I study the effects of information technology (IT) progress in a model where stock prices aggregate speculators’ information and guide firms’ investments. Speculators with limited attention acquire more information about firms with larger investment capacities. IT progress (i.e., lowering information costs) will improve stock price informativeness and corporate efficiency when information is costly. Yet, when information is inexpensive, speculators will use up attention. Then IT progress can backfire:
Firms excessively expand capacities to engage in zero-sum competition for speculators’ attention, reducing corporate efficiency and social welfare. Raising firms’ growth opportunities can reinforce the undesirable effects of IT progress.

Keywords: feedback effect, information acquisition, limited attention, FinTech, price informativeness