Information processing frictions and price informativeness: Evidence from a natural experiment

Frictions during information acquisition and integration impede price discovery. We isolate frictions specific to either stage of information processing by leveraging a policy that triggered unsuccessful requests to the Securities and Exchange Commission’s online repository of company reports. We show that, while having more potential viewers of firms' newly published filings is associated with more informative prices, greater exposure of potential viewers to failed requests weakens this relationship. Consistent with the negative impact of distraction during information integration, successful reading of other firms' new reports by viewers of a company's new disclosures undermines price informativeness.