Regulation Fair Disclosure and Analysts' First-Forecast Horizon
48 Pages Posted: 3 May 2006
Date Written: March 2006
Abstract
We examine the impact of Regulation Fair Disclosure (RFD) on first-forecast horizon of analysts' earnings forecasts. The first-forecast horizon is computed as the number of calendar days between the issue of the analysts' first earnings forecast for a quarter and the fiscal quarter-end date. We find that the first-forecast horizon has decreased by about 12 days after RFD: a 10 percent decrease. The top 25 percent of the analysts for each firm are classified as leaders based on the average first-forecast horizon over each year. Leaders are our proxy for favored analysts because obtaining private guidance before RFD would help such analysts provide forecasts earlier. We find that the first-forecast horizon of the leaders decreased by about 18 days, while that of the followers decreased by about 8 days, on average after RFD. This shows that the playing field has been made more level, in terms of eliminating the timing advantage that a select few analysts enjoyed prior to RFD. Specifically, the differential timing advantage between leaders and followers has decreased by about 10 days, out of a differential of 100 days prior to RFD.
Keywords: Earnings forecast, timeliness, disclosure, regulation, financial analysts
JEL Classification: G14, G23, G28, G29, M41
Suggested Citation: Suggested Citation
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