The effect of modern information technology on corporate payout policy. Evidence from EDGAR implementation

Purpose - This study uses the Electronic Data Gathering Analysis and Retrieval (EDGAR) implementation as an information shock to examine its effect on corporate payout policy. Design/methodology/approach - This study uses a generalized difference-in-differences approach to assess the causal impact of EDGAR implementation on the US publicly traded firms’ payout policy for a period from 1990 to 1999. The approach captures the difference between changes in the dividend policy of firms subjected to EDGAR implementation (treated firms) and those not subjected to the implementation (control firms). Findings - Firms increase payout ratios and the likelihood of paying dividends after the implementation of EDGAR. Notably, these effects are more pronounced in firms characterized by high agency problems ex-ante. Practical implications - Policies designed to improve a firm’s information environment may yield divergent effects on corporate payout policy. Consequently, in countries aiming to promote cash dividends, policymakers seeking to enhance the firm information environment should carefully consider initiatives that will improve minority investors’ access to corporate information. Originality/value - The findings contribute to the real effects of EDGAR implementation on firm policies, addressing the ambiguity surrounding the economic consequences of EDGAR adoption. This paper also contributes to the existing literature on the impact of information shock on corporate payouts. The findings emphasize the multifaceted influence of information shock on corporate payouts.