Regtech Adoption and the Cost of Capital

Lai, Sandy; Lin, Chen; Ma, Xiaorong

doi:10.2139/ssrn.3683046

“…In contrast to our work, these studies do not consider the notion of revelatory price efficiency since their focus is not on how EDGAR affects the real economy. More related to our work are three studies that also examine the real effects of EDGAR: Li and Qi (2020) and Lai, Lin, and Ma (2020) focus on the benefits of EDGAR and show that EDGAR inclusion leads to lower information asymmetry, lower cost of equity capital, and higher capital investment. Bird, Karolyi, Ruchti, and Truong (2020) focus on the costs of EDGAR and show that EDGAR inclusion leads to a lower investmentto-price sensitivity.…”

Section: Related Literaturementioning

confidence: 97%

The Real Effects of Modern Information Technologies

Goldstein

¹

,

Yang

²

,

Zuo

³

2020

View full text Add to dashboard Cite

“…Lai, Lin, and Ma (2020) also examine the effect of the EDGAR shock on a firm's cost of capital and provide similar findings. However, they do not analyze how the EDGAR shock affects a firm's investment, which is the focus of our paper.25 We also find consistent evidence that the EDGAR shock leads to an increase in stock market liquidity, measured by the simple bid-ask spread and the high-low spread estimator(Corwin and Schultz 2012), and this liquidity effect shows up in both value firms and growth firms (see TableA4of the online appendix).…”

mentioning

confidence: 66%

“…7 Second, our paper contributes to the literature assessing how the costs of monitoring, acquiring, and analyzing corporate disclosures affect investor information choices, trades, and market outcomes (see reviews in Lee and So (2015), Kothari, So, andVerdi (2016), andBlankespoor, deHaan, andMarinovic (2020)). In this literature, two financial reporting Wang 2019; Ni, Wang, and Yin 2021), information asymmetry (Gomez 2020), cost of capital (Lai, Lin, and Ma 2020), corporate tax avoidance (Chen, Hong, Kim, and Ryou 2021), and financial reporting (Liu 2021). 6 Bird, Karolyi, Ruchti, and Truong (2021) do not examine the benefits of modern information technologies or assess whether and when the benefits exceed the costs and vice versa.…”

Section: Related Literaturementioning

confidence: 99%

The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation

Goldstein¹,

Yang²,

Zuo³

2020

View full text Add to dashboard Cite

Using the staggered implementation of the EDGAR system from 1993 to 1996 as a shock to information dissemination technologies, we examine the potential benefits and costs of modern information technologies on the real economy. On the one hand, we document results confirming the conventional wisdom that broader information dissemination leads to an increase in the level of equity financing and corporate investment. On the other hand, we provide evidence that greater dissemination of corporate disclosures crowds out private information acquisition and reduces managerial learning from stock prices. This crowdingout effect, while often overlooked, is particularly pronounced in high-growth firms. Our findings suggest that it is important to consider this tradeoff between improved equity financing and reduced managerial learning when evaluating the economic effects of modern information technologies. Our evidence suggests that the former effect dominates in value firms while the latter effect dominates in high-growth firms.

show abstract

“…In contrast to our work, these studies do not consider the notion of revelatory price efficiency since their focus is not on how EDGAR affects the real economy. More related to our work are three studies that also examine the real effects of EDGAR: Li and Qi (2020) and Lai, Lin, and Ma (2020) focus on the benefits of EDGAR and show that EDGAR inclusion leads to lower information asymmetry, lower cost of equity capital, and higher capital investment. Bird, Karolyi, Ruchti, and Truong (2020) focus on the costs of EDGAR and show that EDGAR inclusion leads to a lower investmentto-price sensitivity.…”

Section: Related Literaturementioning

confidence: 97%

The Real Effects of Modern Information Technologies

Goldstein

¹

,

Yang

²

,

Zuo

³

2020

SSRN Journal

1

0

View full text Add to dashboard Cite

Using the staggered implementation of the EDGAR system from 1993 to 1996 as a shock to information dissemination technologies, we examine the potential benefits and costs of modern information technologies on the real economy. On the one hand, we document results confirming the conventional wisdom that broader information dissemination leads to an increase in the level of equity financing and corporate investment. On the other hand, we provide evidence that greater dissemination of corporate disclosures crowds out private information acquisition and reduces managerial learning from stock prices. This crowdingout effect, while often overlooked, is particularly pronounced in high-growth firms. Our findings suggest that it is important to consider this tradeoff between improved equity financing and reduced managerial learning when evaluating the economic effects of modern information technologies. Our evidence suggests that the former effect dominates in value firms while the latter effect dominates in high-growth firms.

show abstract

Regtech Adoption and the Cost of Capital

Cited by 4 publications

References 49 publications

The Real Effects of Modern Information Technologies

The Real Effects of Modern Information Technologies

The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation

The Real Effects of Modern Information Technologies

Contact Info

Product

Resources

About