The Information Content of Corporate Websites

Abstract

In 2008, the SEC published guidance allowing firms to use corporate websites as an alternative disclosure channel to EDGAR. While the information content and market reaction to traditional disclosure channels such as EDGAR filings and press releases are well-documented, evidence on corporate websites as a disclosure channel is scarce. In this paper, we take the first step toward shedding light on corporate websites as an important but unregulated source of information to investors. We begin by developing a novel measure of corporate website content. We then identify large changes in corporate websites content that do not occur in close proximity to EDGAR filings and press releases and examine what effect, if any, these standalone changes in website content have on markets and information production by analysts and journalists. Using standard event study methods, we find that standalone changes in the corporate websites provide significant value-relevant information to investors, reduce information asymmetry, and precede significant revisions in analyst forecasts and increases in media coverage. Collectively, our findings indicate that corporate websites are an economically significant source of new information to markets and information intermediaries that supplements traditional disclosure channels considered in prior literature.

Keywords: corporate websites; voluntary disclosure; information environment

JEL Classification: D82, D83, G12, G14, M41