DIGITAL FINANCIAL REPORTING AND FIRM PRODUCTIVITY

Abstract

I examine the effect of digital financial reporting on firm productivity. To the extent that digital communication of corporate financial data fundamentally changes how firm-specific information is disclosed, released, and disseminated to the public, it mitigates information asymmetry between corporate insiders and outsiders and facilitates the processing of firm-specific information. To test this hypothesis, I use the staggered implementation of the SEC’s Electronic Data Gathering and Analysis Retrieval system (EDGAR) to investigate the impact of digital technology on firms’ productivity. I find that the implementation of EDGAR results in an economically meaningful and statistically significant positive impact on firms’ productivity, measured by total factor productivity (TFP). By focusing on the role of information dissemination in coordinating investments and production, my findings collectively provide evidence on the real effects of “going digital” in corporate reporting.