Processing Industry Classification

External users of financial reporting often rely on industry classification providers to reduce information processing costs. I study the economic consequences of capital market participants relying on the Global Industrial Classification Standard (GICS). I find that firms with higher quality classifications exhibit stronger liquidity, a lower cost of capital, and higher investment. When exploiting staggered GICS reclassifications as a shock to classification quality, I find relative improvements for firms with lower pre-treatment classification quality. The results are stronger for conglomerate firms that are more difficult to process and for firms that lack sell-side analyst coverage. Finally, I find increased investment for spillover firms after reclassified firms join their GICS industry group. Taken together, I provide evidence that industry classification providers generate capital market, real, and spillover effects through their information processing.