We study flexible public information design in global games. In addition to receiving public information from the designer, agents are endowed with exogenous private information and must decide whether or not to “attack” a status-quo. The designer does not trust the agents to play favourably to her and evaluates any policy under the “worst-case scenario.” First, we show that the optimal policy removes any strategic uncertainty by inducing all agents to take the same action, but without permitting them to perfectly learn the fundamentals or the beliefs that rationalize other agents' actions. Second, we identify conditions under which the optimal policy takes the form of a simple pass/fail test. Finally, we show that, when the designer cares only about the probability of regime change, the optimal policy need not be monotone in fundamentals but then identify conditions on payoffs and exogenous beliefs under which the optimal policy is monotone.

An asset owner designs an asset-backed security and a signal about its value. After experiencing a liquidity shock and privately observing the signal, he sells the security to a monopolistic buyer. Within double-monotone securities, asset sale is uniquely optimal, which corresponds to the most informationally sensitive security. Debt is a constrained optimum under external regulatory liquidity requirements on securities. Thus, the “folk intuition” behind the optimality of debt due to its low informational sensitivity holds only under additional restrictions on security/information design. Within monotone securities, a live-or-die security is optimal, whereas additional-tier-1 debt is optimal under the regulatory liquidity requirements.

How much information about financial institutions' balance sheets should regulators pass on to the market? To prevent inefficient default, the optimal disclosure policy imposes transparency for firms with weak fundamentals and opacity, otherwise. Strategic complementarities are exacerbated by financial constraints and induce a preference for granular disclosures. Transparency increases with the volume of nonperforming assets, the maturity mismatch between assets and liabilities, and the deterioration of liquidity buffers. Interestingly, the anticipation of future disclosures can backfire and prove worse than laissez-faire. The optimal policy is robust to investors' adversarial coordination, asymmetric information, and to the firm's strategic reaction to regulation.

A liquidity-constrained asset owner designs an asset-backed security to raise funds from an informed liquidity supplier. Information-insensitive securities reduce the liquidity supplier's informational rents. The optimal screening mechanism with financial securities consists of a debt menu with face values monotonically ordered in the liquidity supplier's valuation. We leverage this characterization to show that when the liquidity supplier's private information becomes more accurate (Lehmann (1988)), the issuer optimally offers debt contracts with smaller face values. Surprisingly, the concavity of debt on the asset's future cashflows implies that the issuer may be better off when trading with a more informed liquidity supplier. Our results challenge the idea that, when trading securities, the informed party should obtain an information-sensitive security and provide a novel rationale for the emergence of venture debt and the prevalence of collateralized lending.

The nature of Environmental and Social (ES) corporate investments, characterized by the long-term horizon of managerial actions, exacerbates the agency conflicts between CEOs and shareholders. Due to the incentive misalignment, the information available to investors (carbon footprints, ESG scores) is crucial for market discipline to be effective. Enhancing the quality of the available information amplifies the sensitivity of the stock price to ES outcomes, thereby fostering ES effort even if it may adversely affect shareholders. We show that the dispersion of investors' ES preferences affects CEOs' incentives. We find that a more polarized shareholder base endogenously leads to less ES corporate investment. We demonstrate that whether or not ES investment leads to smaller expected returns crucially depends on the nature of the agency conflict and provide sufficient conditions for each case. Overall, we provide a theoretical framework to study the economics of ES investing, and how the information available to market participants and the heterogeneity of investors' ES preferences affect managerial incentives.