Mobile communication and local information flow

Evidence from distracted driving laws

Nerissa C. Brown, Han Stice, Roger White

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

We examine the influence of mobile communication on local information flow and local investor activity using the enforcement of statewide distracted driving restrictions, which are exogenous events that constrain mobile communication while driving. By restricting mobile communication across a potentially sizable set of local individuals, these restrictions could inhibit local information flow and, in turn, the market activity of stocks headquartered in enforcement states. We first document a decline in Google search activity for local stocks when restrictions take effect, suggesting that constraints on mobile communication significantly affect individuals' information search activity. We further find significant declines in local trading volume when restrictions are enforced. This drop in liquidity is (1) attenuated when laws provide substitutive means of mobile communication and (2) magnified when locals have long car commutes and when their daily commutes overlap with regular exchange hours. Moreover, trading volume suffers the most for local stocks with lower institutional ownership, less analyst coverage, and more intangible information. Additional analyses show lower intraday volume during local commute times when mobile connectivity is constrained. Together, our results suggest that local information and local investors matter in stock markets and that mobile communication is an important mechanism through which these elements operate to affect liquidity and price discovery.

Original languageEnglish (US)
Pages (from-to)275-329
Number of pages55
JournalJournal of Accounting Research
Volume53
Issue number2
DOIs
StatePublished - Jan 1 2015
Externally publishedYes

Fingerprint

Mobile communication
Information flow
Local information
Liquidity
Trading volume
Enforcement
Investors
Analyst coverage
Price discovery
Car
Intangibles
Connectivity
Information search
Local time
Headquarters
Stock market
Market activity
Google
Institutional ownership

Keywords

  • Liquidity
  • Local bias
  • Mobile communication

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Mobile communication and local information flow : Evidence from distracted driving laws. / Brown, Nerissa C.; Stice, Han; White, Roger.

In: Journal of Accounting Research, Vol. 53, No. 2, 01.01.2015, p. 275-329.

Research output: Contribution to journalArticle

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