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The Efficacy of Regulation Fair Disclosure

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  • Praveen Sinha
  • Christopher Gadarowski

Abstract

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.

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
    DOI: 10.1111/j.1540-6288.2010.00250.x
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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. Agapova, Anna & Madura, Jeff, 2016. "Market uncertainty and earnings guidance," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 97-111.
    3. Chao Ying, 2020. "The Pre-FOMC Announcement Drift and Private Information: Kyle Meets Macro-Finance," 2020 Papers pyi149, Job Market Papers.
    4. Kurov, Alexander & Sancetta, Alessio & Strasser, Georg & Wolfe, Marketa Halova, 2019. "Price Drift Before U.S. Macroeconomic News: Private Information about Public Announcements?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(1), pages 449-479, February.
    5. Arpita Sharma & Shailesh Rastogi, 2021. "Impact of Efficiency on Voluntary Disclosure of Non-Banking Financial Company—Microfinance Institutions in India," JRFM, MDPI, vol. 14(7), pages 1-21, June.
    6. Agapova, Anna & Madura, Jeff & Volkov, Nikanor, 2020. "Information leakage of ADRs Prior to company issued guidance," Research in International Business and Finance, Elsevier, vol. 54(C).

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