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Impact of Regulatory Enforcement on Leakages Prior to Analyst Recommendations

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  • Jeff Madura
  • Arjan Premti

Abstract

The financial press suggests that information is commonly leaked prior to analyst recommendations. We examine the impact that three regulatory actions (Regulation Fair Disclosure, Global Analysts Research Settlement, and the legal case against Galleon Group) have on information leakage prior to analyst recommendations. We find that all three regulatory actions have significantly reduced the leakage of information prior to analyst recommendations, even after controlling for several characteristics that explain the variation in information leakage. Our results are robust when applying an alternative method of measuring information leakage, and when forming various samples of analyst recommendations based on different criteria.

Suggested Citation

  • Jeff Madura & Arjan Premti, 2014. "Impact of Regulatory Enforcement on Leakages Prior to Analyst Recommendations," The Financial Review, Eastern Finance Association, vol. 49(3), pages 565-592, August.
    • Handle: RePEc:bla:finrev:v:49:y:2014:i:3:p:565-592
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    File URL: http://hdl.handle.net/10.1111/fire.12044
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    Cited by:

    1. Mao, Ruiqi & Segara, Reuben & Westerholm, Joakim, 2019. "Analyst tipping: Evidence on Finnish stocks," International Review of Financial Analysis, Elsevier, vol. 66(C).
    2. Devos, Erik & Hao, Wei & Prevost, Andrew K. & Wongchoti, Udomsak, 2015. "Stock return synchronicity and the market response to analyst recommendation revisions," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 376-389.

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