Market Adaptation to Regulation Fair Disclosure: The Use of Industry Information to Enhance the Informational Environment
30 Pages Posted: 11 May 2015
Date Written: May 10, 2015
Our fundamental research question is in understanding ways in which the financial markets have adapted to Reg FD, and our particular focus is on how market participants use industry information embedded in firms’ earnings announcements. We find that announcements of quarterly earnings made by companies that are the first in their industry to report earnings in a given quarter have significant effects on the stock returns of other firms in the same industry as well as on their own stock returns. We then test the implications of these findings for their effects on the information environment. Overall, our empirical findings support the conclusion that the implementation of Reg FD has led to increased use of industry information that is revealed in earnings announcements. This is one way, among others, in which analysts and other market participants have adapted to the requirements of Reg FD. In this case, they have made the adaptation by developing new uses of public information to enhance the informational environment.
Keywords: Reg FD, Earnings Announcements, Earnings Surprises, Industry Contagion, Industry Competition
JEL Classification: G14, G18
Suggested Citation: Suggested Citation