EDGAR Implementation, Unionization, and Strategic Disclosure

This study focuses on the effect of disclosure processing frictions in labor markets. We go back in time 30 years ago and examine whether firms facing strong organized labor strategically responded to the implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, which substantially reduced labor unions' information processing costs. Consistent with firms having incentives to maintain an information advantage over unions for bargaining purposes, we find that they reduce financial statement disaggregation, the likelihood and frequency of management forecasts, and the proportion of good news forecasts. Our study is the first to investigate the implications of information processing costs for labor markets and suggests that an SEC mandate intended to reduce disclosure processing costs for investors caused unintended strategic responses by firms facing proprietary cost of disclosures in other markets.