# Internet searching and stock price informativeness: Evidence from Google withdrawal in China

## TL;DR

The paper shows that reduced internet searching, like after Google's 2010 withdrawal in China, leads to less informative stock prices, especially for firms with more retail investors.

## Contribution

The study provides causal evidence linking internet search availability to stock price informativeness using a quasi-natural experiment.

## Key findings

- Firms with higher Google search volume saw a 10% drop in stock price informativeness after Google's withdrawal.
- The effect was stronger for firms with more retail investors, larger state ownership, and poor analyst forecasts.
- Internet searching helps retail investors gather firm-specific information more efficiently.

## Abstract

We analyze whether and how internet searching impacts stock price informativeness. Using the 2010 Google withdrawal in China as a quasi-natural experiment, we establish a causal effect between internet searching and stock price informativeness using a difference-in-difference framework. We find that firms with higher Google search volume experience a 10% decrease in stock price informativeness after the Google withdrawal. The negative effect of the Google withdrawal on stock price informativeness is pronounced in firms with more retail investors, larger state-ownership, and poor analysts’ earnings forecasts. Our results suggest that retail investors can benefit from internet searching to collect and process firm-specific information more efficiently.