The Effects of Regulation Fair Disclosure on Management Forecasts

The Effects of Regulation Fair Disclosure on Management Forecasts
Title The Effects of Regulation Fair Disclosure on Management Forecasts PDF eBook
Author Carla Carnaghan
Publisher
Pages 44
Release 2004
Genre
ISBN

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We examine management forecasts to determine whether Regulation Fair Disclosure has improved the quality and quantity of public disclosures. Management forecasts are voluntary, provide earnings guidance and are highly sought by investors and analysts. We find that the information disclosed by managers has improved in terms of frequency, specificity and verifiable information provided. We also find that Regulation Fair Disclosure has reduced information asymmetry, and information leakage prior to the release of the MEF. We find no evidence of greater returns volatility. Our results suggest that generally Regulation Fair Disclosure has achieved one of its stated goals of providing a more level playing field to all investors.

Good News Versus Bad News Management Forecasts in the Pre-and Post-regulation Fair Disclosure Periods

Good News Versus Bad News Management Forecasts in the Pre-and Post-regulation Fair Disclosure Periods
Title Good News Versus Bad News Management Forecasts in the Pre-and Post-regulation Fair Disclosure Periods PDF eBook
Author Yue Zhang
Publisher
Pages 122
Release 2009
Genre Corporate profits
ISBN

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This study shows that the likelihood of good news management forecasts relative to bad news management forecasts of quarterly earnings increases after the enactment of Regulation Fair Disclosure (Reg FD). This result suggests that Reg FD leads to a significantly greater change in private to public disclosure of good news than of bad news. I also find that compared to the pre-Reg FD period, in the post-Reg FD period, the horizon of good news forecasts is greater than the horizon of bad news forecasts. This result suggests that good news management earnings forecasts are disclosed to the market more quickly than bad news management earnings forecasts. Overall, the study contributes to the literature on the effectiveness of Reg FD and whether managers withhold bad news.

Management Forecasts, Regulation FD, Information Asymmetry and the Cost of Debt

Management Forecasts, Regulation FD, Information Asymmetry and the Cost of Debt
Title Management Forecasts, Regulation FD, Information Asymmetry and the Cost of Debt PDF eBook
Author Boyoung Kim
Publisher
Pages 38
Release 2013
Genre
ISBN

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This study examines firms' strategic management disclosure policy around debt offerings and its consequences on the cost of debt, considering Regulation Fair Disclosure (FD). Contrary to the literature on equity offerings, there is little evidence about whether debt offering firms increase their disclosure to reduce information asymmetry and how creditors evaluate management earnings forecasts. We find that firms issue more management disclosures around debt offerings and that the increase in management forecasts is more pronounced after Regulation FD. The results suggest that Regulation FD affects a firm's disclosure policy before debt offerings. We also find that firms with high information asymmetry release more management disclosures before debt offerings. Finally, our results show that creditors reward the increased public disclosures with a lower cost of debt, especially more for the firms with severe information asymmetry. In total, this paper adds some evidence to the literature in this area on debt offerings, where there is a lack of such evidence.

The Determinants and Consequences of Managerial Earnings Guidance Prior to Regulation Fair Disclosure

The Determinants and Consequences of Managerial Earnings Guidance Prior to Regulation Fair Disclosure
Title The Determinants and Consequences of Managerial Earnings Guidance Prior to Regulation Fair Disclosure PDF eBook
Author Amy P. Hutton
Publisher
Pages 46
Release 2002
Genre
ISBN

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Abstract: Prior to Regulation Fair Disclosure some management spent considerable time and effort guiding analyst earnings estimates; other management did not. In this paper I examine the determinants and consequences of management's decision to work with analysts in the development of their earnings estimates using proprietary survey data from the National Investor Relations Institute. Findings suggest that when earnings are important to valuation but hard to forecast because businesses and financial transactions are complex, management is more likely to provide assistance to analysts presumably to avoid inaccurate analyst forecasts and negative earnings surprises. A comparison of guided and unguided analyst forecasts indicates that guided quarterly earnings forecasts are more accurate but also more frequently pessimistic, consistent with analysts rationally trading offbias for accuracy to retain access to management's earnings guidance. Cross-sample comparisons of analysts' stock recommendations and long-term growth forecasts provide additional support for the hypothesis that analyst objectivity and independence is affected by management's decision to provide earnings guidance. Finally, evidence from stock price reactions to deviations from the consensus forecast (the traditional measure of earnings surprises) indicates that investors distinguish between guided and unguided analyst forecasts when forming their earnings expectations. This study furthers our understanding of what factors affect management's disclosure choices and how managers' disclosure choices influence the objectivity and independence of sell-side analysts.

The Effects of Regulation Fair Disclosure on Financial Analysts' Forecasts

The Effects of Regulation Fair Disclosure on Financial Analysts' Forecasts
Title The Effects of Regulation Fair Disclosure on Financial Analysts' Forecasts PDF eBook
Author Lei Shi
Publisher
Pages 112
Release 2007
Genre Business forecasting
ISBN

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Regulation Fair Disclosure and the Private Information of Analysts

Regulation Fair Disclosure and the Private Information of Analysts
Title Regulation Fair Disclosure and the Private Information of Analysts PDF eBook
Author Eric Zitzewitz
Publisher
Pages 47
Release 2002
Genre
ISBN

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This paper reports evidence that Regulation Fair Disclosure has had its desired effect of reducing selective disclosure of information about future earnings to individual analysts without reducing the total amount of information disclosed. In particular, it finds that multi-forecast days, which typically follow public announcements or events, now account for over 70 percent of the new information about earnings, up from 35 percent before Reg FD. This result is obtained by applying a new methodology from Zitzewitz (2001a) for measuring the information content of individual forecasts. These results are strongest for the fourth quarter of 2000, when the SEC Chairman who introduced Reg FD was still in office; since the change in administration, some of the initial effects of Reg FD appear to have been reversed.

Analyst Reactions to Expectations Management in the Post-Regulation Fair Disclosure Period

Analyst Reactions to Expectations Management in the Post-Regulation Fair Disclosure Period
Title Analyst Reactions to Expectations Management in the Post-Regulation Fair Disclosure Period PDF eBook
Author Sherry F. Li
Publisher
Pages 12
Release 2014
Genre
ISBN

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Using a uniquely hand-collected dataset, we examine how financial analysts react to expectations management in the post-Regulation Fair Disclosure (FD) period. We find evidence that management issues pessimistic public guidance to lower analysts' expectations to a beatable level in the new regulatory environment. Majority of the analysts revised their forecasts downward immediately (in terms of days rather than weeks) after the issuance of a pessimistic public guidance. The magnitude of the downward revision is significantly greater for firms that beat the expectations through managerial guidance than firms that beat the expectations without guidance. In addition, firms that beat analysts' expectations through pessimistic guidance are able to achieve a larger positive earnings surprise at the earnings announcement than the “legitimate beaters”