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

A fundamental question in corporate finance is whether a firm's cost of equity (COE) is influenced more by the amount of information disclosed or by the direction and tone of that information. While greater transparency can reduce information asymmetry and lower financing costs, negative disclosures may increase perceived risk and, consequently, firms' COE. We examine this trade-off using the adoption of U.S. state anti-SLAPP laws, which provide speech protections to corporate critics, thereby promoting the freer flow of information and negative disclosures. Employing an imputation-based difference-indifferences approach, we find that anti-SLAPP laws reduce firms' COE, especially for those in opaque information environments or with better-informed employees. Further analysis suggests that this effect operates through declines in information asymmetry, return volatility, and systematic and stock price crash risk. Our findings highlight how legal institutions that encourage free speech can lower financing costs by enhancing transparency and reducing uncertainty in capital markets.