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 exogenous shocks to information dissemination technologies, we document that faster dissemination of corporate disclosures through the internet increases firms’ future stock price crash risk. These results are robust to alternative sample constructions, measures of crash risk, and fixed effects. Supplemental evidence suggests two channels: an increase in stock liquidity and an increase in investors’ reliance on public disclosure, both of which exacerbate managers’ incentives to withhold bad news. Overall, our findings suggest that modern information technology may have an unintended effect on managers’ bad news hoarding behavior.

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

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