Disclosure Processing Costs and Market Feedback Around the World

55 Pages Posted: 25 Jan 2021

See all articles by Charles McClure

Charles McClure

University of Chicago Booth School of Business

Shawn Shi

Stanford Graduate School of Business

Edward M. Watts

Yale School of Management

Date Written: October 27, 2020

Abstract

Investors' incentive to acquire private information—and the extent it is reflected in price—is a function of disclosure processing costs. Theory predicts that if these costs change, the amount the manager can learn from price will also vary. To provide evidence on this issue, we exploit the worldwide introduction of centralized electronic disclosure systems, which, like the SEC's EDGAR, substantially reduces disclosure processing costs. Leveraging country- and firm-level variation resulting from these platforms' adoptions, we find an economically significant decrease in investment sensitivity to price. Moreover, we find that higher levels of country-wide technology use, more developed capital markets, and better regulatory environments mute this decline in investment sensitivity to price. Collectively, our findings show that technology adoptions that reduce disclosure processing costs have real effects on the economy.

Keywords: Disclosure processing costs, Corporate investment, Financial technology, Information acquisition, Information technologies

JEL Classification: G12, G14, G31

Suggested Citation

McClure, Charles and Shi, Shawn and Watts, Edward, Disclosure Processing Costs and Market Feedback Around the World (October 27, 2020). 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

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Edward Watts

Yale School of Management ( email )

165 Whitney Ave
New Haven, CT 06511

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
176
Abstract Views
727
rank
207,092
PlumX Metrics