When Speaking Freely Pays: Anti-SLAPP Laws and Firms' Cost of Equity

We examine whether investors price firms' ability to suppress unfavorable information generated by outsiders. We exploit the staggered adoption of state anti-SLAPP (Strategic Lawsuits Against Public Participation) laws, which limit firms' use of litigation to deter outside criticism. Using an imputation-based difference-in-differences design, we find that anti-SLAPP adoption lowers firms' cost of equity (COE). We further show that anti-SLAPP laws meaningfully alter firms' information environments by increasing unfavorable outside information, reducing disclosures of litigation related to criticism and speech, and increasing reputational-risk disclosures. Consistent with an uncertainty-resolution mechanism, anti-SLAPP adoption reduces information asymmetry, firm risk, undervaluation, and stock price crash risk, indicating that investors face less uncertainty about hidden firm risks. The decline in COE is concentrated among firms with poorer information environments, weaker internal governance, and greater exposure to public scrutiny, where outside information is especially valuable for reducing informational uncertainty. Our findings identify firms' ability to suppress outside criticism as a distinct, priced information friction and suggest that legal institutions governing third-party speech play an important role in the information infrastructure of capital markets.