Corporate futarchy

Todd Henderson:

Conditional prediction markets (e.g.,, what will Firm X’s stock price be in one year if the strategy proposed by a corporate raider is adopted) could allow corporations to estimate the effect of different major decisions, such as whether to acquire a target, whether to adopt a governance reform, or whether to dismiss a CEO, on stock price.

Henderson doesn’t take this as far as corporate governance by , but that’s the logical conclusion if such prediction markets work well.

Via Chris Masse of course (Mr. Liquidity, please note “…make it possible to generate sound predictions even in very thin markets”).

One Response

  1. Even if the altrnatives to CDA (Pennock, Hanson) allow for thiner markets, STILL, you need to have some traders. And I would like to understand, thru marketing data, if there are busy managers or executives who would spend some of their work time speculating on a Sarbanes-Oxley prediction market.

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