The Real Effects of Modern Information Technologies
Using the staggered implementation of the EDGAR system from 1993 to 1996 as a shock to information dissemination technologies, we examine the potential benefits and costs of modern information technologies on the real economy. On the one hand, we document that broader information dissemination leads to an increase in the level of equity financing and corporate investment. On the other hand, we provide evidence that greater dissemination of corporate disclosures crowds out investors’ private information acquisition and reduces managerial learning from stock prices. This crowding-out effect, while often overlooked, is particularly pronounced in high-growth firms. Our findings suggest that it is important to consider this tradeoff between improved equity financing and reduced managerial learning when evaluating the economic effects of modern information technologies. Our evidence suggests that the former effect dominates in value firms while the latter effect dominates in high-growth firms.
We gratefully acknowledge helpful comments from Lucian Bebchuk, John Core, Enrique Gomez, Louis Kaplow, Charles Lee, Andrew Leone, Chen Lin, K. Ramesh, Sugata Roychowdhury, Eric So, Holger Spamann, Sri Sridhar, Rodrigo Verdi, Joseph Weber, and Franco Wong, as well as seminar participants at Cornell University, Harvard University, the Massachusetts Institute of Technology, Northwestern University, University of Toronto, Wuhan University, the 2020 Virtual Conference of Accounting Society of China, and the 2021 Hawai’i Accounting Research Conference. 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,...