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The Efficacy of Regulation Fair Disclosure


  • Praveen Sinha
  • Christopher Gadarowski


This paper examines the impact of Securities and Exchange Commission's Regulation Fair Disclosure (FD) on information leakage around voluntary management disclosures. We find a positive correlation between stock returns two days before and after the voluntary disclosure in the pre-Regulation FD period, but not in the post-Regulation FD period. After Regulation FD is implemented, pre-announcement abnormal return as a percentage of total return decreases by "26.1"% ("21.4"%) for large firms with good (bad) news, suggesting that the amount of information leakage reduces for these firms. These findings provide support for the premise and the intended purpose of the regulation for large firms. Copyright (c) 2010, The Eastern Finance Association.

Suggested Citation

  • Praveen Sinha & Christopher Gadarowski, 2010. "The Efficacy of Regulation Fair Disclosure," The Financial Review, Eastern Finance Association, vol. 45(2), pages 331-354, May.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:2:p:331-354

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    References listed on IDEAS

    1. P. Hartmann & S. Straetmans & C. G. de Vries, 2004. "Asset Market Linkages in Crisis Periods," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 313-326, February.
    2. Brian M Lucey, Valerio Poti, Edel Tully, 2006. "International Portfolio Formation, Skewness & the Role of Gold," Frontiers in Finance and Economics, SKEMA Business School, vol. 3(1), pages 49-68, June.
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    4. Gonzalo, Jesús & Olmo, José, 2005. "Contagion versus flight to quality in financial markets," UC3M Working papers. Economics we051810, Universidad Carlos III de Madrid. Departamento de Economía.
    5. Christophe Faugere & Julian Van Erlach, 2004. "The Price of Gold: A Global Required Yield Theory," Finance 0403003, EconWPA.
    6. Davidson, Sinclair & Faff, Robert & Hillier, David, 2003. "Gold factor exposures in international asset pricing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(3), pages 271-289, July.
    7. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July.
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    Cited by:

    1. Grégoire, Philippe & Huang, Hui, 2012. "Information disclosure with leakages," Economic Modelling, Elsevier, vol. 29(5), pages 2005-2010.
    2. Alexander Kurov & Alessio Sancetta & Georg H. Strasser & Marketa Halova Wolfe, 2015. "Price Drift before U.S. Macroeconomic News: Private Information about Public Announcements?," Boston College Working Papers in Economics 881, Boston College Department of Economics, revised 29 Jul 2015.
    3. Agapova, Anna & Madura, Jeff, 2016. "Market uncertainty and earnings guidance," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 97-111.

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