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The Impact of Regulation FD on Institutional Investor Informativeness
Author(s) -
Cook Douglas O.,
Tang Tian
Publication year - 2010
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2010.01112.x
Subject(s) - prudence , market liquidity , institutional investor , private information retrieval , monetary economics , valuation (finance) , equity (law) , business , limiting , private placement , momentum (technical analysis) , fair value , economics , finance , investment banking , corporate governance , mechanical engineering , philosophy , statistics , theology , mathematics , political science , law , engineering
Although there is conflicting evidence and resulting skepticism regarding the value provided by professional investment management, Gibson, Safieddine, and Sonti (2004) document institutional investor informativeness relative to seasoned equity offering (SEO) purchases. We find that Regulation Fair Disclosure's significantly reduces institutional investors’ ability to identify mispriced SEO firms. Informativeness is diminished not by investors following analysts who have experienced a reduction in forecasting accuracy, but limiting investors’ direct access to private information. This information loss is replaced by reliance on a greater number of public information variables resulting in less consideration for prudence proxies and a liquidity motive and more for higher price momentum.