The Impact of Information Technology on Stock Price Crash Risk: Evidence from the EDGAR Implementation

47 Pages Posted: 9 Sep 2019

See all articles by Feng Guo

Feng Guo

Iowa State University - Department of Accounting and Finance

Ling Lei Lisic

Virginia Polytechnic Institute & State University - Pamplin College of Business

Michael D. Stuart

Vanderbilt University - Accounting

Chong Wang

The Hong Kong Polytechnic University

Date Written: August 2019

Abstract

This paper examines the effect of information technologies on stock price crash risk. Information technology advancements change the way firm-specific information is disseminated and acquired, providing significant benefits to investors. We use the required staggered implementation of the SEC’s Electronic Data Gathering and Analysis Retrieval system (EDGAR) to examine the impact of information technologies on stock price crash risk. We find that the implementation of EDGAR is associated with a decrease in stock price crash risk and this effect is more pronounced for firms with greater information asymmetry. Additionally, we provide evidence that conservatism increases following the EDGAR implementation, suggesting that more timely recognition of bad news is a channel through which stock price crash risk decreases following the implementation. Our results suggest that information technologies that strengthen the monitoring ability of investors limit managers’ ability to conceal and hoard bad news, which ultimately reduces stock price crash risk.

Keywords: Information technology, EDGAR, stock price crash risk

Suggested Citation

Guo, Feng and Lisic, Ling Lei and Stuart, Michael D. and Wang, Chong, The Impact of Information Technology on Stock Price Crash Risk: Evidence from the EDGAR Implementation (August 2019). Available at SSRN: https://ssrn.com/abstract=3223521 or http://dx.doi.org/10.2139/ssrn.3223521

Feng Guo

Iowa State University - Department of Accounting and Finance ( email )

College of Business
Ames, IA 50011-2063
United States

Ling Lei Lisic

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States

Michael D. Stuart (Contact Author)

Vanderbilt University - Accounting ( email )

Nashville, TN 37203
United States

Chong Wang

The Hong Kong Polytechnic University ( email )

Hong Kong
Hong Kong

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