Working Paper: NBER ID: w27529
Authors: Itay Goldstein; Shijie Yang; Luo Zuo
Abstract: 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.
Keywords: EDGAR; information technology; corporate investment; equity financing; managerial incentives
JEL Codes: G12; G14; G31; M41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EDGAR implementation (C88) | corporate investment levels (G31) |
| EDGAR implementation (C88) | stock liquidity (G10) |
| EDGAR implementation (C88) | cost of equity capital (G12) |
| EDGAR implementation (C88) | level of equity financing (G32) |
| EDGAR implementation (C88) | return on assets (G32) |
| EDGAR implementation (C88) | managerial opportunism (L21) |
| EDGAR implementation (C88) | resource utilization (Q21) |
| EDGAR implementation (C88) | investment of industry peers (G24) |