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Regulation Fair Disclosure and the Determinants of Analyst Coverage

Received: 18 October 2015     Accepted: 26 October 2015     Published: 13 November 2015
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Abstract

Using a sample of 49,956 firm-years from the United States of American, this study documents that analysts place significant less weight on firm size, return volatility, and more weight on trading volume in deciding which firms to issue earnings forecasts after the passage of Regulation Fair Disclosure (Reg FD) in 2000. The evidence of this study suggests that Reg FD leveled playing field among analysts, lowering the costs of covering smaller and risky firms for analysts.

Published in Journal of Finance and Accounting (Volume 3, Issue 6)
DOI 10.11648/j.jfa.20150306.15
Page(s) 205-210
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Reg FD, Analyst Coverage, Determinants of Analyst Coverage, Regulation, Competitive Advantage

References
[1] Association for Investment Management and Research (AIMR). (2001). FD e–survey Summary. Website. http://www.aimr. Com/pressroom/01releases/regfdsurveysum.htm.
[2] Barth, M.E., R. Kasznik, and M.F. McNichols. (2001). “Analyst Coverage and Intangible Assets.” Journal of Accounting Research 39 (1): 1-33
[3] Bhushan, R. (1989). “Firm Characteristics and Analyst Following.” Journal of Accounting and Economics (11):255-74.
[4] Bloomberg News. 1999. SEC may bar selective disclosures by firms. Los Angeles Times (March 17).
[5] Brennan, M. and P. Hughes. (1991) “Stock Prices and the Supply of Information.” The Journal of Finance 46: 1665–91.
[6] Cameron, A. Trivedi, P. (1990). “Regression-based Tests for Over-dispersion in the Poisson Model”. Journal of Econometrics (46). pp. 347-364
[7] Francis, J, D., Nanda, and X., Wang (2006). "Re-Examining the Effects of Regulation Fair Disclosure using Foreign Listed Firms to Control for Concurrent Shocks". Journal of Accounting and Economics 41(3): 271-292
[8] Fortin R. and G. Roth. Analyst coverage of small cap firms in a period of brokerage firm retrenchment. Journal of Business and Economics Research (5): 17: 61-68
[9] Heflin, F., K. R. Subramanyam, and Y. Zhang. (2003). “Regulation FD and the financial information environment: Early evidence”. The Accounting Review 78 (1): 1–37
[10] Irani, A.J. and I. Karamanou. (2003). “Regulation of Fair Disclosure, Analyst Following, and Analyst Forecast Dispersion.” Accounting Horizons (12):15-29
[11] Lang, M.H. and R.J.Lundholm. (1996). “Corporate Disclosure Policy and Analyst Behaviour” The Accounting Review (71):467 – 492
[12] Merton, R.C. (1987). “A simple model of capital market equilibrium with incomplete information”. The Journal of Finance (42): 483–510.
[13] Mohanram R.S. and S.V. Sunder (2006) “How Has Regulation FD Affected the Operations of Financial Analysts?” Contemporary Accounting Research (23):491-525
[14] O’Brien, P. and Bhushan, R. (1990). “Analyst following and Institutional Ownership.” Journal of Accounting Research (28):55-76.
[15] Securities and Exchange Commission (SEC). 2000. Selective Disclosure and Insider Trading. Release Nos. 33 – 7881, 34 – 43154. Washington, DC: SEC.
[16] Shon, J. and S. M. Young (2011). Determinants of analysts’ dropped coverage decision: The role of analyst incentives, experience, and accounting fundamentals. Journal of Business Finance & Accounting 38(7-8): 861-886
[17] Young, S.M. and E. Y. Peng (2013). An analysis of accounting frauds and the timing of analyst coverage decisions and recommendation revisions: evidence from the US. Journal of Business Financed & Accounting 40 (3-4): 399-439.
Cite This Article
  • APA Style

    Yutao Li. (2015). Regulation Fair Disclosure and the Determinants of Analyst Coverage. Journal of Finance and Accounting, 3(6), 205-210. https://doi.org/10.11648/j.jfa.20150306.15

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    ACS Style

    Yutao Li. Regulation Fair Disclosure and the Determinants of Analyst Coverage. J. Finance Account. 2015, 3(6), 205-210. doi: 10.11648/j.jfa.20150306.15

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    AMA Style

    Yutao Li. Regulation Fair Disclosure and the Determinants of Analyst Coverage. J Finance Account. 2015;3(6):205-210. doi: 10.11648/j.jfa.20150306.15

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  • @article{10.11648/j.jfa.20150306.15,
      author = {Yutao Li},
      title = {Regulation Fair Disclosure and the Determinants of Analyst Coverage},
      journal = {Journal of Finance and Accounting},
      volume = {3},
      number = {6},
      pages = {205-210},
      doi = {10.11648/j.jfa.20150306.15},
      url = {https://doi.org/10.11648/j.jfa.20150306.15},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20150306.15},
      abstract = {Using a sample of 49,956 firm-years from the United States of American, this study documents that analysts place significant less weight on firm size, return volatility, and more weight on trading volume in deciding which firms to issue earnings forecasts after the passage of Regulation Fair Disclosure (Reg FD) in 2000. The evidence of this study suggests that Reg FD leveled playing field among analysts, lowering the costs of covering smaller and risky firms for analysts.},
     year = {2015}
    }
    

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    AB  - Using a sample of 49,956 firm-years from the United States of American, this study documents that analysts place significant less weight on firm size, return volatility, and more weight on trading volume in deciding which firms to issue earnings forecasts after the passage of Regulation Fair Disclosure (Reg FD) in 2000. The evidence of this study suggests that Reg FD leveled playing field among analysts, lowering the costs of covering smaller and risky firms for analysts.
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Author Information
  • Faculty of Management, University of Lethbridge, Lethbridge, Canada

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