The Effect of Regulation FD on Market Reactions

Rong Yang

《Advances in Financial Planning and Forecasting》 3期 (2008/03) Pp. 1-19

https://doi.org/10.6292/AFPF.2008.03.01

並列摘要

The U.S. Securities and Exchange Commission (SEC) issued Regulation Fair Disclosure (FD) on October 23, 2000, which prohibits selective disclosure of material nonpublic information to certain financial analysts, institutional investors and others prior to making it available to the general public. This study investigates the effect of Regulation FD on market reactions for closed-call firms and open-call firms as well as non-conference-call firms in the post-FD periods. Given conference calls increase the information gap between analysts privy to the call and the remainder of investors before Reg. FD took effect (Bowen, Davis and Matsumoto 2002), this study further analyzes price reactions between previous closed-call firms and previous open-call and non-conference-call firms after the release of the new regulation. This study provides evidence that the new rule did reduce the price volatility for firms that previously limited access to their calls. Moreover, I find that price volatility around earnings announcement dates in two windows is not significantly different between the previous closed-call firms and control groups (including open-call and non-conference-call firms) after the implementation of Regulation FD. Overall, there is no evidence to support the theory that Regulation FD might have the unintended consequence of increasing price reactions due to the decreasing amount of information disclosed during the call period in the post-FD environment, contrary to the concerns of Regulation FD opponents. Since the results are statistically significant, they appear to suggest less, not more, price volatility in the POST period.

並列關鍵字

Regulation ； Price volatility ； Conference calls

參考文獻

Securities and Exchange Commssion (SEC). (2000). Selective Disclosure and Insider Trading. Release 33-7881, 34-43154. Washington, D.C.

Shane P., N. Soderstorm, & S. Yoon. (2001). Earnings and price discovery in the post-Reg. FD information environment: A preliminary analysis. University of Colorado, Working paper.

Bailey, W.,Li, H.,Mao, C.,Zhong, R.(2003).Regulation fair disclosure and earnings information: Market, analyst, and corporate responses.Journal of Finance.58(6),2487-2514.

Baiman, S.,Verrecchia, R.(1996).The relation among capital markets, financial disclosure, production efficiency, and insider trading.Journal of Accounting Research.34(1),1-22.

Bowen, R. M.,Davis, A. K.,Matsumoto, D. A.(2002).Do conference calls affect analysts' forecasts?.The Accounting Review.77,285-316.