Anti-Selective Disclosure Regulation and Analyst Forecast Accuracy and Usefulness

59 Pages Posted: 8 Jul 2020

Date Written: June 8, 2020


We investigate regulations intended to stop managers from privately disclosing corporate information to analysts in a setting with enhanced potential to isolate regulatory effects: the European Union (EU) Market Abuse Directive (MAD), a common regulation implemented by member states with varying sanctions and enforcement resources. Following the implementation of MAD in a country, analyst forecasts become more accurate, with relatively little of the effect attributable to increased voluntary public disclosure by covered firms. The effect of MAD on analyst accuracy is stronger in countries with more stringent enforcement and sanction systems. Although the improvement in accuracy is associated with the implementation of MAD alone, stock prices do not respond more strongly to analyst forecast releases until after market-trading enforcement improves under subsequent EU legislation (MiFID).

Keywords: Market Abuse Directive, financial analysts, sell-side analysts, selective disclosure, IBES, earnings announcements, Markets in Financial Instruments Directive (MiFID), Regulation Fair Disclosure (Reg FD)

JEL Classification: G14, G17, G18, G24, G28, G38

Suggested Citation

Cowan, Arnold R. and Salotti, Valentina, Anti-Selective Disclosure Regulation and Analyst Forecast Accuracy and Usefulness (June 8, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: or

Arnold R. Cowan (Contact Author)

Iowa State University ( email )

College of Business
3344 Gerdin Business Building
Ames, IA 50011-1350
United States


Valentina Salotti

Iowa State University ( email )

613 Wallace Road
Ames, IA 50011-2063
United States

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