The Effects of Regulation FD on Informal and Institutionalized Leakages of Information in Earnings Press Releases

Dong, Bei; Li, Edward Xuejun; Ramesh, K.; Shen, Min

doi:10.2139/ssrn.1940675

Cited by 4 publications

(2 citation statements)

References 75 publications

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“…There are many sources of this new information, including news articles, management conference presentations, and analyst forecast revisions (e.g., Dong et al. ). While both the bond and stock markets have access to the same information during the pre‐announcement period, we predict that bond prices impound bad news information sooner than stock prices.…”

Section: Motivationmentioning

confidence: 99%

The Timeliness of the Bond Market Reaction to Bad Earnings News

DeFond

Zhang

2014

Contemporary Accting Res

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We find that bond price quotes impound bad earnings news on a more timely basis than good earnings news and that the bond market impounds bad news on a more timely basis than the stock market. We also find that the timeliness of the bond market reaction to bad news is concentrated primarily among speculative‐grade bonds, consistent with earnings news having a larger effect on bond price quotes when default risk is high. In addition, we find that a portion of the bad news impounded by the bond market reverses following the earnings announcement. Overall, our findings are consistent with bondholders’ asymmetric payoff function having important implications for the valuation role of accounting information in the bond market. Specifically, our findings indicate that bond quotes impound bad earnings news much earlier in the pre‐earnings announcement period than stock prices. In addition, bondholders appear to overreact to the bad earnings news initially and correct this overreaction subsequent to the earnings announcement.

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Section: Motivationmentioning

confidence: 99%

The Timeliness of the Bond Market Reaction to Bad Earnings News

DeFond

Zhang

2014

Contemporary Accting Res

View full text Add to dashboard Cite

show abstract

“…The study concludes that, after the Rule's adoption, information leakages were reduced prior to earnings disclosures and that price volatility increased after the adoption, 84 suggesting that the public disclosures revealed information not previously available to traders. 89 Importantly, the study also suggests that the reduction of these asymmetries is beneficial to the market. It finds that Regulation FD reduced bid-ask spreads, reflecting reduced concern by market participants over the potential information advantages possessed by their trading counterparties.…”

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confidence: 78%