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The Efficacy of Regulation Fair Disclosure
Author(s) -
Sinha Praveen,
Gadarowski Christopher
Publication year - 2010
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.1540-6288.2010.00250.x
Subject(s) - premise , commission , business , leakage (economics) , voluntary disclosure , stock (firearms) , information leakage , accounting , monetary economics , finance , economics , computer security , computer science , mechanical engineering , philosophy , linguistics , engineering , macroeconomics
Abstract This paper examines the impact of Securities and Exchange Commission's Regulation Fair Disclosure (FD) on information leakage around voluntary management disclosures. We find a positive correlation between stock returns two days before and after the voluntary disclosure in the pre‐Regulation FD period, but not in the post‐Regulation FD period. After Regulation FD is implemented, pre‐announcement abnormal return as a percentage of total return decreases by 26.1 % ( 21.4 %) for large firms with good (bad) news, suggesting that the amount of information leakage reduces for these firms. These findings provide support for the premise and the intended purpose of the regulation for large firms.