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

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  • Chiraphol N. Chiyachantana
  • Christine X. Jiang
  • Nareerat Taechapiroontong
  • Robert A. Wood
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    Abstract

    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. Copyright 2004 by the Eastern Finance Association.

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    Bibliographic Info

    Article provided by Eastern Finance Association in its journal The Financial Review.

    Volume (Year): 39 (2004)
    Issue (Month): 4 (November)
    Pages: 549-577

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    Handle: RePEc:bla:finrev:v:39:y:2004:i:4:p:549-577

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    Web page: http://www.easternfinance.org/
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    Cited by:
    1. Chelley-Steeley, Patricia & Park, Keebong, 2010. "The adverse selection component of exchange traded funds," International Review of Financial Analysis, Elsevier, vol. 19(1), pages 65-76, January.
    2. Duarte, Jefferson & Han, Xi & Harford, Jarrad & Young, Lance, 2008. "Information asymmetry, information dissemination and the effect of regulation FD on the cost of capital," Journal of Financial Economics, Elsevier, vol. 87(1), pages 24-44, January.
    3. repec:eme:mfipps:v:36:y:2010:i:3:p:380-402 is not listed on IDEAS
    4. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    5. Shen, Carl Hsin-han, 2014. "Pecking order, access to public debt market, and information asymmetry," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 291-306.
    6. Collver, Charles D., 2007. "Is there less informed trading after regulation fair disclosure?," Journal of Corporate Finance, Elsevier, vol. 13(2-3), pages 270-281, June.

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