More is Less: Publicizing Information and Market Feedback

Review of Finance, Forthcoming

51 Pages Posted: 5 Aug 2020 Last revised: 23 Oct 2021

See all articles by Andrew Bird

Andrew Bird

Chapman University - The George L. Argyros School of Business & Economics

Stephen A. Karolyi

Office of the Comptroller of the Currency

Thomas Ruchti

Government of the United States of America - Office of Financial Research

Phong Truong

Pennsylvania State University

Date Written: Sep 18, 2020

Abstract

We study whether and how publicizing internal information affects the value of financial markets to the real economy. By publicizing corporate filings, the SEC’s EDGAR web platform reduces the cost of acquiring internal information for outsiders and so makes it relatively less attractive to gather external information. We find that the staggered introduction of EDGAR reduced the sensitivity of firm investment to prices, consistent with prices being less informative to managers due to the crowding out of external information gathering. This crowding out effect is stronger when outsiders’ incentives for gathering information are stronger and for firms that rely more on external information. Our findings suggest that policies designed to “level the playing field” by publicizing internal information can have significant unintended consequences by reducing the informativeness of prices for real decisions.

Keywords: EDGAR, real effects of financial markets, price efficiency, price informativeness, information acquisition, SEC regulation, information technology

JEL Classification: G10, G30, M41

Suggested Citation

Bird, Andrew and Karolyi, Stephen A. and Ruchti, Thomas and Truong, Phong, More is Less: Publicizing Information and Market Feedback (Sep 18, 2020). Review of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3641837 or http://dx.doi.org/10.2139/ssrn.3641837

Andrew Bird

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

Stephen A. Karolyi (Contact Author)

Office of the Comptroller of the Currency ( email )

400 7th Street SW
Washington, DC 20219
United States

Thomas Ruchti

Government of the United States of America - Office of Financial Research ( email )

717 14th Street, NW
Washington DC, DC 20005
United States

Phong Truong

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States
16802 (Fax)

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