empirical analysis provides evidence that collective reputation plays a role in determining the behaviour of analysts independently of their individual reputation.
Financial intermediaries are known to have access to privileged in- formation on …rm value, poten... more Financial intermediaries are known to have access to privileged in- formation on …rm value, potentially providing important services by revealing it to uninformed investors. An important issue that arises is whether Investment Banks have an incentive to distort prices by com- municating biased information on the …rms they are underwriting in IPOs. Reputation acquisition may mitigate this problem as interme- diaries may lose credibility by incorrectly forecasting the pro…tability of …rms. We argue that the introduction of reputation may not su¢ ce to eliminate all scope for misreporting, allowing less talented interme- diaries to pro…t from not revealing their private information to the market.
SSRN Electronic Journal, 2017
Decision makers often face uncertainty about the ability and the integrity of their advisors. If ... more Decision makers often face uncertainty about the ability and the integrity of their advisors. If an expert is sufficiently concerned about establishing a reputation for being skilled and unbiased, she may truthfully report her private information about the decision-relevant state. However, while in a truthtelling equilibrium the decision maker learns only about the ability of the expert, in an equilibrium with some misreporting she also learns about the expert's bias. Although truthtelling allows for better current decisions, it may lead to worse sorting outcomes. Therefore, if a decision maker is sufficiently concerned about future choices, lying may be welfare improving.