Who is Afraid of Reg Fd? The Behavior and Performance of Sell-Side Analysts Following the Sec's Fair Disclosure Rules

36 Pages Posted: 2 Mar 2002 Last revised: 13 Feb 2011

See all articles by Anup Agrawal

Anup Agrawal

University of Alabama - Culverhouse College of Commerce & Business Administration

Mark A. Chen

Georgia State University - Department of Finance

Sahiba Chadha

University of Alabama - Culverhouse College of Commerce & Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2005

Abstract

This paper analyzes the impact of Regulation FD on the accuracy and dispersion of earnings forecasts made by sell-side equity analysts. Using a large sample of forecasts made over a nearly ten-year period surrounding FD's adoption, we uncover two main sets of findings. First, earnings forecasts become less accurate post-FD at the levels of both the individual analyst and the consensus. This effect is significantly larger for early forecasts than for late forecasts, and for smaller companies than for larger companies. Second, the dispersion in earnings forecasts across individual analysts following a company increases post-FD. This effect is also larger for early forecasts than for late forecasts, and it increases with the passage of time following FD's adoption. These results are quite robust to alternative empirical methodologies. Our findings suggest that there has been a reduction in both selective guidance and the quality of analyst forecasts post-FD.

Keywords: Reg FD, Regulation Fair Disclosure, Fair Disclosure rules, Brokerage analysts, Sell-side analysts, Security analysts, Analyst forecasts

JEL Classification: G14, K22, L51, M4

Suggested Citation

Agrawal, Anup and Chen, Mark and Chadha, Sahiba, Who is Afraid of Reg Fd? The Behavior and Performance of Sell-Side Analysts Following the Sec's Fair Disclosure Rules (June 1, 2005). AFA 2003 Washington, DC Meetings Paper; EFA 2002 Berlin Meetings Paper. Available at SSRN: https://ssrn.com/abstract=738685 or http://dx.doi.org/10.2139/ssrn.738685

Anup Agrawal (Contact Author)

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
EFLS, Box 870224
Tuscaloosa, AL 35487-0224
United States
205-348-8970 (Phone)
205-348-0590 (Fax)

HOME PAGE: http://aagrawal.people.ua.edu/

Mark Chen

Georgia State University - Department of Finance ( email )

University Plaza
Atlanta, GA 30303-3083
United States

Sahiba Chadha

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
205-348-8966 (Phone)
205-348-0590 (Fax)

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