The Impact of Regulation Fair Disclosure on Investors' Prior Information Quality - Evidence from an Analysis of Changes in Trading Volume and Stock Price Reactions to Earnings Announcements

Posted: 28 Jan 2007

See all articles by Anwer S. Ahmed

Anwer S. Ahmed

Texas A&M University - Mays Business School

Richard A. Schneible Jr.

State University of New York (SUNY) at Albany

Abstract

We document that Regulation Fair Disclosure has reduced differences in information quality between investors prior to quarterly earnings announcements consistent with the intent of the regulation. This reduction is driven by small firms and high technology firms, rather than the large firms targeted by the SEC, which suggests that selective disclosure among large firms may have been much more limited than what was presumed by proponents of FD. In addition, we document that FD has decreased the average information quality of investors in small and high technology firms in the period prior to an earnings announcement while having no lasting effect on other firms. Taken together these two results suggest that, for small and high technology firms, FD succeeded in eliminating selective disclosure but also lowered the average quality of information available about these firms.

Keywords: Fair Disclosure, FD, SEC regulation, trading volume

JEL Classification: G10, G12, G14, G38, M41, M45

Suggested Citation

Ahmed, Anwer S. and Schneible, Richard, The Impact of Regulation Fair Disclosure on Investors' Prior Information Quality - Evidence from an Analysis of Changes in Trading Volume and Stock Price Reactions to Earnings Announcements. Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=959716

Anwer S. Ahmed

Texas A&M University - Mays Business School ( email )

430 Wehner
College Station, TX 77843-4353
United States

Richard Schneible (Contact Author)

State University of New York (SUNY) at Albany ( email )

Albany, NY 12222
United States

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