52 Pages Posted: 9 Oct 2011 Last revised: 3 Nov 2015
Date Written: December 1, 2014
This study examines the unintended effects of a pre-Reg FD practice 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 priority dissemination practice contributed to 22 percent of the overall price discovery due to overall exclusionary access prior to public release of earnings, and that its impact increased to over 50 percent for firms announcing earnings during regular trading hours. In addition, we find that transient institutions benefitted from priority dissemination, especially when the earnings contained good news. Finally, consistent with economic theory, we find that intraday bid-ask spreads decreased post-Reg FD for firms that had sufficient market liquidity to allow trading opportunities during the 15-minute window. Our study has implications for current discussions on whether preferential information distribution by firms and information intermediaries creates an uneven playing field among investors.
Keywords: Information distribution; Earnings press releases; Intraday market reaction; Regulation Fair Disclosure; Market Microstructure
JEL Classification: D82, G14, K22, M45
Suggested Citation: Suggested Citation
Dong, Bei and Li, Edward Xuejun and Ramesh, K. and Shen, Min, Priority Dissemination of Public Disclosures (December 1, 2014). Accounting Review, Vol. 90, Issue 6, pp. 2235-2266, November 2015. Available at SSRN: https://ssrn.com/abstract=1940675 or http://dx.doi.org/10.2139/ssrn.1940675
By Michael Tang