Managerial and Investor Responses to Disclosure Regulation: The Case of Reg Fd and Conference Calls

43 Pages Posted: 17 May 2002

See all articles by Brian J. Bushee

Brian J. Bushee

University of Pennsylvania - The Wharton School

Dawn A. Matsumoto

University of Washington - Department of Accounting

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: February 2004

Abstract

This paper investigates the effect of regulation that mandates open access to information on managers' disclosure choices and investors' reactions to disclosures. The recently passed Regulation FD (Reg FD) requires firms to make material disclosures broadly available. Using a sample of firms that previously restricted access to conference calls and a sample of firms that voluntarily allowed unlimited access to their calls in the pre-Reg FD period, we examine the effect of the new rule on managers' decisions regarding the timing, use, and information content of calls, as well as the effect on investors' trading behavior during the call. Our results indicate that Reg FD had a significant negative impact on managers' decisions to continue hosting conference calls and on their decisions regarding the optimal time to hold the call. However, contrary to the concerns of many critics, the magnitudes of these changes are not large. We do not find evidence that Reg FD decreased the amount of information disclosed during the call period, contrary to the concerns of Reg FD opponents. Finally, we find evidence that the new rule increased price volatility for firms that previously restricted access to their calls (relative to firms that previously held open calls) and that the amount of individual investor trading increased following the rule change. Overall, our results suggest that Reg FD impacted trading during the conference call window for firms most affected by the new regulation.

Keywords: Disclosure regulation, Regulation FD, Disclosure Policy, Individual Investor Trading, Price Volatility

JEL Classification: M41, M44, G12, G14, G39, K22

Suggested Citation

Bushee, Brian J. and Matsumoto, Dawn and Miller, Gregory S., Managerial and Investor Responses to Disclosure Regulation: The Case of Reg Fd and Conference Calls (February 2004). Available at SSRN: https://ssrn.com/abstract=310233 or http://dx.doi.org/10.2139/ssrn.310233

Brian J. Bushee (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-4872 (Phone)
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Dawn Matsumoto

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States
206-543-4454 (Phone)
206-685-9392 (Fax)

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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