The Influence of Disclosure Regulation on Selective Disclosure: Impact on Difficult-to-Measure Reporting Activities and the Importance of Assurance Services

2006 ◽  
Vol 6 (1) ◽  
pp. 70-94 ◽  
Author(s):  
Diane J. Janvrin ◽  
James M. Kurtenbach
Keyword(s):  
Financial Information ◽  
Corporate Disclosure ◽  
Regulation Fair Disclosure ◽  
Disclosure Regulation ◽  
The Public ◽  
Market Participants ◽  
Fair Disclosure ◽  
Phone Calls ◽  
Assurance Services ◽  
Selective Disclosure

The objective of recent disclosure regulation (e.g., Regulation Fair Disclosure [FD]) is to reduce selective disclosure, the practice of releasing financial information to selected users before publicly disclosing the information. Prior to FD, providers used narrow distribution reporting activities, such as phone calls and one-on-one meetings with analysts, reviews of analysts' earnings estimates, and analysts' contracts with suppliers and firm employees, to communicate private financial information to selected users at the expense of uninformed users. Public interest theorists view regulation as a means to protect the public. We predict that if FD is effective, providers will move away from narrow reporting activities and reduce the probability that selected users can achieve a competitive advantage over the general investing public. In addition, assuming that reducing selective disclosure increases the number of market participants receiving information, we argue that the importance of assurance services will increase since FD (1) reduces users' ability to evaluate the credibility of provider information based on personal relationships with providers, and (2) increases the pressure on provider investor relations personnel to monitor the amount and credibility of information disclosed to decrease the likelihood that market participants view the information released as unreliable. Due to the lack of available empirical data related to narrow reporting activities and the importance of assurance services, we employ a field-based questionnaire of providers and users to address these issues. Results indicate that (1) providers and users perceive that narrow distribution reporting activities still exist, and (2) reducing users' personal access to providers may increase the importance of assurance services. The study increases our understanding of how regulation to reduce selective disclosure may protect the public by examining its impact on corporate disclosure activities and policies.

scholarly journals Disclosure Frequency, Information Environment, and Cost of Capital under Regulation Fair Disclosure in the Korean Market

2020 ◽  
Vol 12 (14) ◽  
pp. 5856
Author(s):  
Hoshik Shim
Keyword(s):  
Emerging Markets ◽  
Information Asymmetry ◽  
Information Leakage ◽  
Equity Capital ◽  
Information Environment ◽  
Price Ratio ◽  
Corporate Disclosure ◽  
Regulation Fair Disclosure ◽  
Fair Disclosure ◽  
Korean Market

Disclosure policy contributes to improve sustainable corporate information environment by mitigating information asymmetry surrounding companies. Economic theories generally support that more disclosures reduce the level of information asymmetry, increase stock liquidity, and thus decrease the costs of equity capital. However, the effect of corporate disclosure in emerging markets is not clearly predictable because of the potential information leakage prior to disclosure. Considering this issue, this study focuses on the Regulation Fair Disclosure which prohibits selective disclosure. Using the earnings-to-price ratio as a proxy of the costs of equity, the study finds that disclosure frequency is negatively related to the cost of equity capital. However, I do not find evidence that disclosure is negatively related to the implied costs of equity capital (ICOE). The results of the quintile analysis suggest that this inconsistency is attributable to the better information environment of the ICOE sample. The findings of this study have implications for disclosure regulations in emerging markets, given that the existing literature casts doubt on the effectiveness of corporate disclosure in such markets.

Regulation FD and the Financial Information Environment: Early Evidence

2003 ◽  
Vol 78 (1) ◽  
pp. 1-37 ◽  
Author(s):  
Frank Heflin ◽  
K. R. Subramanyam ◽  
Yuan Zhang
Keyword(s):  
Stock Prices ◽  
Earnings Announcements ◽  
Relevant Information ◽  
Financial Information ◽  
Earnings Forecast ◽  
Forecast Errors ◽  
Informational Efficiency ◽  
The Public ◽  
Fair Disclosure ◽  
Regulation Fd

On October 23, 2000, the SEC implemented Regulation FD (Fair Disclosure), which prohibits firms from privately disclosing value-relevant information to select securities markets professionals without simultaneously disclosing the same information to the public. We examine whether Regulation FD's prohibition of selective disclosure impairs the flow of financial information to the capital markets prior to earnings announcements. After implementation of FD, we find (1) improved informational efficiency of stock prices prior to earnings announcements, as evidenced by smaller deviations between pre-and post-announcement stock prices; (2) no reliable evidence of change in analysts' earnings forecast errors or dispersion; and (3) a substantial increase in the volume of firms' voluntary, forward-looking, earnings-related disclosures. Overall, we find no evidence Regulation FD impaired the information available to investors prior to earnings announcements, and some of our evidence is consistent with improvement.

scholarly journals Do Analysts Follow Managers Who Switch Companies? An Analysis of Relationships in the Capital Markets

2013 ◽  
Vol 89 (2) ◽  
pp. 451-482 ◽  
Author(s):  
Francois Brochet ◽  
Gregory S. Miller ◽  
Suraj Srinivasan
Keyword(s):  
Capital Markets ◽  
Data Availability ◽  
Professional Relationships ◽  
Matched Sample ◽  
Regulation Fair Disclosure ◽  
Analyst Coverage ◽  
Listed Firms ◽  
Fair Disclosure ◽  
Carry Over ◽  
Selective Disclosure

ABSTRACT We examine the importance of professional relationships developed between analysts and managers by investigating analyst coverage decisions in the context of CEO and CFO moves between publicly listed firms. We find that top executive moves from an origin firm to a destination firm trigger analysts following the origin firm to initiate coverage of the destination firm in 10 percent of our sample, which is significantly higher than in a matched sample. Analyst-manager “co-migration” is significantly stronger when both firms are within the same industry. Analysts who move with managers to the destination firm exhibit more intense and accurate coverage of the origin firm than they do in other firms and compared to other analysts covering the origin firm. The advantage no longer holds after the executive's departure, and most of the analysts' advantage does not carry over to the destination firm. However, the analysts do increase the overall market capitalization of firms in their coverage portfolio. Our results hold after Regulation Fair Disclosure, suggesting that these relationships are not based on selective disclosure. Overall, the evidence shows both the importance and limitations of professional relationships in capital markets. Data Availability: Data are publicly available from sources identified in the article.

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.

scholarly journals Institutional investors and acquisition targets

2012 ◽  
Vol 9 (3) ◽  
pp. 428-441
Author(s):  
Lily Qi ◽  
Hong Wan
Keyword(s):  
Mutual Funds ◽  
Institutional Investors ◽  
Institutional Ownership ◽  
Pension Funds ◽  
Public Pension ◽  
Turnover Rates ◽  
Regulation Fair Disclosure ◽  
High Turnover ◽  
Fair Disclosure ◽  
Selective Disclosure

Firms with higher levels of institutional ownership are more likely to be acquired. This paper shows that this positive correlation is due to ownership endogeneity. Institutional investors are better informed investors and buy acquisition targets. After controlling for this ownership endogeneity, the presence of institutional investors reduces the probability of being acquired. Our result further shows that mutual funds or funds with high turnover rates are more likely to benefit from selective disclosure prior to Regulation Fair Disclosure and the presence of public pension funds increases the announcement premiums that targets receive, which indicates a monitoring effect.

Private Earnings Guidance and Its Implications for Disclosure Regulation

2007 ◽  
Vol 82 (5) ◽  
pp. 1299-1332 ◽  
Author(s):  
Isabel Yanyan Wang
Keyword(s):  
Information Environment ◽  
Economic Consequences ◽  
Information Costs ◽  
Earnings Guidance ◽  
Regulation Fair Disclosure ◽  
Significant Deterioration ◽  
Disclosure Regulation ◽  
Exogenous Shock ◽  
Proprietary Information ◽  
Fair Disclosure

This study investigates three related questions: (1) Why did some firms provide private earnings guidance to analysts before Regulation Fair Disclosure? (2) How did the exogenous shock of Regulation Fair Disclosure affect these firms' disclosure policies? (3) What are the economic consequences of this disclosure regulation? To address these questions, I develop a new measure of private earnings guidance. Consistent with theory, I find that firms were more likely to provide private earnings guidance if they had higher proprietary information costs, and if their earnings were more predictive of other firms' earnings. Policymakers enacted Regulation Fair Disclosure to stop private earnings guidance, but they also intended for managers to replace private earnings guidance with public earnings guidance, thereby improving the information environment. However, I find that roughly half of the firms that I classify as relying more on private earnings guidance replace private earnings guidance with non-disclosure instead of public earnings guidance, and as a result, these firms suffer significant deterioration in their information environments. Consistent with theory, firms are more likely to replace private earnings guidance with nondisclosure if they have lower information asymmetry and higher proprietary information costs. On the other hand, firms that replace private earnings guidance with public earnings guidance, on average, prevent significant deterioration in their information environments. Evidence that firms respond to disclosure regulation as predicted by theory can help policymakers anticipate which firms' information environments are likely to be adversely affected by new disclosure regulations.

scholarly journals Comparative Analysis on Corporate Disclosure Practices of Listed Companies in ASEAN-5 after the Adoption of the Renewal Regional Disclosure Standards

2019 ◽  
Vol 26 (01) ◽  
pp. 21
Author(s):  
Nunthapin Chantachaimongkol ◽  
Shuwen Chen
Keyword(s):  
Comparative Analysis ◽  
Economic Integration ◽  
Financial Information ◽  
Corporate Disclosure ◽  
Strategic Information ◽  
Test Analysis ◽  
The Public ◽  
Increasing Trend ◽  
Further Development ◽  
Corporate Information

This study aims to assess and compare the extent of corporate disclosure of the countries that have already implemented the renewal ASEAN disclosure standards with the countries that have not implemented yet. The empirical result indicates that overall picture of corporate disclosure in the ASEAN is in a good progression, with an increasing trend. Then, an independent t-test analysis addresses that the renewal ASEAN disclosure standards could have an effect on the level of corporate disclosure, especially in terms of non-financial and strategic information. But, it has no impacts on financial information. Therefore, it can be concluded that the regional disclosure standards might be one of the supportive factors for enforcing businesses to disclose more corporate information to the public. With this finding, it could alert regional regulators by providing the weaknesses of the current activities related to economic integration and guiding the direction for further development.

International Conference "Ecology. Human. Society"

2017 ◽  
Author(s):  
Daniel Benatov
Keyword(s):  
Educational Process ◽  
Direct Access ◽  
Human Society ◽  
Public Authorities ◽  
State Institutions ◽  
The Public ◽  
Market Participants ◽  
New Information ◽  
Training Courses ◽  
Process Element

Our conference is the first project of Student Science Association, which was restored in our University in 1998. The main peculiarity of the conference is the student organizing committee. The conference was attended by representatives of Russia, Belarus, Sweden, Poland, Bulgaria, Armenia, Azerbaijan, Czech Republic, Lithuania, Latvia, Georgia, Iran, not mentioning hundreds of Ukrainian participants. We’re happy with the fact that our conference allows students to discover new information, which they wouldn’t find in training courses manuals; contrariwise businesses and organizations can get direct access to young and qualified staff. We believe that events like our conference are useful for the young scientists and also for the public authorities and businesses. Conference "Ecology. Human. Society "is a part of feedback between universities and market participants. The conference has overgrown limits of being simple educational process element. Today, it is a serious recruiting resource for state institutions and businesses - an important part of a mutually beneficial dialogue.

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