Does Modern Information Technology Attenuate Managerial Information Hoarding? Evidence from EDGAR Implementation

Abstract

Exploiting the staggered implementation of the EDGAR system from 1993 to 1996 as quasi-exogenous shocks, we find that the internet dissemination of corporate disclosures encourages managers’ bad news hoarding and thus increases firms’ future stock price crash risk. Supplemental evidence suggests that short-term pressures due to increased stock liquidity and investors’ increased reliance on accounting numbers appear to play a role, and both accrual and real earnings management increase. Taken together, our findings indicate that while modern information technologies increase market efficiency by lowering information acquisition costs, they may have an unintended effect on managers’ incentives to hoard bad news.

Keywords: Modern Information Technology, EDGAR, Information Hoarding, Stock Price Crash Risk, Stock Liquidity

JEL Classification: G12, G14, M41, D83, O33