Leveling the Playing Field: Disclosure Regulation and Local Informational Advantage
Singapore Management University - Lee Kong Chian School of Business
University of Miami - School of Business Administration
National University of Singapore (NUS) - Department of Finance; Southern Methodist University (SMU) - Edwin L. Cox School of Business
March 16, 2015
This study examines how changes in firms' information environment affect local agents. We show that local bias and informational advantage of institutional investors and equity analysts located around corporate headquarters decline sharply following the adoption of Regulation Fair Disclosure and Sarbanes-Oxley Act. The decline in local bias is more salient among firms whose information environment is more opaque before the new rules. At the aggregate market level, the degree of informed trading attributed to local investors also declines. Overall, the evidence is consistent with disclosure regulation affecting the informational advantage that market participants enjoy due to their proximity to firms.
Number of Pages in PDF File: 50
Keywords: Disclosure Regulation; Reg FD; Sarbanes-Oxley; Local Bias; Local Performance; Institutional Investors; Equity Analysts
Date posted: April 13, 2011 ; Last revised: March 16, 2015
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