Regulation Fair Disclosure and Earnings Information: Market, Analyst, and Corporate Responses

Bailey, Warren; Li, Haitao; Mao, Connie X.; Zhong, Rui

doi:10.1046/j.1540-6261.2003.00613.x

Cited by 409 publications

(106 citation statements)

References 26 publications

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“…These results suggest that the regulation has curtailed selective disclosure, at least to some extent, and in turn decreased analyst lowballing activity, which has resulted in less consistent forecasts. These findings are in line with Bailey et al (2003), who show that analyst disagreement and the difficulty in making earnings forecasts have increased since the implementation of Reg FD 23…”

Section: Additional Resultssupporting

confidence: 89%

“…Because of the large demand for financial analysts’ earnings forecasts, researchers have long been interested in how analyst forecast characteristics affect price formation and analysts’ career development. For example, prior studies examine the effect of analyst reputation and forecast bias on the volume of trade generated by analyst forecasts (e.g., Bailey et al (2003), Jackson (2005)), as well as the role of herding (e.g., Hong, Kubik, and Solomon (2000)) or optimism (Hong and Kubik (2003)) on labor market outcomes. The literature commonly uses forecast accuracy (the absolute distance between the forecast and realized earnings) to assess analysts’ performance.…”

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confidence: 99%

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Analyst Forecast Consistency

Hilary¹,

Hsu

2013

The Journal of Finance

204

115

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We show empirically that analysts who display more consistent forecast errors have greater ability to affect prices, and that this effect is larger than that of stated accuracy. These results lead to three implications. First, consistent analysts are less likely to be demoted and are more likely to be nominated All Star analysts. Second, analysts strategically deliver downward‐biased forecasts to increase their consistency (if at the expense of stated accuracy). Finally, the benefits of consistency and of “lowballing” (accuracy) are increasing (decreasing) in institutional investors’ presence.

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Section: Additional Resultssupporting

confidence: 89%

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confidence: 99%

Analyst Forecast Consistency

Hilary¹,

Hsu

2013

The Journal of Finance

204

115

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“… For example, the 1992 revision of executive compensation disclosure rules (Lo ), the 1997 SFAS 131 revisions of segment reporting (Wysocki ), and the 2000 Regulation Fair Disclosure (Heflin, Subramanyam, and Zhang ; Bailey, Li, Mao, and Zhong ). …”

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confidence: 99%

Regulatory Oversight of Financial Reporting: Securities and Exchange Commission Comment Letters

Johnston

Petacchi

2017

Contemporary Accting Res

171

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The Securities and Exchange Commission (SEC) reviews company filings (10-Q, 10-K, S-1, etc.) submitted to them. If a review identifies potential deficiencies, the SEC staff sends the company a comment letter seeking clarification, additional information, and ultimately, perhaps, revision of the filing or future filings. We examine the content, resolution, and ensuing informational consequences of SEC comment letters. The content analysis shows that nearly half of all comments involve accounting application, financial reporting, and disclosure issues. More than 17 percent of our sample cases result in immediate amended filings to resolve the issue(s) arising from the comment letters, and financial statements and/or footnotes are frequently revised. Following comment letter resolution, the adverse selection component of the bid-ask spread declines and Earnings Response Coefficients (ERCs) increase. Our results provide little support for the conjecture that the market interprets the receipt of a comment letter as a signal that the firm has poor reporting quality. Finally, we find no evidence that comment letter firms increase the quantity or change the type of voluntary disclosure, thereby eliminating a possible competing explanation for the improved information environment. We conclude the SEC's oversight has beneficial informational effects. Surveillance r eglementaire de l'information financi ere : les lettres d'observations de la SEC r esoudre la ou les questions soulev ees dans les lettres d'observations, et les etats financiers et (ou) les notes font fr equemment l'objet d'une r evision. A la suite de la r esolution des questions soulev ees dans les lettres d'observations, la composante d'antis election de l' ecart acheteur-vendeur d ecline et les coefficients de r eaction aux r esultats augmentent. L' etude livre peu d'indications confirmant l'hypoth ese selon laquelle le march e interpr eterait la r eception d'une lettre d'observations comme un signal de la pi etre qualit e de l'information fournie par la soci et e. Enfin, les auteurs ne rel event aucun el ement qui confirmerait que les soci et es recevant des lettres d'observations augmentent le volume d'information facultative qu'elles publient ou en modifient la nature, ce qui elimine la possibilit e d'invoquer une autre explication : celle d'un meilleur environnement d'information. Les auteurs concluent que la surveillance de la SEC a des r epercussions b en efiques sur l'information.

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“…The results in Bailey et al. () suggest that firms commit themselves to a higher level of voluntary disclosures; however, the increase in the voluntary disclosures is limited to those related to current quarter earnings. Consistent with the results of these studies, Straser () reports an increase in the quantity, although not in quality, of disclosures after Reg.…”

Section: Literature Reviewmentioning

confidence: 98%

The European Market Abuse Directive: Has it Worked?

Shahzad

Mertens

2016

Financ Manag Account

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In this paper, we examine whether the Market Abuse Directive (MAD) has been effective in achieving its objectives of deterring the market manipulation activities, increasing the timeliness of information and decreasing the disclosure of inside information to select groups. Our sample consists of firms listed on Frankfurt Stock Exchange. We use stock prices and analysts' forecast-based proxies to examine the impact and effectiveness of MAD. The analysis based on these two set of proxies provides evidence that the adoption of MAD has been effective. In particular, we find that after the implementation of MAD, on average, (1) the volatility of stock prices around earnings announcement declines, (2) stock prices remain closer to their post earnings announcement level during the period before earnings announcement, (3) the accuracy of analyst forecasts improves, (4) the dispersion of analyst forecasts decreases, and (5) the number of analysts following a company declines.We would like to thank Richard Levich, co-editor, an anonymous reviewer for their constructive comments that helped us to improve the paper. We would also like to thank the participants of 34th EAA Annual Congress -Rome, Italy and the members of the dissertation committee of the corresponding author, Khurram Shahzad.

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Regulation Fair Disclosure and Earnings Information: Market, Analyst, and Corporate Responses

Cited by 409 publications

References 26 publications

Analyst Forecast Consistency

Analyst Forecast Consistency

Regulatory Oversight of Financial Reporting: Securities and Exchange Commission Comment Letters

The European Market Abuse Directive: Has it Worked?

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