More is less: Publicizing information and market feedback

We study whether and how publicizing internal information affects the value of financial markets to the real economy. By publicizing corporate filings, the Securities and Exchange Commission's EDGAR (Electronic Data Gathering, Analysis, and Retrieval) web platform reduces the cost of acquiring internal information for outsiders and so makes it relatively less attractive to gather external information. We find that the staggered introduction of EDGAR reduced the sensitivity of firm investment to prices, consistent with prices being less informative to managers due to the crowding out of external information gathering. This crowding out effect is stronger when outsiders' incentives for gathering information are stronger and for firms that rely more on external information. Our findings suggest that policies designed to "level the playing field"by publicizing internal information can have significant unintended consequences by reducing the informativeness of prices for real decisions.