Review of Quantitative Finance and Accounting, 22: 15–28, 2004
2004 Kluwer Academic Publishers. Manufactured in The Netherlands.
The Effect of Regulation Fair Disclosure on the
Relevance of Conference Calls to Financial Analysts
AFSHAD J. IRANI
Assistant Professor of Accounting, Whittemore School of Business and Economics, University of New Hampshire,
15 College Road, Durham, NH 03824, USA Tel.: (603) 862-3342, Fax: (603) 862-3383
Abstract. This study examines the effect of Regulation Fair Disclosure (FD) on the relevance of company-
sponsored conference calls. Measuring relevance by a conference call’s ability to improve analyst forecast accuracy
and consensus, I ﬁnd larger improvements in both variables during the period surrounding conference calls in the
post-FD era versus the pre-FD era. These ﬁndings imply that in the post-FD era relatively more about a ﬁrm’s
upcoming earnings becomes known during conference calls, consistent with FD’s success in eliminating selective
Keywords: regulation fair disclosure, conference calls, selective disclosure, forecast accuracy, forecast consensus
JEL Classiﬁcation: G10, G29, G38, M41, M45
This study investigates the effect of Regulation Fair Disclosure (FD) on the relevance of
conference calls to ﬁnancial analysts. FD is one of three parts of the Selective Disclosure
and Insider Trading Act passed by the Securities and Exchange Commission (SEC) on
August 10, 2000, and enacted on October 23, 2000. It provides that if and when a ﬁrm dis-
closes material nonpublic information to certain “enumerated persons,” it must make imme-
diate public disclosure of that information.
The SEC and proponents of the rule claim that
FD will result in fairer markets by eliminating selective disclosure and ensuring the prompt
and simultaneous dissemination of information to all market participants (Shiller, 2000).
FD opponents do not refute the proponents’ claim of fairer markets (Hassett, 2000). Some
even acknowledge that FD has resulted in companies issuing more press releases, ﬁling
more 8 Ks, and increasing web casting of conference calls. In fact, a recent study by Bailey
et al. (2004) empirically documents an increase in the quantity of voluntary disclosures,
albeit only for current quarter earnings. However, opponents argue that eliminating selective
disclosure reduces the quality of information in the post-FD era (Barr, 2001). For instance,
Janakiraman, Radhakrishnan and Szwejkowski (2002) ﬁnd a decrease in two dimensions
of information quality: timeliness and accuracy of analyst forecasts.
I provide an alternative test of FD’s impact on information quality by using conference
calls, a medium increasingly used by ﬁrms to disclose information to market participants.
Speciﬁcally, I compare the post-FD relevance of conference calls to the pre-FD relevance.
I measure relevance in terms of the conference call’s ability to increase analyst forecast