Regulation FD: A Review and Synthesis of the Academic Literature

Koch, Adam S.; Lefanowicz, Craig E.; Robinson, John R.

doi:10.2308/acch-50500

Cited by 98 publications

(34 citation statements)

References 61 publications

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“…Before Reg FD was introduced, analysts (or a subset thereof) regularly received information from management access. Recent evidence, surveyed by Koch, Lefanowicz, and Robinson (2013), suggests that most of the benefits that analysts received through management access were eliminated with the introduction of Reg FD. However, subtle variations of management access, for example, through educational ties (Cohen, Frazzini, and Malloy (2010)), may still persist after Reg FD.…”

Section: Hypothesis Development Data and Methodologymentioning

confidence: 99%

Do Financial Analysts Restrain Insiders’ Informational Advantage?

Ellul¹,

Panayides²

2018

J. Financ. Quant. Anal.

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By collecting and disseminating price-sensitive information, financial analysts should reduce firm insiders’ informational advantage with a consequent impact on trading dynamics and market quality. We empirically examine the impact of complete analysts’ coverage termination on stocks’ liquidity, price discovery, and insider trading profitability. Termination leads to deteriorating liquidity and price efficiency, more informed trading, and higher profitability of insider trades. The magnitude of these effects depends on the strength of insiders’ ownership and on management’s decision whether to improve the firm’s information environment after coverage termination. Institutional investors alleviate, but do not eliminate, the negative effects of termination.

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Section: Hypothesis Development Data and Methodologymentioning

confidence: 99%

Do Financial Analysts Restrain Insiders’ Informational Advantage?

Ellul¹,

Panayides²

2018

J. Financ. Quant. Anal.

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“…The use of these Item 7.01 Form 8‐K filings is critically important in our setting, because it provides a setting in which we know (i) that management intended to release material information to the market under Reg FD, (ii) that this information should be released to the market as a whole, and (iii) the date and precise time that the information is publicly released. In addition, focusing on these 8‐K disclosures allows us to investigate time periods after the initial adoption of Reg FD, and thus avoid the confounding effects of contemporaneous events that have affected prior studies (Koch et al 2013). 8 Thus, these disclosures are a powerful setting to examine whether trading is occurring on material information prior to its release to the broader market.…”

Section: Background and Prior Researchmentioning

confidence: 99%

Trading Prior to the Disclosure of Material Information: Evidence from Regulation Fair Disclosure Form 8‐Ks*

Campbell¹,

Twedt

Whipple³

2020

Contemporary Accting Res

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Regulation Fair Disclosure (Reg FD) Form 8‐K filings provide a venue where managers release information to the market as a whole that they designate as being material. Using this setting, we study trading patterns immediately prior to the public disclosure of material information. We offer three main results. First, using both intraday and daily trading data, we find abnormal trading volume of 21 percent (13 percent) in the hour (day) prior to the public disclosure, respectively. Second, we find that this pre‐disclosure abnormal trading volume is concentrated in firms that are smaller, have more growth opportunities, issue fewer voluntary disclosures, and have weaker external monitoring. Finally, we find that this pre‐disclosure volume is concentrated in subsamples in which the information relates to a firm's material contracts, a firm holds investor/analyst conferences, and there is insider trading activity in a firm's shares. Our results do not concentrate in a small number of firms or industries, and do not appear to be explained by the form through which managers first release the material information (e.g., Form 8‐K, press release, website posting, or social media). Our results are also robust to controlling for the firm's other filings and peer filings that occur around the disclosure. Overall, the trading patterns we document may show that, inconsistent with the spirit of Reg FD, a subset of investors trade on information managers deem material prior to its broad, public release.

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“…By fundamentally changing how companies communicate with investors, Reg FD significantly reduces an analyst's private channel to firm-specific information (e.g., Cohen et al (2010)). In a survey of the related literature, Koch et al (2013) conclude that Reg FD has largely eliminated the benefits of private access to management.…”

Section: Superior Access To Managementmentioning

confidence: 99%

“…In one extension, we restrict our analysis to the period after the implementation of Regulation Fair Disclosure (Reg FD). By prohibiting publicly traded companies to selectively disclose information to certain financial market participants, Reg FD has largely eliminated the benefits of private access to management (Koch, Lefanowicz, and Robinson (2013)). Our findings prevail during the post-Reg FD period.…”

mentioning

confidence: 99%

Cultural Proximity and the Processing of Financial Information

Du¹,

Yu²,

Yu³

2017

J. Financ. Quant. Anal.

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This paper examines how culture affects information asymmetry in financial markets. We extract firms traded in the United States but headquartered in regions sharing Chinese culture (“Chinese firms”), and we manually identify a group of U.S. analysts of Chinese ethnic origin (“Chinese analysts”). We find that Chinese analysts issue more accurate forecasts on Chinese firms than non-Chinese analysts. The effect is stronger among firms with less transparent information environments. Further evidence suggests that cultural proximity can go beyond language commonality and analysts’ pre-existing channels for information. Market reaction is stronger when Chinese analysts issue favorable forecast revisions or upgrades about Chinese firms.

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Regulation FD: A Review and Synthesis of the Academic Literature

Cited by 98 publications

References 61 publications

Do Financial Analysts Restrain Insiders’ Informational Advantage?

Do Financial Analysts Restrain Insiders’ Informational Advantage?

Trading Prior to the Disclosure of Material Information: Evidence from Regulation Fair Disclosure Form 8‐Ks*

Cultural Proximity and the Processing of Financial Information

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