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Market adaptation to Regulation Fair Disclosure: The use of industry information to enhance the informational environment


  • Yu, Susana
  • Webb, Gwendolyn


Our fundamental research interest is in exploring the ways in which the financial markets have adapted to Reg FD, and our particular focus is on how market participants use industry information embedded in firms’ earnings announcements. We find that announcements of quarterly earnings made by companies that are the first in their industry to report in a given quarter have significant effects on the stock returns of other firms in the same industry as well as on their own stock returns. We then test the implications of these findings for their effects on the information environment. Overall, our empirical findings support the conclusion that the implementation of Reg FD has led to increased use of industry information that is revealed in earnings announcements. This is one way, among others, in which analysts and other market participants have adapted to the requirements of Reg FD. In this case, they have made the adaptation by developing new uses of public information to enhance the informational environment.

Suggested Citation

  • Yu, Susana & Webb, Gwendolyn, 2017. "Market adaptation to Regulation Fair Disclosure: The use of industry information to enhance the informational environment," Journal of Economics and Business, Elsevier, vol. 89(C), pages 1-12.
  • Handle: RePEc:eee:jebusi:v:89:y:2017:i:c:p:1-12
    DOI: 10.1016/j.jeconbus.2016.10.002

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    References listed on IDEAS

    1. Anup Agrawal & Sahiba Chadha & Mark A. Chen, 2006. "Who Is Afraid of Reg FD? The Behavior and Performance of Sell-Side Analysts Following the SEC's Fair Disclosure Rules," The Journal of Business, University of Chicago Press, vol. 79(6), pages 2811-2834, November.
    2. Aigbe Akhigbe & Jeff Madura & Melinda Newman, 2006. "Industry Effects Of Analyst Stock Revisions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(2), pages 181-198.
    3. Roger K. Loh & René M. Stulz, 2011. "When Are Analyst Recommendation Changes Influential?," Review of Financial Studies, Society for Financial Studies, vol. 24(2), pages 593-627.
    4. Green, T. Clifton & Jame, Russell & Markov, Stanimir & Subasi, Musa, 2014. "Access to management and the informativeness of analyst research," Journal of Financial Economics, Elsevier, vol. 114(2), pages 239-255.
    5. Baljit Sidhu & Tom Smith & Robert E. Whaley & Richard H. Willis, 2008. "Regulation Fair Disclosure and the Cost of Adverse Selection," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 697-728, June.
    6. Dave Jackson & Jeff Madura, 2007. "Impact of regulation fair disclosure on the information flow associated with profit warnings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 31(1), pages 59-74, March.
    7. Jorion, Philippe & Zhang, Gaiyan, 2007. "Good and bad credit contagion: Evidence from credit default swaps," Journal of Financial Economics, Elsevier, vol. 84(3), pages 860-883, June.
    8. Li, Yutao & Saunders, Anthony & Shao, Pei, 2015. "Did Regulation Fair Disclosure affect credit markets?," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 46-59.
    9. Anna Agapova & Jeff Madura & Zhanel Mailibayeva, 2012. "Does Regulation Fair Disclosure Reduce the Information Quality of Managerial Guidance?," The Financial Review, Eastern Finance Association, vol. 47(2), pages 273-297, May.
    10. Mensah, Yaw M. & Yang, Rong, 2008. "An empirical evaluation of analysts' herding behavior following Regulation Fair Disclosure," Journal of Accounting and Public Policy, Elsevier, vol. 27(4), pages 317-338.
    11. Kross, William J. & Suk, Inho, 2012. "Does Regulation FD work? Evidence from analysts' reliance on public disclosure," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 225-248.
    12. Marcel Prokopczuk, 2010. "Intra-industry contagion effects of earnings surprises in the banking sector," Applied Financial Economics, Taylor & Francis Journals, vol. 20(20), pages 1601-1613.
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    More about this item


    Reg FD; Earnings Announcements; Earnings Surprises; Industry Contagion; Industry Competition;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation


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