The Information Content of Corporate Websites

Abstract

In 2008, the SEC published guidance allowing firms to use corporate websites as an alternative disclosure channel to EDGAR. While the information content and market reaction to traditional disclosure channels such as EDGAR filings and press releases are well-documented, evidence on corporate websites as a disclosure channel is scarce. In this paper, we take the first step toward shedding light on corporate websites as an important source of information to investors. Employing standard event study methods, we develop a novel measure of corporate website content and find that increases in website content provide significant value-relevant information to investors incremental to that contained in traditional disclosure channels. In addition, we find a negative relation between website content and information asymmetry, and that this negative relation is most pronounced after the SEC’s 2008 guidance. Comparing the content of websites to EDGAR, we find that websites contain more content related to business operations and that the market reaction to such information is heighten. Collectively, our findings indicate that corporate websites are an economically significant source of new information that supplements traditional disclosure channels considered in prior literature.