Suppressing Third-Party Information and Firms' Cost of Equity: Evidence from Anti-SLAPP Laws
Working Paper Author/Authors
Key Finding
Anti-SLAPP laws that promote free speech lower firms’ financing costs by improving transparency and lowering uncertainty
Abstract
We examine whether investors price firms’ ability to suppress unfavorable information produced by third parties. Exploiting staggered state adoption of anti-SLAPP laws, which limit litigation used to deter outside criticism, we find that adoption lowers firms’ cost of equity. Anti-SLAPP laws increase unfavorable information and alter firms’ disclosures about criticism, speech, and reputational risk. Consistent with improved external verification, adoption reduces information asymmetry, firm risk, undervaluation, and crash risk. The decline in cost of equity is strongest where independently generated information should provide greater verification value. Our findings identify firms’ ability to suppress third-party information as a priced information friction.
© Scott Guernsey, Matthew Serfling, Cheng Yan, 2025
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