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Impact of Regulatory Enforcement on Leakages Prior to Analyst Recommendations
Author(s) -
Madura Jeff,
Premti Arjan
Publication year - 2014
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12044
Subject(s) - information leakage , enforcement , leakage (economics) , business , settlement (finance) , accounting , actuarial science , computer security , computer science , finance , economics , political science , law , payment , macroeconomics
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.