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Who Is Afraid of Reg FD? The Behavior and Performance of Sell-Side Analysts Following the SEC's Fair Disclosure Rules

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  • Anup Agrawal

    (University of Alabama)

  • Sahiba Chadha

    (Dupont Capital Management, Wilmington, Delaware)

  • Mark A. Chen

    (University of Maryland)

Abstract

We examine Regulation FD's impact on the accuracy and dispersion of sell-side analysts' earnings forecasts. Using a large sample of quarterly forecasts made over a nearly 10-year period surrounding FD's adoption, we uncover two main sets of findings. First, individual and consensus forecasts become less accurate post-FD, particularly for early forecasts and for smaller companies. Second, forecast dispersion increases post-FD. This effect is stronger for early forecasts and has increased with the passage of time. These results, which are quite robust to alternative empirical methodologies, suggest that there has been a reduction in both selective guidance and forecast quality post-FD.

Suggested Citation

  • 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.
    • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:6:p:2811-2834
    DOI: 10.1086/508000
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