Information Acquisition Costs and Price Informativeness: Global Evidence

72 Pages Posted: 25 Jan 2021 Last revised: 21 Sep 2023

See all articles by Charles McClure

Charles McClure

University of Chicago Booth School of Business

Shawn Shi

University of Washington - Michael G. Foster School of Business

Edward M. Watts

Yale School of Management

Date Written: September 12, 2023

Abstract

We study how global changes in information acquisition costs affect price informativeness. To provide evidence on this issue, we examine worldwide adoptions of centralized electronic disclosure systems. Despite broadening the dissemination of corporate disclosures, we find a significant reduction in information acquisition before earnings announcements post-adoption. These effects are most pronounced in countries with the most substantial reductions in information acquisition costs and where we find more significant decreases in informed trade. Overall, we highlight a critical tension between acquiring disclosure information and incorporating it into asset prices.

Keywords: Disclosure, Information acquisition, Price efficiency, Price informativeness, Earnings announcements

JEL Classification: M41, G12, G14, G31

Suggested Citation

McClure, Charles and Shi, Shawn and Watts, Edward, Information Acquisition Costs and Price Informativeness: Global Evidence (September 12, 2023). Chicago Booth Research Paper No. 21-05, Available at SSRN: https://ssrn.com/abstract=3771361 or http://dx.doi.org/10.2139/ssrn.3771361

Charles McClure (Contact Author)

University of Chicago Booth School of Business ( email )

7737024885 (Phone)

Shawn Shi

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Edward Watts

Yale School of Management ( email )

165 Whitney Ave
New Haven, CT 06511

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