The impact of regulation fair disclosure on earnings management and analyst forecast bias

2007 ◽  
Vol 31 (1) ◽  
pp. 87-98 ◽  
Author(s):  
Seung-Woog (Austin) Kwag ◽  
Kenneth Small
Keyword(s):  
Earnings Management ◽  
Analyst Forecast ◽  
Regulation Fair Disclosure ◽  
Forecast Bias ◽  
Fair Disclosure ◽  
The Impact

A Contextual Evaluation of Composite Forecasts of Annual Earnings

2016 ◽  
Vol 19 (03) ◽  
pp. 1650014 ◽  
Author(s):  
Pieter T. Elgers ◽  
May H. Lo ◽  
Wenjuan Xie ◽  
Le Emily Xu
Keyword(s):  
Time Series ◽  
Firm Size ◽  
Predictive Accuracy ◽  
Relative Accuracy ◽  
Regulation Fair Disclosure ◽  
Fair Disclosure ◽  
Time Periods ◽  
Time Specific ◽  
Annual Earnings ◽  
The Impact

This study addresses the impact of firm- and time-specific attributes on the accuracy of composite forecasts of annual earnings, constructed from time-series, price-based, and analysts' forecasts. The attributes examined include firm size, analysts' coverage, and time periods pre-dating and following the implementation of regulation fair disclosure. Our results indicate that the relative accuracy of the composite forecasts is time-specific. In the pre-regulation fair disclosure period, composite forecasts significantly outperform each of the three individual forecast sources. Moreover, the extent of improvement in accuracy of composite forecasts is significantly higher for the smaller and lightly-covered firms. Collectively, these results suggest that the predictive accuracy of composite forecasts is contextual.

The Impact of Regulation Fair Disclosure: Trading Costs and Information Asymmetry

2004 ◽  
Vol 39 (2) ◽  
pp. 209-225 ◽  
Author(s):  
Venkat R. Eleswarapu ◽  
Rex Thompson ◽  
Kumar Venkataraman
Keyword(s):  
Information Asymmetry ◽  
Securities And Exchange Commission ◽  
Return Volatility ◽  
Trading Costs ◽  
Regulation Fair Disclosure ◽  
Fair Disclosure ◽  
Regulation Fd ◽  
Material Information ◽  
The Impact ◽  
Selective Disclosure

AbstractIn October 2000, the Securities and Exchange Commission (SEC) passed Regulation Fair Disclosure (FD) in an effort to reduce selective disclosure of material information by firms to analysts and other investment professionals. We find that the information asymmetry reflected in trading costs at earnings announcements has declined after Regulation FD, with the decrease more pronounced for smaller and less liquid stocks. Return volatility around mandatory announcements is also lower but overall information flow is unchanged when mandatory and voluntary announcements are combined. Thus, the SEC appears to have diminished the advantage of informed investors, without increasing volatility.

International Diversification and Forecast Optimism: The Effects of Reg FD

2008 ◽  
Vol 22 (2) ◽  
pp. 179-197 ◽  
Author(s):  
Donald R. Herrmann ◽  
Ole-Kristian Hope ◽  
Wayne B. Thomas
Keyword(s):  
Multinational Firms ◽  
Forecast Accuracy ◽  
International Diversification ◽  
Analyst Forecast ◽  
Full Sample ◽  
Forecast Bias ◽  
Fair Disclosure ◽  
Foreign Operations ◽  
Diversified Firms ◽  
Reg Fd

SYNOPSIS: Research shows that analysts following companies with a higher portion of foreign operations provide more optimistic forecasts, presumably to maintain favorable relations with management and thereby obtain improved access to information. We examine the effect of the introduction of Regulation Fair Disclosure (Reg FD) on analyst forecast bias for internationally diversified firms. We hypothesize that analysts’ incentives to issue optimistic forecasts for such firms should be reduced in the post-Reg FD era, because Reg FD prohibits firms from selectively disclosing management information to analysts. First, we demonstrate that average forecast bias decreases for our full sample of multinational firms. Second, we show that the positive relation between forecast optimism and international diversification significantly declines (and even disappears) in the post-Reg FD period. Reg FD appears to have been successful in reducing analysts’ optimistic bias and in reducing the effect of forecasting complexity on forecast bias for our sample of multinational firms. In a sensitivity test, we also find that the relation between international operations and forecast accuracy improves in the post-Reg FD period.

Regulation Fair Disclosure, Analyst Following, and Analyst Forecast Dispersion

2003 ◽  
Vol 17 (1) ◽  
pp. 15-29 ◽  
Author(s):  
Afshad J. Irani ◽  
Irene Karamanou
Keyword(s):  
Negative Impact ◽  
Preliminary Evidence ◽  
Analyst Forecast ◽  
Specific Information ◽  
Regulation Fair Disclosure ◽  
Forecast Dispersion ◽  
Analyst Following ◽  
Playing Field ◽  
Fair Disclosure

This paper presents preliminary evidence of the effect of Regulation Fair Disclosure (FD) on the quantity and quality of firm-specific information released to the market by comparing analyst forecast data from pre-FD to post-FD time periods. By prohibiting selective disclosure of material information to privileged individuals, the Securities and Exchange Commission intends to provide a level playing field to all investors. However, opponents argue that FD has a negative impact by decreasing the quantity and quality of publicly available information. Consistent with this argument, we document a decrease in analyst following and an increase in forecast dispersion following the passage of FD.

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