Research

This paper investigates the impact of disclosing information acquisition footprints, namely traces that investors leave when acquiring or searching for information about firms, on price informativeness and information asymmetry among market participants. Employing the SEC's 54 FOIA (Freedom of Information Act) log updates from November 2013 to May 2022 as the research setting, I find that investors' information acquisition footprints significantly predict future stock movements. Retail investors, but not institutions, trade in line with these signals after these footprints become publicly available. Consistently, information asymmetry among investors narrows, and stock price movements contain more information. The relevance of this study comes from its insight that making the information acquisition footprints publicly available can serve as a practical approach to improve the disadvantageous position of retail investors when the extant information disclosure (e.g., under the Freedom of Information Act) provides inherent advantages to more sophisticated investors.

We examine how sophisticated institutional investors adapt their information acquisition strategies in response to high-frequency traders' (HFTs) participation in the market and the resulting effects on market efficiency. Our identification strategy leverages the suspension of direct access to HFTs by two major newswires in 2014, which exogenously updates institutional investors' beliefs about the threats from HFTs. We find that institutional investors exhibit stronger incentives for information acquisition and processing with the belief update, as reflected in higher EDGAR downloads and larger institutional trading volumes when firms previously more exposed to HFT-catering newswires announce earnings. Our study highlights that while Regulation Fair Disclosure (Reg FD) has effectively ensured equal access to relevant information for all investors during the information disclosure process, there are still loopholes in the information dissemination process that facilitate a small number of investors systematically front-running others in the post-Reg FD era. While the specific loophole studied has been addressed, regulators need to monitor potential loopholes in the dynamic capital market vigilantly.

This study sheds light on whether managers' earnings management decisions are influenced by external shareholders' enhanced understanding of firms' inter-period performance. Having confirmed the significant predictive power of firm-related tweets for forthcoming earnings surprises, I observe that the availability of real-time tweet analysis leads to reduced earnings management practices. Consistent with the monitoring effect of external shareholders' being more informed of firms' inter-period performance, the reduced earnings management is especially prominent for firms with more predictive tweets about their earnings. This study features the potential of leveraging Big Data to address agency problems and alleviate information frictions in the market.

This study examines how investors' information acquisition activities influence firms' voluntary disclosure decisions. Leveraging firms' mechanical awareness of investors' information demands through FOIA  (Freedom of Information Act) requests for particular redacted filings, I find that firms with a heightened awareness of investors' information demands are more inclined to disclose the requested information. The relevance of this study stems from the augmented accessibility of third-party value-relevant information about firms to external investors with the emergence of Big Data in recent decades, which makes understanding the interplay between investors' information discovery activities and managers' disclosure decisions increasingly imperative.