Who Is Afraid of Reg FD? The Behavior and Performance of Sell-Side Analysts Following the SEC's Fair Disclosure Rules

Anup Agrawal, Sahiba Chadha and Mark A. Chen
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Anup Agrawal: University of Alabama
Sahiba Chadha: Dupont Capital Management, Wilmington, Delaware
Mark A. Chen: University of Maryland

Journal of Business, 2006, vol. 79, issue 6, pages 2811-2834

Abstract: We examine Regulation FD's impact on the accuracy and dispersion of sell-side analysts' earnings forecasts. Using a large sample of quarterly forecasts made over a nearly 10-year period surrounding FD's adoption, we uncover two main sets of findings. First, individual and consensus forecasts become less accurate post-FD, particularly for early forecasts and for smaller companies. Second, forecast dispersion increases post-FD. This effect is stronger for early forecasts and has increased with the passage of time. These results, which are quite robust to alternative empirical methodologies, suggest that there has been a reduction in both selective guidance and forecast quality post-FD.

Date: 2006
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