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The changing relationship between earnings expectations and earnings for value and growth stocks during Reg FD

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  • de Jong, Pieter J.
  • Apilado, Vince P.

Abstract

Regulation Fair Disclosure (Reg FD) altered the voluntary disclosure practices of firms with publicly traded securities, thereby affecting relationships between value and growth stock expectations and actual earnings. The results show that earnings forecasts for both stock groups are biased but that bias is less after the introduction of Reg FD. In fact, the difference in pre/post FD forecast bias is larger for growth stocks, suggesting that before Reg FD, analysts did not just misinterpret news but consciously tried to maintain relationships with growth firm managers. However, Reg FD limited these relationships severing the monetary advantage that might be gained from manipulating forecasts.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 2 (February)
Pages: 435-442

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:2:p:435-442

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Value stocks Growth stocks Regulation fair disclosure Financial analysts;

References

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Citations

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Cited by:
  1. Niehaus, Greg & Zhang, Donghang, 2010. "The impact of sell-side analyst research coverage on an affiliated broker's market share of trading volume," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 776-787, April.
  2. Henderson, Brian J. & Marks, Joseph M., 2013. "Predicting forecast errors through joint observation of earnings and revenue forecasts," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4265-4277.
  3. Kim, Yongtae & Lobo, Gerald J. & Song, Minsup, 2011. "Analyst characteristics, timing of forecast revisions, and analyst forecasting ability," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2158-2168, August.
  4. April Knill & Kristina Minnick & Ali Nejadmalayeri, 2012. "Experience, information asymmetry, and rational forecast bias," Review of Quantitative Finance and Accounting, Springer, vol. 39(2), pages 241-272, August.
  5. Anolli, Mario & Beccalli, Elena & Molyneux, Philip, 2014. "Bank earnings forecasts, risk and the crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 309-335.
  6. Datta, Sudip & Iskandar-Datta, Mai & Sharma, Vivek, 2011. "Product market pricing power, industry concentration and analysts' earnings forecasts," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1352-1366, June.
  7. Choi, Hyung Suk & Clarke, Jonathan & Ferris, Stephen P. & Jayaraman, Narayanan, 2009. "The effects of regulation on industry structure and trade generation in the US securities industry," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1434-1445, August.
  8. repec:eme:mfipps:v:36:y:2010:i:3:p:380-402 is not listed on IDEAS

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