RegTech Adoption and the Cost of Capital

• 成果类型: Article
• 署名作者: Lai, Sandy; Lin, Chen; Ma, Xiaorong
• 署名单位: National Taiwan University; University of Hong Kong; University of Macau
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4660
• 发表日期: 2024
• 关键词: RegTech; information acquisition cost; cost of capital; liquidity; corporate governance; EDGAR

摘要

This paper studies the cost of capital effect of a major regulatory technology, or RegTech, event: the staggered implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system of the Securities and Exchange Commission in the period from 1993 to 1996. This event represents a largely exogenous shock to corporate information dissemination technologies, resulting in a considerable reduction in information acquisition costs for investors. Using a difference-in-differences research design, we show that the cost of equity capital declines substantially after a firm switches from paper filing to mandatory electronic filing in EDGAR. The effect is stronger for small firms and firms with low analyst coverage and low institutional ownership. We identify three channels through which EDGAR affects a firm's cost of capital: the liquidity, risk-taking, and corporate governance channels. EDGAR implementation also improves a firm's investment efficiency significantly. We find evidence that the marginal value of a firm's capital investment and cash is higher during the post-EDGAR period.