This study examines the interdependence between institutional ownership and the speed with which Standard & Poor's disseminates corporate accounting information. From the demand-side perspective, we find that quasi-indexers, who rely on corporate accounting information as a low-cost monitoring system, are the key driver of the institutional demand for speedy information dissemination. In addition, dissemination speed increases substantially for stocks listed in major market indices but decreases with high arbitrage risk or transaction costs. From the consequences perspective, we find that both transient investors and quasi-indexers gravitate to stocks with faster information dissemination, consistent with the latter using accounting information as a low-cost performance-monitoring mechanism, and the former being better enabled to implement their trading strategies in a richer information environment. Overall, this study provides new insights into the capital market information infrastructure by examining how information intermediaries and sophisticated investors impact each others' resource allocation decisions.

We examine the role of newswires in identifying and conveying market-moving information in periodic SEC reports to capital market participants. Using data on Dow Jones Newswires, we find that newswires are more likely to send alerts on firms that do not release preliminary earnings, have credit ratings, are included in major market indices, have litigation exposure, or report losses. Reflective of the market’s focus on certain key events, firms with a nonstandard audit opinion, in the process of delisting, reporting unusual accounting items, or raising equity capital also receive alerts. Moreover, not only do we find significant price and volume reactions to the alerts at the daily level, but also we document immediate intra-day market activity triggered by the alerts, whereas we detect no similar reaction for SEC filings that trigger the alerts. Additional analysis suggests that the intra-day reaction is not driven by noise trading.

This study provides the first empirical evidence that the Federal Reserve (the Fed) systematically retrieves micro-level accounting reports to aid its understanding of the state of the macroeconomy. Using unique data identifying its direct access of corporate SEC filings, we show that the Fed tracks firms that are bellwethers and industry leaders, or that can engender systemic risk. The qualitative information in the Fed-accessed periodic reports explains the Fed’s GDP growth forecasts for up to four quarters, after controlling for contemporaneous aggregate earnings and other economic information. However, professional forecasts fail to incorporate such qualitative accounting information. In addition, this qualitative information is reflected in the tone of the ensuing FOMC meeting discussions as well as in Fed forecasts of key macro demand and supply factors. Overall, our evidence suggests important externalities of micro-level accounting reports, especially qualitative disclosures, on the central bank’s macroeconomic forecasts and, by extension, monetary policy. Data Availability: Data are available from public sources.

This study examines the unintended effects of a pre-Reg FD practice that gave a broad group of sophisticated market participants 15-minute earlier access to all corporate press releases than the general public. We find that roughly one-eighth of the price discovery to earnings announcements issued during regular trading hours was due to privileged access to information in earnings press releases, with the 15-minute priority dissemination contributing to just over 50 percent of price discovery from all privileged access. In addition, we find that transient institutions benefited from priority dissemination, especially when the earnings contained good news. Finally, consistent with economic theory, we find that intraday bid-ask spreads decreased post-Reg FD for firms that had sufficient market liquidity to allow trading opportunities during the 15-minute window. Our study has implications for current discussions on whether preferential information distribution by firms and information intermediaries creates an uneven playing field among investors. Data Availability: The data used in this study are available from the public sources identified in the paper

Ball and Brown (1968) introduce a method to measure accounting earnings’ contribution to price discovery toward the end-of-period price. Building on this method, we examine a comprehensive set of corporate disclosures and document a large gap in their contribution to annual price discovery between bad and good news years (40 percent versus over 60 percent), despite no such difference in stock return variance (partial R2). These patterns are consistent with managers proactively releasing good news to counteract negative news during bad news years. Our finding broadens the concept of news bundling from concurrent releases to intertemporal dynamics within an annual window. Voluntary press releases are a key driver of this disparity in price discovery, adding 3 percent in bad times while being the top contributor in good times (27 percent). Investor private information acquisition contributes to bridging the gap left by corporate disclosures in price discovery during bad news years. Data Availability: Data are available from public sources cited in the text.