The Effect of Regulation FD on Management Earnings Forecasts

46 Pages Posted: 20 Sep 2008

See all articles by Frank Heflin

Frank Heflin

University of Georgia - J.M. Tull School of Accounting

William Kross

State University of New York (SUNY) at Buffalo - Department of Accounting

Inho Suk

State University of New York (SUNY) at Buffalo - School of Management

Date Written: September 19, 2008

Abstract

We investigate Regulation FD's effect on managers' earnings forecasts. FD's prohibition on private communication between managers and analysts alters the net benefits firms derive from public disclosure, which we hypothesize 1) simultaneously motivates some firms to stop and other firms to start providing management earnings forecasts, 2) reduces management earnings forecast optimism bias, 3) increases forecast accuracy, and 4) increases forecast informativeness. Our evidence is consistent with all four hypotheses. Thus, our evidence suggests that, although FD motivated some firms to stop forecasting, it improved most firms' forecast properties (more forecasts that are less biased, more accurate, and more informative).

Keywords: Capital markets; regulation, management earnings forecasts; disclosure

JEL Classification: G10, G38, K22, M41

Suggested Citation

Heflin, Frank and Kross, William and Suk, Inho, The Effect of Regulation FD on Management Earnings Forecasts (September 19, 2008). Available at SSRN: https://ssrn.com/abstract=1270919 or http://dx.doi.org/10.2139/ssrn.1270919

Frank Heflin (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706-542-1616 (Phone)
706-542-3630 (Fax)

William Kross

State University of New York (SUNY) at Buffalo - Department of Accounting ( email )

Buffalo, NY 14260
United States

Inho Suk

State University of New York (SUNY) at Buffalo - School of Management ( email )

342 Jacobs Management Center
Buffalo, NY 14260-4000
United States
716-645-3215 (Phone)

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