Reg FD and the Competitiveness of All-Star Analysts

Mark Bagnoli, Susan G. Watts and Yong Zhang

Purdue University Economics Working Papers from Purdue University, Department of Economics

Abstract: This paper examines the impact of Regulation Fair Disclosure (Reg FD) on the competitive advantage of All-Star analysts. We find that Institutional Investor All-Americans, chosen by the votes of institutional investors based on overall helpfulness to the buy-side, experienced a significant increase in turnover during the implementation and immediate aftermath of Reg FD. We do not observe a similar change in the Institutional Investor buy-side rankings of non-U.S. analysts or in the Wall Street Journal s Best on the Street rankings which are based solely on returns generated from the analyst s public stock recommendations. Furthermore, the significant change in All-American rankings is concentrated in those sectors identified by DIRI and Hutton (2005) as being most affected by Reg FD. By 2003, the competitive environment for All-Americans had stabilized, with turnover returning to (approximately) pre-Reg FD levels. This suggests that within a few years, All-Americans had built a new competitive advantage stressing aspects of performance less dependent on privileged communication with management.

Pages: 32 pages
Date: 2005-12
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:pur:prukra:1185

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