The Chilling Effect of Regulation FD: Evidence from Twitter

47 Pages Posted: 31 May 2019

Date Written: April 2019


We use Twitter to examine whether the level playing field requirement of Regulation Fair Disclosure (“Reg-FD”) chills the adoption and use of new disclosure technologies. We focus on Twitter because prior studies have established that the corporate use of Twitter generates capital market benefits for the firm. We generate inferences using the unexpected endorsement of social media following an SEC investigation (“Reg-SocMedia”). Our analyses indicate that there were substantial changes in the use of Twitter and in the market response to firms’ financial tweets following Reg-SocMedia. We find a non-transitory stock price response of 25 basis points to financial tweets following Reg-SocMedia, compared with no detectable response before Reg-SocMedia. This finding persists on days with no concurrent disclosures, and is stronger for firms with more Twitter followers. We also find a substantial increase in followers for financial tweeting firms, suggesting that investors are responding to changes in firms’ tweeting practices. Collectively, our findings suggest that firms were reluctant to use Twitter for communicating value relevant financial information without SEC guidance related to Reg-FD. This finding is consistent with the notion that Reg-FD has potentially slowed the adoption of valuable new disclosure technologies.

Keywords: Regulation FD, Social Media

JEL Classification: G15, G18, M41

Suggested Citation

Al Guindy, M. and Naughton, James P. and Riordan, Ryan, The Chilling Effect of Regulation FD: Evidence from Twitter (April 2019). Available at SSRN: or

M. Al Guindy (Contact Author)

Carleton University - Eric Sprott School of Business ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S SB6

James P. Naughton

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Ryan Riordan

Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6

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