The Impact Of Regulation Fair Disclosure On Information Asymmetry And Trading PDF Download
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| Author | : Kumar Venkataraman |
| Publisher | : |
| Total Pages | : 34 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
Download The Impact of Regulation Fair Disclosure Book in PDF, ePub and Kindle
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 | : Chiraphol N. Chiyachantana |
| Publisher | : |
| Total Pages | : 38 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
Download The Impact of Regulation Fair Disclosure on Information Asymmetry and Trading Book in PDF, ePub and Kindle
This study examines the impact of Regulation Fair Disclosure (FD) on liquidity, information asymmetry, and institutional and retail investors trading behavior. Our main findings suggest three conclusions. First, Regulation FD has been effective in improving liquidity and in decreasing the level of information asymmetry. Second, retail trading activity increases dramatically after earnings announcements, but there is a significant decline in institutional trading surrounding earnings announcements, particularly in the pre-announcement period. Last, the decline in information asymmetry around earnings announcements is closely associated with a lower participation rate in the pre-announcement period and more active trading of retail investors after earnings releases.
| Author | : Vesna Straser |
| Publisher | : |
| Total Pages | : 62 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
Download Regulation Fair Disclosure and Information Asymmetry Book in PDF, ePub and Kindle
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 | : Shyam V. Sunder |
| Publisher | : |
| Total Pages | : 53 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
Download Investor Access to Conference Call Disclosures Book in PDF, ePub and Kindle
This study provides evidence on the impact of the Securities and Exchange Commission's (SEC) Regulation Fair Disclosure (Reg. FD) on information asymmetry. Reg. FD prohibits firms from disclosing quot;materialquot; information selectively to analysts and institutional investors. The regulation has triggered a debate on mainly three issues: (a) whether use of nonpublic channels for selective disclosure (such as, analyst conference calls) results in information asymmetry among investors, (b) whether prohibiting nonpublic communications is contributing to leveling of information asymmetry among investors, and (c) whether Reg. FD has caused firms to reduce the quality of their public voluntary disclosures. The present study addresses all of these issues. I use a sample of earnings conference calls and classify firms as either, (1) quot;openquot; firms, which always held conference calls accessible to all investors; or (2) quot;restrictedquot; firms, which held conference calls for only analysts and institutional investors in the pre- Reg. FD period. I find that restricted firms faced higher information asymmetry compared to open firms in the pre- Reg. FD period. However, in the post- Reg. FD period the differences in information asymmetry between open and restricted firms do not persist. Taken together it suggests that selective disclosure was causing greater information asymmetry among investors and Reg. FD has contributed to the leveling of such information asymmetry. In additional tests, I do not find evidence that Reg. FD has caused firms to reduce quality of information conveyed in conference calls. The study adds to our understanding of how voluntary and mandated disclosure impact information asymmetry among investors.
| Author | : Chun I. Lee |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
Download Effect of Regulation Fd on Asymmetric Information Book in PDF, ePub and Kindle
On 23 October 2000, the U.S. SEC put Regulation Fair Disclosure into effect. It requires companies to disseminate releases of material information to all investors, not selectively. Proponents of Regulation FD argued that the flow of information would improve; critics of the regulation asserted that Regulation FD would increase volatility and reduce the quantity of information being released into the market, resulting in an increase in asymmetric information. We examined components of the bid-ask spread surrounding news releases and trading activity by retail versus institutional investors before and after the institution of Regulation FD. Our results indicate no significant increase in volatility after Regulation FD, and we found little or no increase in the adverse-selection component of bid-ask spreads. Overall, our results do not support critics of Regulation FD.
| Author | : Anwer S. Ahmed |
| Publisher | : |
| Total Pages | : |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
Download 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 Book in PDF, ePub and Kindle
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.
| Author | : Rei-Ning Chen |
| Publisher | : |
| Total Pages | : 71 |
| Release | : 2009 |
| Genre | : Corporations |
| ISBN | : |
Download Regulation Fair Disclosure and Capital Structure Book in PDF, ePub and Kindle
Abstract: This study examines the impact of Regulation Fair Disclosure (FD) on corporate financing choices. Regulation FD puts more constraints on corporate disclosure in the equity market than in the debt market. After the regulation, although firms are no longer able to selectively disclose material information to market professionals in the equity market, they can still do so to banks and rating agencies in the debt market. Consistent with the expectation that FD affects firms differentially, I find substantial cross-sectional variation in changes in information asymmetry in the equity market. I further find that firms experiencing greater increases in information asymmetry increase their leverage more after FD. The results suggest that firms who cannot perfectly replace private disclosure with public disclosure are likely to experience increases in information asymmetry and that they may turn to the debt market for capital where private disclosure is still available.
| Author | : Shyam V. Sunder |
| Publisher | : |
| Total Pages | : 124 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
Download Impact of Disclosure Regulation on Information Asymmetry Case of Regulation Fair Disclosure Book in PDF, ePub and Kindle
| Author | : United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises |
| Publisher | : |
| Total Pages | : 182 |
| Release | : 2001 |
| Genre | : Business & Economics |
| ISBN | : |
Download Fair Disclosure Or Flawed Disclosure Book in PDF, ePub and Kindle
| Author | : Anwer S. Ahmed |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
Download Did Regulation Fair Disclosure Level the Playing Field? Evidence from an Analysis of Changes in Trading Volume and Stock Price Reactions to Earnings Announcements Book in PDF, ePub and Kindle
We contribute to the literature on Regulation Fair Disclosure (FD) in three ways. First, we provide evidence on whether FD has achieved its intended effect of leveling the information playing field by examining whether differences across investors' information quality prior to earnings announcements have declined after the pronouncement of the regulation. We find strong evidence of a decline in earnings announcement period trading volume attributable to differential prior precision after FD consistent with a more level playing field. Second, we re-examine whether FD has resulted in firms reducing or chilling their information flows (disclosures) to investors. Contrary to prior work, we find that there is evidence of an overall reduction or chill in information flows after FD relative to a quot;cleanerquot; pre-FD period than the pre-FD period used in other studies. Third, we document that while the leveling effect of FD is relatively wide-spread, the chill effect is driven by (i) relatively smaller, high technology firms and (ii) relatively larger firms with high book-to-market ratios. We interpret the latter result as evidence that firms with relatively high costs of public disclosure chose to eliminate the disclosure altogether rather than broadening access to the disclosure.
