Informational effects of regulation FD: evidence from rating agencies

Informational effects of regulation FD: evidence from rating agencies Regulation Fair Disclosure, implemented on October 23, 2000, prohibits U.S. public companies from making selective, nonpublic disclosures to favored investment professionals. Regulation Fair Disclosure has a number of exclusions, however, including disclosure of nonpublic information to credit rating agencies. As a result, credit analysts at rating agencies have access to confidential information that is no longer made available to equity analysts, potentially increasing the information content of credit ratings. We examine the effect of credit rating changes on stock prices and find that the informational effect of downgrades and upgrades is much greater in the post-FD period. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Informational effects of regulation FD: evidence from rating agencies

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Publisher
Elsevier
Copyright
Copyright © 2004 Elsevier B.V.
ISSN
0304-405x
D.O.I.
10.1016/j.jfineco.2004.05.001
Publisher site
See Article on Publisher Site

Abstract

Regulation Fair Disclosure, implemented on October 23, 2000, prohibits U.S. public companies from making selective, nonpublic disclosures to favored investment professionals. Regulation Fair Disclosure has a number of exclusions, however, including disclosure of nonpublic information to credit rating agencies. As a result, credit analysts at rating agencies have access to confidential information that is no longer made available to equity analysts, potentially increasing the information content of credit ratings. We examine the effect of credit rating changes on stock prices and find that the informational effect of downgrades and upgrades is much greater in the post-FD period.

Journal

Journal of Financial EconomicsElsevier

Published: May 1, 2005

References

  • Analyst coverage and intangible assets
    Barth, M.; Kasznik, R.; McNichols, M.
  • Open versus closed calls
    Bushee, B.; Matsumoto, D.A.; Miller, G.S.
  • The effect of bond rating agency announcements on bond and stock prices
    Hand, J.; Holthausen, R.; Leftwich, R.

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