Regulation FD and analysts’ vs. investors’ weightings of the cash components of earnings

May H. Lo and Xu, Le (Emily)

Research in Accounting Regulation, 2013, vol. 25, issue 2, 169-184

Abstract: This paper investigates whether investors’ bias in processing the information contained in the cash components of annual earnings has been reduced, and whether the difference in bias between financial analysts and investors has decreased subsequent to Regulation Fair Disclosure (hereafter, Reg FD). We compare analysts’ and investors’ weightings of the three cash flow components of earnings, defined by Dechow, Richardson, and Sloan (2008), from 1985 to 2008, using historical weightings as benchmarks. Our results show that, in the post Reg FD period, the magnitude of investors’ (analysts’) mis-weightings has decreased (increased), and the differences between analysts’ and investors’ mis-weightings have become smaller. Overall, these results suggest that financial analysts’ information advantages over investors declined after Reg FD took effect, and that investors consequently are less biased in assessing the persistence of the cash flow components of earnings following the implementation of Reg FD.

Keywords: Regulation fair disclosure; Financial analysts; Investors; Earnings components (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1052045713000192
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reacre:v:25:y:2013:i:2:p:169-184

DOI: 10.1016/j.racreg.2013.08.006

Access Statistics for this article

Research in Accounting Regulation is currently edited by G. Previts

More articles in Research in Accounting Regulation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().