On the fast track: Information acquisition costs and information production

Deqiu Chen, Yujing Ma, Xiumin Martin and Roni Michaely

Journal of Financial Economics, 2022, vol. 143, issue 2, 794-823

Abstract: Using the introduction of high-speed rail (HSR) as an exogenous shock to costs of information acquisition, we show reductions in information-acquisition costs lead to (i) a significant increase in information production, evidenced by a higher frequency of analysts visiting portfolio firms and (ii) improvement in output quality, manifested in higher forecast accuracy and better recommendations. The effect is more pronounced for firms with information that is difficult to produce. Importantly, more information production is also associated with improved price efficiency. We corroborate these findings using a large-scale survey of financial analysts. Finally, both the empirical and survey results highlight the importance of soft information in analysts’ unique-information production.

Keywords: Information acquisition; Acquisition cost; Information production; Information quality; Soft information; Sell-side analysts; Price efficiency (search for similar items in EconPapers)
JEL-codes: D83 D84 G14 G24 G34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Working Paper: On the Fast Track: Information Acquisition Costs and Information Production (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:143:y:2022:i:2:p:794-823

DOI: 10.1016/j.jfineco.2021.06.025

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