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Author: Eric Zitzewitz Publisher: ISBN: Category : Languages : en Pages : 47
Book Description
This paper reports evidence that Regulation Fair Disclosure has had its desired effect of reducing selective disclosure of information about future earnings to individual analysts without reducing the total amount of information disclosed. In particular, it finds that multi-forecast days, which typically follow public announcements or events, now account for over 70 percent of the new information about earnings, up from 35 percent before Reg FD. This result is obtained by applying a new methodology from Zitzewitz (2001a) for measuring the information content of individual forecasts. These results are strongest for the fourth quarter of 2000, when the SEC Chairman who introduced Reg FD was still in office; since the change in administration, some of the initial effects of Reg FD appear to have been reversed.
Author: Eric Zitzewitz Publisher: ISBN: Category : Languages : en Pages : 47
Book Description
This paper reports evidence that Regulation Fair Disclosure has had its desired effect of reducing selective disclosure of information about future earnings to individual analysts without reducing the total amount of information disclosed. In particular, it finds that multi-forecast days, which typically follow public announcements or events, now account for over 70 percent of the new information about earnings, up from 35 percent before Reg FD. This result is obtained by applying a new methodology from Zitzewitz (2001a) for measuring the information content of individual forecasts. These results are strongest for the fourth quarter of 2000, when the SEC Chairman who introduced Reg FD was still in office; since the change in administration, some of the initial effects of Reg FD appear to have been reversed.
Author: Marcia Millon Cornett Publisher: ISBN: Category : Languages : en Pages : 39
Book Description
Regulation Fair Disclosure (RegFD) prohibits selective disclosure of material non-public information by public companies to privileged individuals (such as favored research analysts or, in general, securities markets professionals) and requires broad, non-exclusionary disclosure of such information. We examine firms' stock price reactions to investment recommendation changes from two distinct groups of analysts around the passage of RegFD. We find that RegFD has had a significant impact regardless of whether recommendation changes were announced by affiliated analysts (those who are affiliated with investment banks that underwrite securities for companies) or unaffiliated analysts. Further, the results suggest that investors reacted more significantly to recommendation changes by affiliated analysts than to those by unaffiliated analysts prior to the implementation of RegFD. However, these significant differences are not present after the passage of RegFD.
Author: United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises Publisher: ISBN: Category : Business & Economics Languages : en Pages : 182
Author: Vesna Straser Publisher: ISBN: Category : Languages : en Pages : 62
Book Description
With the institution of Regulation Fair Disclosure (FD) on October 23, 2000, the Securities and Exchange Commission (SEC) imposed higher transparency requirements on the voluntary disclosure practices of public companies. This paper investigates whether the regulation induced companies to commit to higher or lower levels of voluntary disclosures by studying the changes in information asymmetry. The analysis is based on the extant economic theory suggesting that increases in the quantity and/or quality of disclosures should reduce companies' levels of information asymmetry. We study two proxies of information asymmetry - the probability of informed trading and the adverse selection component of the spread. After the implementation of Regulation FD we find a significant increase in both proxies of information asymmetry and the probability of new information events that contain private information while the proportion of informed traders decreases. An analysis of the volume of disclosures shows that the regulation was successful in increasing the quantity of available public information. Combined with the previous results we are able to conclude that, at least initially, companies responded to the regulation by providing more public information of lower quality.
Author: Warren Bailey Publisher: ISBN: Category : Languages : en Pages : 50
Book Description
With the adoption of Regulation Fair Disclosure (Reg FD), market behavior around earnings releases displays no significant change in return volatility (after controlling for decimalization of stock trading) but significant increases in trading volume due to difference in opinion. Analyst forecast dispersion increases, and increases in other measures of disagreement and difference of opinion suggest greater difficulty in forming forecasts beyond the current quarter. Corporations increase the quantity of voluntary disclosures, but only for current quarter earnings. Thus, Reg FD seems to increase the quantity of information available to the public while demanding more effort and struggle from investment professionals.
Author: Jennifer Francis Publisher: ISBN: Category : Languages : en Pages :
Book Description
We re-examine the effects of regulation fair disclosure (Reg FD) using ADRs (who are exempt from Reg FD) to control for confounding events which affected all traded firms. Tests based on public information metrics (returns volatility, informational efficiency and trading volume) and on analyst information metrics (forecast dispersion and accuracy) suggest that Reg FD did not uniquely affect the US information environment. However, analyst report informativeness declined for US firms relative to ADR firms, providing evidence consistent with Reg FD achieving one of its objectives - reducing private information flows to analysts.
Author: Armando R. Gomes Publisher: ISBN: Category : Languages : en Pages : 43
Book Description
We empirically investigate the effects of the adoption of Regulation Fair Disclosure (Reg FD) by the U.S. Securities and Exchange Commission in October 2000. This rule was intended to stop the practice of selective disclosure, in which companies give material information only to a few analysts and institutional investors prior to disclosing it publicly. We find that the adoption of Reg FD caused a significant reallocation of information-producing resources, resulting in a welfare loss for small firms, which now face a higher cost of capital. The loss of the selective disclosure channel for information flows could not be compensated for via other information transmission channels. This effect was more pronounced for firms communicating complex information and, consistent with the investor recognition hypothesis, for those losing analyst coverage. Moreover, we find no significant relationship of the different responses with litigation risks and agency costs. Our results suggest that Reg FD had unintended consequences and that information in financial markets may be more complicated than current finance theory admits.
Author: Kumar Venkataraman Publisher: ISBN: Category : Languages : en Pages : 34
Book Description
Recently, the Securities and Exchange Commission (SEC) passed a new rule, known as Regulation Fair Disclosure (Reg. FD), that prohibits selective disclosure of material information to analysts and other investment professionals. Both proponents and critics, in emphasizing different aspects of the information environment, have offered logical support for their views. Our study is designed to clarify the empirical impact of this new regulation on trading costs and, by inference, on the degree of information asymmetry extant in the equity markets. In brief, we find no evidence to suggest that Reg. FD has caused asymmetry to increase. On the contrary, our measures of trading costs suggest that the risk of adverse selection during information events has reduced significantly after the introduction of Reg. FD. In addition, we find some evidence that the SEC appears to be successful in accomplishing its objective of preventing select investors from gaining preferential access to material information before information events. In a cross-section, our analysis suggests that the more illiquid firms obtain, relatively, a greater benefit from this reduction in trading costs.Finally, our analysis of market model residuals and announcement period return prediction errors provides no support for the contention that Reg. FD increases return volatility and exaggerates price reactions to announcements. If anything, the data suggest that information flow around mandatory announcements has decreased but overall information flow is unchanged.
Author: Eric Zitzewitz
Author: Eric Zitzewitz
Author: Marcia Millon Cornett
Author: United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises
Author: Vesna Straser
Author: Warren Bailey
Author: Jennifer Francis
Author: Armando R. Gomes
Author: Kumar Venkataraman
Author: Juhyun Lee
Author: Jared L. Kopel