Regulation FD: A Review and Synthesis of the Academic Literature

49 Pages Posted: 19 Oct 2012 Last revised: 13 Jun 2013

Adam S. Koch

University of Virginia - McIntire School of Commerce

Craig E. Lefanowicz

University of Virginia - McIntire School of Commerce

John R. Robinson

Texas A&M University

Date Written: March 13, 2013

Abstract

We summarize the empirical evidence regarding Regulation Fair Disclosure (FD) to gauge whether the regulation achieves its stated objectives and to provide insights and direction for future research. Overall, we find that FD’s prohibition against the selective disclosure of material information eliminates the information advantage enjoyed by certain investors and analysts and thereby provides a more level playing field for all investors. In addition, a number of firms respond to FD by expanding public disclosures and the information environment of the average firm does not appear to be adversely affected. However, we find that an unintended consequence of FD is a reduction in the total amount of information available in the market (i.e., a “chilling effect”) for small or high-technology firms. Finally, ongoing research suggests that private access to management continues to provide select analysts or investors with non-material information used to complete the “mosaic” of information.

Keywords: Regulation Fair Disclosure (Reg FD), Financial Analysts, Earnings Guidance, Capital Markets

JEL Classification: G14, G18, M41

Suggested Citation

Koch, Adam S. and Lefanowicz, Craig E. and Robinson, John R., Regulation FD: A Review and Synthesis of the Academic Literature (March 13, 2013). Accounting Horizons, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2163572 or http://dx.doi.org/10.2139/ssrn.2163572

Adam S. Koch (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

Craig E. Lefanowicz

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-924-6356 (Phone)

John R. Robinson

Texas A&M University ( email )

mail stop 4353
Mays School of Business
college state, TX 77843-4353
United States
979-845-3457 (Phone)
979-845-0028 (Fax)

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