The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation
61 Pages Posted: 7 Jul 2020 Last revised: 19 Oct 2021
Date Written: October 18, 2021
Using the 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 a decrease in the cost of capital and 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. 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.
Keywords: Corporate Investment, Information Technologies, EDGAR, Equity Financing, Managerial Learning.
JEL Classification: G12, G14, G31, M41.
Suggested Citation: Suggested Citation