This paper shows that managers can compete for speculators’ scarce attention by withholding private information about their firm. By raising speculators’ uncertainty regarding the future payoff, a firm becomes a more attractive target for speculators who allocate more attention to it, in turn. Each firm has an incentive to do this because more attention implies more informative prices, which allows firm managers to extract more information and to invest more efficiently. In a setting with endogenous capital, the firms’ fight for attention is inefficient, i.e. all firms would be better off if they instead disclosed their private information to speculators. Surprisingly, giving each firm manager a myopic contract that rewards increases in the short-run asset price, encourages disclosure and implements the first-best outcome.
