Regulation FD: A Review and Synthesis of the Academic Literature
49 Pages Posted: 19 Oct 2012 Last revised: 13 Jun 2013
Date Written: March 13, 2013
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: Suggested Citation