Priority Dissemination of Public Disclosures
University of South Florida - School of Accountancy
Edward Xuejun Li
City University of New York (CUNY) - Stan Ross Department of Accountancy
City University of New York (CUNY) - Stan Ross Department of Accountancy; George Mason University
July 10, 2014
This study examines a practice of press release firms in the pre-Reg FD era that gave a broad group of sophisticated market participants 15-minute earlier access to all corporate press releases than the general public. We find that this practice contributed to 22 percent of the overall price discovery due to exclusionary access prior to public release of earnings, and that the impact of priority dissemination increased to over 50 percent for firms announcing earnings during regular trading hours. In addition, for earnings announced during regular or extended trading hours, we find evidence that transient institutions took advantage of the priority dissemination, especially when the earnings contained good news. Finally, consistent with economic theory, we find that bid-ask spreads decreased post Reg FD for firms that had sufficient market liquidity to engender immediate price discovery during the 15-minute priority dissemination window. Our study has implications for current discussions on whether preferential information distribution by firms and information intermediaries would create uneven playing field among investors.
Number of Pages in PDF File: 50
Keywords: Information distribution; Earnings press releases; Intraday market reaction; Regulation Fair Disclosure; Market Microstructure
JEL Classification: D82, G14, K22, M45working papers series
Date posted: October 9, 2011 ; Last revised: August 21, 2014
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