This paper shows that improving financial efficiency may reduce real efficiency. Financial efficiency depends on the total amount of information in prices, but the manager’s real decisions depend on the relative amounts of hard (verifiable) and soft (non-verifiable) information. Disclosing more hard information augments total information, raising financial efficiency and reducing the cost of capital. However, it also induces the manager to prioritize hard information over soft by cutting investment, lowering real efficiency. The optimal level of financial efficiency is non-monotonic in the investment opportunity. When it is weak, real efficiency is unimportant relative to the cost of capital and optimal financial efficiency is high. When it is strong, it will be pursued even with high financial efficiency. Even if low financial efficiency is optimal to induce investment, the manager may be unable to commit to it. Optimal government policy may involve upper bounds, rather than lower bounds, on financial efficiency. Joint with Mirko Heinle and Chong Huang.