On the Fast Track: Information Acquisition Costs and Information Production

Deqiu Chen, Yujing Ma, Xiumin Martin and Roni Michaely
Additional contact information
Deqiu Chen: Business School, University of International Business and Economics
Yujing Ma: Business School, University of International Business and Economics
Xiumin Martin: Washington University in Saint Louis - Olin School of Business

No 20-14, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Using the introduction of high-speed rail as exogenous shocks to costs of information acquisition, we show that reductions in information-acquisition costs lead to a significant increase in information production and improvement in output quality, evidenced by higher frequency of analysts visiting portfolio firms, and higher forecast accuracy. We further find that information production represents the channel through which acquisition costs affect output quality. We corroborate these findings using a large-scale survey of financial analysts. More information production is also associated with improved price efficiency. Finally, both the empirical and survey results highlight the importance of soft information in analysts’ information production.

Keywords: Information acquisition; Acquisition cost; Information quality; Soft information; Sell side analysts; Price efficiency (search for similar items in EconPapers)
JEL-codes: D8 G14 G2 G24 G3 (search for similar items in EconPapers)
Pages: 94 pages
Date: 2020-01
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On the fast track: Information acquisition costs and information production (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2014

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