The Effect of Regulation Fd on Transient Institutional Investors' Trading Behavior
46 Pages Posted: 3 May 2005 Last revised: 13 Mar 2008
Date Written: March 2008
Abstract
We assess the impact of Reg FD on the trading behavior of transient institutional investors in the quarter prior to a bad news break in a string of consecutive earnings increases. Bad news breaks are defined as breaks that are by growth firms, preceded by longer strings of consecutive earnings increases, followed by longer strings of consecutive earnings decreases, and associated with larger declines in earnings. Pre Reg FD transient institutions have abnormal selling of stocks in the quarter immediately preceding a bad news break. This abnormal selling is confined to firms that held conference calls in the pre Reg FD period. However, in the post Reg FD period transient institutions do not exhibit similar abnormal selling of stocks in the quarter before a bad news break. Furthermore, after Reg FD transient institutions allocate less of their stock portfolios to conference call firms relative to non-conference call firms in the quarters prior to a bad news break. These results demonstrate that Reg FD has had an impact on management's selective disclosure behavior and significantly changed the trading behavior of transient institutions.
Keywords: Regulation FD, earnings strings, transient institutional investors
JEL Classification: M41, M45, G38, G23
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Regulation Fd and the Financial Information Environment
By Frank Heflin, K.r. Subramanyam, ...
-
Regulation Fair Disclosure and Earnings Information: Market, Analyst, and Corporate Responses
By Warren Bailey, Haitao Li, ...
-
Informational Effects of Regulation Fd: Evidence from Rating Agencies
By Philippe Jorion, Alfred Z. Liu, ...
-
The Effectiveness of Regulation Fd
By Andreas Gintschel and Stanimir Markov
-
By Anup Agrawal, Mark A. Chen, ...
-
The Impact of Regulation Fair Disclosure: Trading Costs and Information Asymmetry
By Kumar Venkataraman, Rex Thompson, ...
-
Managerial and Investor Responses to Disclosure Regulation: The Case of Reg Fd and Conference Calls
By Brian J. Bushee, Dawn A. Matsumoto, ...
-
Managerial and Investor Responses to Disclosure Regulation: The Case of Reg Fd and Conference Calls
By Brian J. Bushee, Dawn A. Matsumoto, ...
-
Getting Up to Speed on the Financial Crisis: a One-Weekend-Reader&Apos;S Guide
By Gary B. Gorton and Andrew Metrick
