The Real Effects of Modern Information Technologies
Modern information technologies have greatly facilitated timely dissemination of information to a broad base of investors at low costs. To examine their effects on the real economy, we exploit the staggered implementation of the EDGAR system from 1993 to 1996 as a shock to information dissemination technologies. We find that the EDGAR implementation leads to an increase in the level of corporate investment but a decrease in the investment-to-price sensitivity. We provide evidence that improved equity financing and reduced managerial learning from prices are the underlying mechanisms that explain these real effects, respectively. In addition, we show that the EDGAR implementation leads to an improvement in performance in value firms but a decline in performance in high-growth firms where learning from the market is particularly important.
We gratefully acknowledge helpful comments from John Core, Eric So, Rodrigo Verdi, Joseph Weber, and seminar participants at the Massachusetts Institute of Technology. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- After the SEC’s EDGAR system expanded access to firms’ financial data, the role of expert analysis in moving stock prices declined,...