Premium
An Examination of the Differential Impact of Regulation FD on Analysts' Forecast Accuracy
Author(s) -
Findlay Scott,
Mathew Prem G.
Publication year - 2006
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/j.1540-6288.2006.00130.x
Subject(s) - earnings , explanatory power , differential (mechanical device) , accounting , variation (astronomy) , dissemination , econometrics , business , differential effects , economics , computer science , telecommunications , engineering , philosophy , physics , epistemology , astrophysics , aerospace engineering , medicine
Regulation fair disclosure (FD) requires companies to publicly disseminate information, effectively preventing the selective pre‐earnings announcement guidance to analysts common in the past. We investigate the effects of Regulation FD's reducing information disparity across analysts on their forecast accuracy. Proxies for private information, including brokerage size and analyst company‐specific experience, lose their explanatory power for analysts' relative accuracy after Regulation FD. Analyst forecast accuracy declines overall, but analysts that are relatively less accurate (more accurate) before Regulation FD improve (deteriorate) after implementation. Our findings are consistent with selective guidance partially explaining variation in the forecasting accuracy of analysts before Regulation FD.