UMD Theses and Dissertations
Permanent URI for this collectionhttp://hdl.handle.net/1903/3
New submissions to the thesis/dissertation collections are added automatically as they are received from the Graduate School. Currently, the Graduate School deposits all theses and dissertations from a given semester after the official graduation date. This means that there may be up to a 4 month delay in the appearance of a given thesis/dissertation in DRUM.
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Item Ex-ante Asymmetric Information in Credit Markets and Macroeconomic Fluctuations(2013) Ture, Hatice Elif; Aruoba, Boragan; Korinek, Anton; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation analyzes macroeconomic effects of ex-ante information acquisition problems between lenders and borrowers in credit markets. It examines the ways in which the costs associated with the screening of privately informed heterogeneous borrowers affect contractual arrangements, efficient allocation of credit and macroeconomic fluctuations. In the first chapter, screening can be achieved by collateral requirements and credit limits. We analyze how changes in collateral availability affect aggregate investment and output dynamics through the misallocation of credit across heterogeneous investors. Groups of investors with different observable quality finance investment projects through bank loans, pledging part of their projects. Borrower risk is private information within a group, which requires financial contracts that may pool or separate borrowers with common quality. Pooling contracts offer efficient loan amounts but entail cross subsidization of high-risk borrowers, while separating contracts offer efficient loan rates but entail credit rationing of low-risk borrowers. A financial shock that reduces the collateral capacity of investors may switch the financial contracts designed for low-quality investors from pooling to separating, which increases credit rationing and reallocates credit in favor of high-quality investors. This flight to quality in bank lending reduces aggregate investment efficiency and real economic activity. In the second chapter, screening can be achieved by incurring resource costs. We build a dynamic model featuring costly screening of borrowers to examine how aggregate shocks are amplified and propagated through net-worth effects compared to a standard model of ex-post monitoring costs. Costly screening is a way to economize on agency costs induced by cross subsidization, but is an agency cost itself, making investment dependent on borrower net-worth. Thus, costly screening can be an alternative to widely assumed monitoring costs in generating net-worth effects that enhance the propagation of aggregate shocks. One advantage of the screening framework is that it yields wealth effects that induce persistent dynamics especially in bad times when screening is more likely, which may create deeper and longer recessions than booms. Moreover, by yielding efficient risk pricing and quantity rationing endogenously, the screening framework constitutes an empirically plausible alternative to monitoring costs to motivate the agency costs in unsecured lending.Item The Value of Security Audits, Asymmetric Information and Market Impact of Security Breaches(2004-08-10) Zhou, Lei; Gordon, Lawrence A.; Loeb, Martin P.; Accounting and Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation includes two essays on the economic aspects of information security. The first essay presents a principal-agent model for assessing the value of information security audits. The issue of information security investments is confounded by control problems arising from asymmetric information and conflicting managerial interests within the firm. By analyzing the impacts of asymmetric information and security audits, this study extends the literature in three ways. First, the degree of information asymmetry is formally measured, which allows one to study how different levels of information asymmetry affect information security investment decisions. Second, the intensity of an information security audit is explicitly modeled, and the interactions between information asymmetry and security audits are examined. This analysis provides conditions under which the benefit from security audits increases with the degree of information asymmetry. Third, the current research provides an analytic model that helps to explain existing empirical findings (e.g., Gordon and Smith, 1992) concerning the relation between information asymmetry and the value of audits. The second essay examines the economic costs of publicly announced information security breaches. Similar to Campbell et al. (2003), the current study applies the event study approach, but uses a larger sample and a more sophisticated market model (Fama and French, 1993). The results confirm those of Campbell et al. (2003) that security breaches involving confidential information cause significant market reactions and security breaches not involving confidential information only cause insignificant market reactions. Further investigations also suggest that the insignificance of market reactions to non-confidential events does not seem to vary with the nature of those events.