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

CFA Digest ◽  
2004 ◽  
Vol 34 (4) ◽  
pp. 9-10 ◽  
Author(s):  
William A. Trent
Keyword(s):  
Information Asymmetry ◽  
Trading Costs ◽  
Regulation Fair Disclosure ◽  
Fair Disclosure ◽  
The Impact

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 The Impact of Regulation Fair Disclosure on Information Asymmetry and Trading: An Intraday Analysis

2004 ◽  
Vol 39 (4) ◽  
pp. 549-577 ◽  
Author(s):  
Chiraphol N. Chiyachantana ◽  
Christine X. Jiang ◽  
Nareerat Taechapiroontong ◽  
Robert A. Wood
Keyword(s):  
Information Asymmetry ◽  
Regulation Fair Disclosure ◽  
Fair Disclosure ◽  
Intraday Analysis ◽  
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.

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.

Information Acquisition in the Era of Fair Disclosure: An Application of Asymmetric Awareness

2017 ◽  
Vol 17 (2) ◽  
Author(s):  
Zhen Liu
Keyword(s):  
Information Asymmetry ◽  
Information Acquisition ◽  
Information Quality ◽  
Information Dissemination ◽  
Quality Information ◽  
High Quality ◽  
Accounting Regulation ◽  
Fair Disclosure ◽  
High Quality Information ◽  
The Impact

AbstractAs the cost of financial information dissemination continues to decline, investors, firms, and regulators are gradually adopting the principle of fair disclosure, which requires no preferential public disclosure. We use a simple model to examine the impact of this change on information acquisition with two alternative assumptions: (1) Investors have symmetric awareness about the underlying uncertainties, or (2) this awareness is asymmetric among them. Under the first assumption, the change reduces information asymmetry among investors and induces acquisition of high-quality information. Under the second assumption, however, the reduction of information asymmetry may be limited, and information acquisition is either reduced or less efficient. Specifically, investors with high awareness may either acquire high-quality information at a higher cost or not acquire it; investors with low awareness only acquire low-quality information. The loss in overall information quality is greater when awareness asymmetry is moderate than when it is high or low; this causes information asymmetry between the insiders and outside investors as a whole. These results offer explanations for intriguing empirical findings regarding the effect of a recent accounting regulation (Regulation Fair Disclosure).

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