How Does Soft Information Affect External Firm Financing?

In recent years, there have been significant changes in the information environment facing firms. In particular, the explosive growth in computing power and the reduction in the costs of disseminating economically relevant information due to the widespread use of the internet have significantly enhanced the ability of investors to produce and transmit information useful for valuing firms’ equity and for evaluating firm’s financing and investment policies. To give one example, Several internet sites allow employees to rate a firm’s management, work culture, compensation schemes, and overall prospects, e.g., Glassdoor Employee Ratings. While it is difficult to argue that such ratings … Read more