Information Acquisition Cost and Information Production: the case of the High-Speed Rail in China

Speaker: Prof. Xiumin Martin (Washington University in Saint Louis)

Topic:	Information Acquisition Cost and Information Production: the case of the High-Speed Rail in China
Time&Date:	10:00-11:30 am, 2019/5/24 (Friday)
Venue:	Room 619, Teaching A
Speaker:	Prof. Xiumin Martin (Washington University in Saint Louis)
Abstract:	Do information acquisition costs matter for information collection and the quality of decision made based on that information even in the modern era of FinTechs? Utilizing the introduction of high speed rails as exogenous shocks to analysts’cost of information acquisition, we show that reductions in cost of acquiring information due to HSR introduction lead to a significant increase in both the frequency of analysts visiting portfolio firms and the quality of decisions made − the accuracy of earnings forecasts, the information contents of earnings revisions, and the profitability of stock recommendations all improve, post an HSR introduction. The evidence from our large-scale survey of financial analysts as well as cross sectional test confirms these findings, and highlights that soft information is important in analyst information production and is difficult to be substituted by FinTechs.