Impact of Regulatory Enforcement on Leakages Prior to Analyst Recommendations

28 Pages Posted: 26 Jul 2014

See all articles by Jeff Madura

Jeff Madura

Florida Atlantic University - College of Business

Arjan Premti

University of Wisconsin - Whitewater

Date Written: August 2014

Abstract

The financial press suggests that information is commonly leaked prior to analyst recommendations. We examine the impact that three regulatory actions (Regulation Fair Disclosure, Global Analysts Research Settlement, and the legal case against Galleon Group) have on information leakage prior to analyst recommendations. We find that all three regulatory actions have significantly reduced the leakage of information prior to analyst recommendations, even after controlling for several characteristics that explain the variation in information leakage. Our results are robust when applying an alternative method of measuring information leakage, and when forming various samples of analyst recommendations based on different criteria.

Keywords: analyst recommendations, informed trading, insider trading, information leakage

JEL Classification: G14, G24, G34

Suggested Citation

Madura, Jeff and Premti, Arjan, Impact of Regulatory Enforcement on Leakages Prior to Analyst Recommendations (August 2014). Financial Review, Vol. 49, Issue 3, pp. 565-592, 2014. Available at SSRN: https://ssrn.com/abstract=2472191 or http://dx.doi.org/10.1111/fire.12044

Jeff Madura (Contact Author)

Florida Atlantic University - College of Business ( email )

University Tower
220 SE 2 Avenue
Fort Lauderdale, FL 33301
United States
(954)762-5632 (Phone)
(954)762-5245 (Fax)

Arjan Premti

University of Wisconsin - Whitewater ( email )

Whitewater, WI 53190
United States

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