Information Processing Frictions and Price Informativeness : Evidence from a Natural Experiment

We isolate frictions at the acquisition and integration stages of information processing by leveraging a policy that resulted in users of the Securities and Exchange Commission's online repository of company reports failing to consult the disclosures they had requested. Exploiting this plausible source of exogenous variation in news access in a difference-in-differences design, we show that price informativeness decreases after a filing's submission if its potential viewers experience more failures and if they successfully download more new reports by other firms. Our findings provide empirical evidence for the three-step framework proposed in the literature to understand investors' use of information