The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation
Using the implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system from 1993 to 1996 as a shock to information dissemination technologies, we examine how a significant reduction in disclosure processing costs affects the real economy. We find that the EDGAR implementation leads to an increase in corporate investment and that this effect is concentrated in value firms. We provide evidence that improved equity financing and enhanced managerial incentives are likely the underlying mechanisms. Specifically, the EDGAR implementation leads to an increase in a firm’s stock liquidity, a decrease in the cost of equity capital, and an increase in the level of equity financing. Consistent with the monitoring effect of broad information dissemination, the EDGAR implementation leads to an increase in a firm’s operating performance. Our findings suggest that it is important to consider information dissemination beyond information production when examining the real effects of corporate disclosures.
Non-Technical Summaries
- After the SEC’s EDGAR system expanded access to firms’ financial data, the role of expert analysis in moving stock prices declined,...
Published Versions
ITAY GOLDSTEIN & SHIJIE YANG & LUO ZUO, 2023. "The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation," Journal of Accounting Research, vol 61(5), pages 1699-1733.
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