Do Corporate Disclosures Constrain Strategic Analyst Behavior?

Testing Disagreement Models

“…We differ from this work in that we focus on EDGAR's asset pricing consequences in the context of disagreement models. Chang, Ljungqvist, and Tseng (2021), the paper closest to ours, shows that EDGAR inclusion constrains strategic analyst behavior. Emery and Gulen (2019) and Gao and Huang (2020) view EDGAR as an IT improvement and show that it helps the retail customers of an online discount broker to overcome their home bias and improves the informativeness of their trades.…”

“…Firms in waves 5 through 10 did not know their EDGAR join dates until a few months before joining. 7 As Chang, Ljungqvist, and Tseng (2021) note, electronic filing per se would not be expected to affect investors' costs of accessing mandatory disclosures. The actual shock to information access is due to the National Science Foundation's (NSF's) decision in October 1993 to acquire Mead Data Central's historic EDGAR filings and to fund a project to make EDGAR filings available for free online, hosted by New York University (NYU).…”

“…We use the final phase-in dates as per the December 1994 announcement. In doing so, we follow Chang, Ljungqvist, and Tseng (2021) but depart from Emery and Gulen (2019), Guo et al (2019), and Gao and Huang (2020), who use the preliminary dates.…”

“…Three features of the SEC's implementation of EDGAR greatly reduce endogeneity concerns. First, the SEC assigned registered firms to the 10 implementation waves randomly, conditional only on size (Chang, Ljungqvist, and Tseng (2021)). Second, while all registered firms joined EDGAR eventually, the staggered roll-out of EDGAR provides us with a set of control firms with which to establish a counterfactual that is plausibly free of the confounding effects of unobserved contemporaneous factors that might have affected investor disagreement, such as market-wide changes in regulations and sentiment or macroeconomic news.…”

“…Chang, Ljungqvist, and Tseng (2021) characterize the information-economic effects of EDGAR inclusion as a reduction in investors' costs of verifying the accuracy and veracity of information provided by information intermediaries such as sell-side stock analysts. In particular, reduced verification costs constrain analysts' ability to strategically skew their forecasts and recommendations in ways that benefit themselves or their brokerage firm employers.…”