Does Regulation Fair Disclosure affect analysts’ forecast performance? The case of restructuring firms

Does Regulation Fair Disclosure affect analysts’ forecast performance? The case of... The main purpose of this paper is to investigate how the enactment of Regulation Fair Disclosure (Reg. FD) influences analysts’ forecast characteristics for restructuring firms. The Reg. FD requires all firms disseminate material information not only to some institutional investors and certain financial analysts, but to all market participants simultaneously. We expect that the regulatory effect of Reg. FD on financial analysts’ forecast performance would be pronounced because of uncertain earnings signals and information complexity produced by restructuring activities. Particularly, we examine how the enactment of Reg. FD affects the relationship between analysts’ earnings forecast attributes and the occurrence and magnitude of restructuring charges. Our general finding is that analysts’ forecast errors and forecast dispersion have declined in the post-FD period for restructuring firms. However, such an impact cannot be persistent with an increase in the relative magnitude of restructuring charges, the proxy for restructuring complexity. This study provides additional evidence that Reg. FD has limited private information, and attempts to provide all users with the same access to information within the context of firms reporting restructuring charges. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Does Regulation Fair Disclosure affect analysts’ forecast performance? The case of restructuring firms

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Publisher
Springer Journals
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-011-0234-3
Publisher site
See Article on Publisher Site

Abstract

The main purpose of this paper is to investigate how the enactment of Regulation Fair Disclosure (Reg. FD) influences analysts’ forecast characteristics for restructuring firms. The Reg. FD requires all firms disseminate material information not only to some institutional investors and certain financial analysts, but to all market participants simultaneously. We expect that the regulatory effect of Reg. FD on financial analysts’ forecast performance would be pronounced because of uncertain earnings signals and information complexity produced by restructuring activities. Particularly, we examine how the enactment of Reg. FD affects the relationship between analysts’ earnings forecast attributes and the occurrence and magnitude of restructuring charges. Our general finding is that analysts’ forecast errors and forecast dispersion have declined in the post-FD period for restructuring firms. However, such an impact cannot be persistent with an increase in the relative magnitude of restructuring charges, the proxy for restructuring complexity. This study provides additional evidence that Reg. FD has limited private information, and attempts to provide all users with the same access to information within the context of firms reporting restructuring charges.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Mar 19, 2011

References

  • A temporal analysis of earnings surprises: profits vs. losses
    Brown, L
  • Firm size and the information content of prices with respect to earnings
    Collins, DW; Kothari, SP; Rayburn, JD
  • The impact of regulation fair disclosure: trading costs and information asymmetry
    Eleswarapu, VR; Thompson, R; Venkataraman, K
  • Repeated accounting write-offs and the information content of earnings
    Elliott, JA; Hanna, JD
  • SEC regulation fair disclosure, information, and the cost of capital
    Gomes, A; Gorton, G; Madureira, L
  • The effect of repeat restructuring charges on analysts’ forecast revisions and accuracy
    Lin, B; Yang, R

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