Does more public information always improve price efficiency? Evidence from the EDGAR adoption

We study whether disclosure reforms improve price efficiency once heterogeneity in firms' liquidity responses is taken into account. Using 41,840 firm–half-year observations of U.S. stocks from 1991 to 1998, we exploit the SEC's staggered EDGAR rollout as an exogenous increase in public information. We estimate stacked difference-in-differences models and apply a novel stock return variance decomposition to measure price efficiency via noise and private information shares. In the full treated sample, EDGAR increases the public- and private-information components, reduces the noise component, and improves liquidity. We then study heterogeneity in liquidity responses to EDGAR introduction and find that when liquidity improves the most, the noise component rises while the private-information component falls. For firms whose liquidity deteriorates after EDGAR adoption, the opposite patterns are weak. Overall, the evidence suggests that disclosure reforms can improve price efficiency on average, but effects are not uniform across firms with varying liquidity responses.