Conference Agenda

Financial data vendors intermediate the flow of information from firms to investors. I study frictions that arise in the context of this intermediation by focusing on one of the most prominent data vendors in the finance industry: Standard & Poor's ('S&P') Compustat database. Compustat provides subscribers with decades of 10-K and 10-Q data; however, it does not cover every public firm in every period. I show that a significant fraction of institutional investors do not invest in firms with missing data -- institutional ownership is over 40% below its unconditional mean for firms not covered in Compustat. A policy change instituted at S&P in the early 1990s provides a quasi-natural experiment to confirm a causal association between Compustat data coverage and institutional investor demand. In a battery of empirical tests, I then show that limited access to financial data is associated with lower informational efficiency of equity prices. This highlights the role that data vendors play in facilitating the flow of information within financial markets.