Does Regulation FD Work? Evidence from Analysts’ Reliance on Public Disclosure
Posted: 13 Nov 2011 Last revised: 15 Feb 2012
Date Written: October 27, 2011
We examine how Regulation FD changed analysts’ reliance on firms’ public disclosure. Regulation FD is associated with a stronger analyst response to earnings announcements, management forecasts and conference calls – that is, analysts respond to these events more quickly, more frequently and with larger forecast revisions after FD. Further, following public disclosure, the decline in analyst forecast dispersion and forecast error accelerates after FD. We find no such changes either for foreign ADR firms or around several confounding events. Overall, Regulation FD levels the playing field between the analysts and individual investors, thereby promoting 'fair game' property of the market.
Keywords: public disclosure, analyst forecast revision, analyst forecast quality, regulation FD
JEL Classification: D10, G14, G29, M40, M41
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