the broad market demand
for corporate accounting information,
coupled with the prevalence of high
fixed costs and close-to-zero marginal
costs in the market for information
goods, provides the impetus for
information intermediaries such as
newswires to enter the marketplace.
We developed an empirical model to
identify firm characteristics and
circumstances associated with the
efforts of newswire services to deliver
key accounting information in a
salient fashion to market participants.
Moreover, our study is the first one to
use market microstructure level data
to document the value-added services
provided by newswire services. Our
study demonstrated instantaneous (5
to 15 minutes) price and volume
reactions to newswire alerts that were
issued several hours after the SEC
reports were filed. The takeaway from
our study is that newswire services
act as delegated information
intermediaries for corporate
accounting information, consistent
with the theory of market for
information goods.
A second study we conducted
provides evidence relating to the
economic forces that explain the
existence of data aggregators in capital
markets. Why do various data
aggregators such as Compustat,
Bloomberg, and FactSet invest large
resources to collect high-quality
standardized corporate accounting
data that are not only comprehensive
in the cross-section, but also have a
long time-series, especially given that
these data collection efforts, even in
current times, take nontrivial time
and effort after public disclosures by
corporations? And, why do various
sophisticated investors pay large
sums of money to subscribe to these
data services? What benefits do these
market participants expect from
"belatedly" squeezing the information
orange a second time? Based on prior
evidence that certain institutional
investors rely upon corporate
accounting information as a low-cost
monitoring system, our study
examined the demand from
sophisticated investors for
standardized panel data of accounting
information to test and develop
investment strategies. Specifically, we
examined the demand and supply
considerations that influence a major
data aggregator's choice of the speed at
which it disseminates corporate
accounting information to its
commercial clients. The novel
contribution of the paper is to clearly
predict and find which type of
institutional investors will demand
faster dissemination of accounting
information, and to the extent that the
dissemination speed changes the
richness of the information
environment, the study also predicts
and finds which institutions’ trading
behavior will correspondingly
change. Overall, the study takes a first
look at the role played by data
aggregators in contributing to the
informational efficiency of the capital
market as well as the mutual effects
that data aggregators and institutional
investors have on each others’
resource allocation decisions.
Overall, we are starting to make
progress on understanding the role of
pure information intermediaries in
shaping the information efficiency of
capital markets. Of course, there is
more work to be done including
examining the role of disclosure
networks.
Obviously, India is a significant
player in the information
intermediation market through her
expertise in technology. Cases likes
Reuters are an important indication of
the bigger role India can play in other
areas as well. While the great
technical prowess of India is well
known, she is also leveraging her
language, communication, and
journalism expertise to contribute in
important ways to the global capital
market information environment.
Even setting aside capital market
contexts, I understand that there are
more than 100 legal outsourcing
companies in India, which further
demonstrates the breadth of expertise
that India can offer. Personally, I have
seen real-life circumstances in which
some US companies have been
pleasantly surprised by the ability of
Indian professionals to quickly grasp
the complex US disclosure
requirements and act as effective
information intermediaries. In a
nutshell, yes, I do see a continuing
and growing role for India in the
global information revolution.
